Target loss ratio
The share of premium an insurer expects to pay out in claims.
The target loss ratio is the proportion of premium the insurer intends to return as claims. The remainder funds the expense load. A plan running consistently below its target is generating margin for the carrier.
Comparing your actual loss ratio against the target is the clearest single test of whether a renewal increase is justified.
What this means for a BC plan
If your BC plan has run well under its target loss ratio for two or three consecutive years and the renewal still arrives with an increase, that is a specific, answerable question to put to the carrier.
Related terms
Where this comes up
What drives the price of a plan · All glossary terms · Ask an advisor directly
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