Combined Ratio Calculator
Calculate the combined ratio for insurance companies — the key metric for underwriting profitability. Free online calculator with loss ratio, expense ratio, and charts.
About This Calculator
The Combined Ratio Calculator helps insurance professionals, analysts, and investors evaluate an insurance company's underwriting profitability. The combined ratio is the most comprehensive metric for assessing an insurer's operational efficiency, as it captures both claim costs and the expenses of acquiring and servicing policies.
The combined ratio is calculated as: Combined Ratio = (Loss Expense + Underwriting Expense) ÷ Total Premiums Earned × 100%. Loss expense includes claim losses paid to policyholders plus loss adjustment expenses (the cost of investigating and settling claims). Underwriting expenses include agent commissions, marketing, underwriting salaries, and other costs of acquiring new policies. The combined ratio is the sum of the loss ratio and the expense ratio.
A combined ratio below 100% means the insurance company is making an underwriting profit — it is collecting more in premiums than it pays out in claims and expenses. A ratio above 100% indicates an underwriting loss. Most well-managed insurers target a combined ratio between 85% and 95% to ensure profitability even after investment income.
Regional Notes
- India: IRDAI mandates solvency ratio monitoring for Indian insurers. The combined ratio is a key metric reported quarterly. General insurers in India typically report combined ratios between 95% and 110%. Life insurers focus more on embedded value but also track combined ratio for non-participating products.
- United States: US property and casualty insurers report combined ratios in statutory filings (NAIC). The industry average combined ratio for P&C insurers has ranged from 95% to 110% over the past decade. The combined ratio excluding investment income is known as the statutory combined ratio.
- United Kingdom: UK insurers report under the FCA and PRA regulatory framework. The combined ratio is a standard KPI in Lloyd's of London market reports. The UK insurance market typically targets combined ratios below 100% for sustainable underwriting.
Frequently Asked Questions
What is the combined ratio in insurance?
The combined ratio is a key insurance metric that measures underwriting profitability by adding the loss ratio and expense ratio. A combined ratio below 100% indicates the insurance company is making an underwriting profit, while above 100% indicates a loss.
How is the combined ratio calculated?
The combined ratio is calculated as (Loss Expense + Underwriting Expense) / Total Premiums Earned × 100%. Loss Expense includes claim losses and loss adjustment expenses. The result is the sum of the loss ratio and the expense ratio.
What is a good combined ratio?
A combined ratio below 100% is considered good as it indicates underwriting profitability. Insurance companies typically target a combined ratio between 85% and 95%. Industry benchmarks vary by line of business — property and casualty insurers often have higher ratios than life insurers.
What is the difference between combined ratio and loss ratio?
The loss ratio only measures claims losses relative to premiums, while the combined ratio also includes underwriting expenses. The combined ratio provides a more complete picture of insurance profitability because it accounts for both claim costs and the cost of acquiring and servicing policies.
Can the combined ratio be negative?
No, the combined ratio cannot be negative. Since premiums, claim losses, loss adjustments, and underwriting expenses are always positive amounts, the combined ratio will always be a positive percentage.
What causes a high combined ratio?
A high combined ratio can be caused by mispricing insurance policies, higher-than-expected claim frequency or severity, inefficient claims handling, high underwriting and acquisition costs, catastrophic events, or a low customer retention ratio leading to higher acquisition costs.
Is the Combined Ratio Calculator free?
Yes, the Combined Ratio Calculator on Calculy is completely free to use with no registration or login required. You can run unlimited scenarios to analyze insurance company profitability.