Jasz
VIP Contributor
Accident and health expenses ratio is a term used in the insurance industry. It refers to the percentage of premiums that a company spends on actual claims. This differs from loss ratio, which refers to the percentage of premiums that an insurance company spends on paying out claims and expenses. Accident and health expenses ratio is expressed as follows:
Claims expense ratio = Actual claim payments / Premiums earned
Insurance companies want to keep their ratio as low as possible because it means they're spending less money on claims than they're bringing in through premiums. If they have more cash on hand, this gives them more flexibility when paying out claims, especially if there's a large number of claims at once. The lower your ratio is, the better off you'll be if there's a major disaster or epidemic that leads to multiple claims being filed at once.
Claims expense ratio = Actual claim payments / Premiums earned
Insurance companies want to keep their ratio as low as possible because it means they're spending less money on claims than they're bringing in through premiums. If they have more cash on hand, this gives them more flexibility when paying out claims, especially if there's a large number of claims at once. The lower your ratio is, the better off you'll be if there's a major disaster or epidemic that leads to multiple claims being filed at once.
