Which of the following statements about the combined ratio is true?
A)It is equal to the loss ratio minus the expense ratio.
B)A combined ratio greater than 1 (or 100 percent)means an underwriting loss has occurred.
C)The combined ratio considers the company's investment income.
D)A combined ratio less than 1 (or 100 percent)indicates that an underwriting loss has occurred.

Question

Quizplus · Accepted Answer

The combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio greater than 1 (or 100 percent) indicates that the company is paying out more in claims and expenses than it is receiving in premiums, resulting in an underwriting loss. Therefore, option B is true. Option A is incorrect because the combined ratio is the sum of the loss ratio and expense ratio, not the difference. Option C is incorrect because the combined ratio only considers underwriting income and expenses, not investment income. Option D is incorrect because a combined ratio less than 1 (or 100 percent) indicates that the company is making an underwriting profit.

Which of the Following Statements About the Combined Ratio Is