Glossary
Loss ratio
Loss ratio is losses divided by premium, expressed as a percentage. A book that earns $100,000 of premium and pays out $60,000 in claims runs a 60% loss ratio. Carriers track it by policy, by line of business, and by agency, and it drives how they treat all three.
Why carriers watch your agency's loss ratio
Contingent commission and profit-sharing agreements are usually keyed to the loss ratio of the book you place with that carrier. Run a profitable book and the contingency check shows up. Run hot for several years and the check shrinks, then the conversations about your appointment start.
The flip side is leverage. An agency with a consistently profitable book is a carrier's favorite kind of partner, and that shows up in underwriting flexibility, appetite access, and how fast your submissions get worked.
Loss ratio vs combined ratio
Loss ratio only counts losses. Combined ratio adds the carrier's expense ratio on top: commissions, salaries, overhead. A combined ratio over 100% means the carrier lost money on underwriting, even if investment income covered the gap.
For agency purposes, loss ratio is the number that matters, because it is the part of carrier profitability your book selection actually controls.
Common questions
What is a good loss ratio for an agency's book?
It depends on the line and the carrier's targets. The practical answer lives in your profit-sharing agreements, which spell out the loss ratio thresholds that trigger contingent commission. Read those, not a generic benchmark.
Is a very low loss ratio always good?
On a small book, no single year means much. One large claim can swing a small book from 10% to 200%. Carriers apply credibility adjustments for exactly this reason, and many average results over multiple years.
Part of the Relay insurance operations glossary. Updated 2026-07-11. See how we source content.
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