Sunday, February 26, 2012

Ho-RATIO Hears A Who!

"In the insurance business, the combined ratio is a measure of profitability of an insurance company. The combined ratio is calculated by dividing the sum of incurred losses and expenses by earned premium. Each insurance company is required to report its combined ratio in their annual statement filed with their state insurance department."

This quote is taken from the Insurance Daily Quote Calendar (Yes, I read daily postings from an Insurance daily quote calendar, doesn't everyone?).

The combined ratios of insurance companies determine how their pricing will be the following year. Right now, insurance companies are reporting combined ratios well above 1.00. This means that they are paying out more money than they are making in premium. The industry as a whole lost money on underwriting last year, which means that they will try to correct this in 2012. Look for prices to increase as the year progresses. Look also for companies to non-renew clients who are in high risk industries or who have had bad loss experience.

Winter is coming.


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