Loss ratio
Also known as: Claims ratio · Incurred loss ratio
The ratio of losses incurred to premiums earned — the number that tells you whether the pricing was right.
At Zarv
18% average improvement in the first 12 months after implementation.
Loss ratio is underwriting's scoreboard. It does not tell you whether you sold a lot; it tells you whether you priced correctly — and so it reveals, late, every mistake made at the front of the book. Add expenses and you get the combined ratio; above 100%, underwriting is losing money before investment income.
The lateness is the problem. A bad pricing decision made today only shows up in the loss ratio months later, when the claim is reported and reserved, and by then the book is already written. Anyone steering by this number alone is always correcting last year.
Shortening that loop means acting where it starts: behavioral signal at quote, repricing when observed risk changes mid-term, and evidence at the claim so that suspicious losses are not paid for lack of proof. Across Zarv implementations the average improvement was 18% in the first 12 months.
Frequently asked questions
How do you calculate loss ratio?
Divide losses incurred, usually including loss adjustment expenses, by premiums earned over the same period. A loss ratio of 65% means that for every 100 dollars of earned premium, 65 went to claims.