3-92 What Does the Loss Ratio Measure in Any Particular

question 72

Multiple Choice

3-92 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:

Target Margin

The desired profit margin that a company aims to achieve for a product or service, used as a benchmark for pricing and cost management strategies.

Target Cost

The desired cost of manufacturing a product, which is calculated to ensure profitability at a specific selling price.

Activity-based Management System

A system that uses activity-based costing information to improve business processes and resource allocation, enhancing operational efficiency.

Real Causes

The underlying reasons or factors that lead to a certain effect or condition, often distinguished from more visible or immediate causes.