What term is used to describe the ratio of loss to total premiums received?

The term that describes the ratio of loss to total premiums received is known as the loss ratio. This metric is essential in the insurance industry as it provides insight into the company's efficiency in managing underwriting risks. The loss ratio is calculated by dividing the total amount of claims paid or reserved by the total premiums earned during a specific period. A lower loss ratio indicates that the insurance company is retaining more of the premium income as profit after paying out claims, while a higher loss ratio suggests that a larger portion of the premiums is being consumed by claims.

Understanding the loss ratio is critical for evaluating the financial health of an insurance provider. It helps stakeholders assess how well the company is performing in its core business of underwriting insurance policies, thereby guiding future decision-making and pricing strategies.