What is a Combined Ratio?
The ratio of addition of the incurred losses and operating expenses as part of the percentage of earned premium is known as the Combined Ratio. It measures the profitability of the insurance company to find out its performance in day to day operations. It basically gauges the outflow of money from the insurance company as dividends, expenses and losses. The loss ratio is also critical as it a clear signal of the insurer’s discipline in various underwriting policies. The expense ratio indicates the efficiency of the insurance company and how it makes use of the resources to drive proper growth. It is generally expressed as a percentage.