Get the opportunity to grow your influence by giving your products or services prime exposure with Performance Magazine.

If you are interested in advertising with Performance Magazine, leave your address below or contact us at: marketing@smartkpis.com.

Advertise with us
logo1 KPI Certified

KPI of the Day – Insurance: % Insurance loss ratio

FacebooktwitterlinkedinFacebooktwitterlinkedin
loss ratio

Definition

Measures the percentage of incurred claims value, from the value of the earned premiums.

Purpose

To indicate how much of the premiums the insurer pays out in claims.

Recommendations

In order to understand why premiums increase, it is important to analyze an insurer’s reliance on its loss rate. Larger claims over the past several years can be been a major reason for higher premiums.

When it comes to maximizing company revenue, the insurance loss ratio has a significant impact on bottom lines. Apart from focusing on the volume of policies underwritten and calendar year combined ratios, insurers are now calculating the loss ratio to predict the company’s performance.

As an indicator, the loss ratio aids cost estimation, revenue prediction, and the forecasting of company profitability levels. However, the claims settled that add to insurance loss, exclusively depend on the materialization of the risk covered. Up-to-date statistics therefore play an imported role in the insurance industry.

Insurance companies that have included external factors into the prediction of insurance loss ratios, have also proved more able to provision themselves against risk. Factors such as litigation management, subrogation, and new government regulations are just a few examples.

Several recommendations on minimizing the risk of loss in the insurance industry include the following:

  • Early detection of fraudulent claims to avoid unnecessary loss;
  • Ensuring priority responses for priority claims to maintain customer satisfaction and loyalty;
  • Optimize payment techniques and limits for instant pay out to avoid overpaying fast-track claims;
  • Reduce loss-adjustment expenses by generating early alerts regarding such occurrences.

As claims depend on the materialization of an initial risk, targets may be difficult to set by the insurer, mainly in the case of natural disasters, accidents, etc. If you wish to increase the accuracy of your measurements, you should decide whether to measure earned or paid premiums.

Image source:

KPI of the Day – Insurance: % Claims rejection ratio
KPI of the Day – Insurance: $ Insurance policy value
free

Tags: ,

Leave a comment

THE KPI INSTITUTE

The KPI Institute’s 2019 Agenda is now available! |  The latest updates from The KPI Institute |  Thriving testimonials from our clients |