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What is Expense Ratio?

The expense Ratio is the ratio of expenses to premiums generated. Using it, companies can determine their efficiency.

What is Expense Ratio?

After the loss ratio, Expense Ratio is the second critical ratio which is the percentage of expenses (other than paid claims) to the premium generated during the period. It assists companies in analysing the company’s efficiency; the lower the expense ratio, the better the profitability.

Example of Expense Ratio:

For an expense ratio of 30%, it is assumed that for every \$100 of generated premiums, $30 will be paid in expenses.

Why is the Expense Ratio important?

These ratios are considered critical for analysts for analysing the performance of an insurance company. It also assists analysts in comparing different insurance companies operating in the same market.

Owais Siddiqui
1 min read
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