What is the loss ratio if an insurance company pays out $35,900 and collects $69,550 in premiums?

To calculate the loss ratio, one must divide the total losses paid out by the total premiums collected, and then multiply the result by 100 to express it as a percentage. In this case, the insurance company has paid out $35,900 in losses and collected $69,550 in premiums.

First, the loss ratio can be calculated using the formula:

Loss Ratio = (Total Losses / Total Premiums) × 100.

Plugging the numbers into the formula:

Loss Ratio = ($35,900 / $69,550) × 100.

This calculation yields approximately 51.6%. Therefore, the loss ratio indicates that around 51.6% of the premiums collected were used to cover losses, reflecting the efficiency of the insurance company in managing its underwriting risk and the proportion of premiums that are paid out in claims.

Understanding the loss ratio is important as it provides insight into an insurance company's profitability and claims management, which are critical factors in assessing the company's overall performance in the insurance market.