What Does the Loss Ratio Measure in Any Particular Year

question 21

Multiple Choice

What does the loss ratio measure in any particular year?

• A)Payouts on policies to premiums earned.
• B)Amount of premiums earned relative to the payout on policies.
• C)Overall underwriting profitability of a line.
• D)Loss adjustment expenses to premiums earned.
• E)Commission and other acquisition costs to premiums written.

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Definitions:

Implicit Rate

The interest rate implied in the terms of a lease or financial arrangement, often used in leasing transactions to calculate lease payments.

Economic Life

The period over which an asset is expected to be economically useful to the owner.

Warranty

A guarantee provided by a seller that a product will meet certain performance standards or an offer to repair or replace defective goods within a certain time frame.

Implicit Rate Of Return

An interest rate that equates the present value of expected future cash flows of an investment to its initial cost.