Loss ratio (definition)
Claims paid plus reserves as a share of earned premium; the carrier's core profitability read on a book, and the agency's contingents lever.
Loss ratio is incurred losses (claims paid plus reserves) divided by earned premium. It is the carrier’s core profitability measure on a book of business, and it flows directly back to the agency through contingent commission thresholds and underwriting appetite.
An agency’s aggregate loss ratio with a carrier shapes the relationship: clean ratios earn appetite, authority, and contingents; deteriorating ratios earn re-underwriting and non-renewals across the book.
Producers influence loss ratio through risk selection and account quality long before claims happen, which is why “we write anything that breathes” is an expensive growth strategy.