General Concepts
Loss Ratio
Loss ratio is one of the key financial-health metrics for insurance carriers — it measures how much of every premium dollar is paid back to policyholders as claims.
Last reviewed: May 2026 · Editorial methodology
Definition
Loss ratio = (claims paid + claims reserves) ÷ premiums earned. A loss ratio of 70% means the insurer is paying $0.70 in claims for every $1.00 of premium collected; the remaining $0.30 covers operating expenses, agent commissions, reinsurance, and profit. Healthy property-casualty loss ratios typically run 60-75%. Loss ratios above 100% mean the insurer is paying more in claims than it's collecting in premium (often after a major catastrophe), which is unsustainable without rate increases or capital infusion. The ACA imposes minimum medical loss ratios on health insurers — 80% for individual/small-group plans and 85% for large-group plans — requiring rebates to policyholders if the insurer keeps too much. NAIC tracks industry-wide loss ratios as a measure of market health. As a consumer, sustained low loss ratios at a carrier may indicate they're either underpaying claims or aggressively denying them; sustained high loss ratios may indicate financial stress.
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Cover Forge USA Editorial Team
Editorial Lead
This article was researched and written by the Cover Forge USA editorial team against federal sources (NAIC, CMS, FEMA, DOL, SSA, state DOIs) and standard policy forms. Bylines organize content by topic — they do not assert individual licensure. See our editorial-policy for details.
Reviewed 2026-06-14
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