The combined ratio is:
A) the loss ratio plus the expense ratio
B) a measure of underwriting losses
C) the loss ratio divided by the expense ratio
D) a measure of capital gains and dividend returns

Question

Quizplus · Accepted Answer

The combined ratio is the sum of the loss ratio (claims paid out divided by premiums earned) and the expense ratio (operating expenses divided by premiums earned). It is a measure of the insurance company's overall profitability and ability to control costs. Option B is incorrect as it only refers to underwriting losses and does not include other expenses. Option C is incorrect as it combines two ratios instead of adding them together. Option D is not correct as it refers to investment returns and not the combined ratio.

The Combined Ratio Is