Insurance
Expense ratio (insurance)
An insurer's costs of selling and running policies as a share of premiums.
Last reviewedWhat does Expense ratio (insurance) mean?
The expense ratio is an insurer's underwriting expenses (commissions to agents and brokers, staff, marketing, systems) divided by premiums, written or earned depending on the convention used. Example: 30 of expenses on 100 of premium is an expense ratio of 30 percent. Direct and digital sales can lower it by cutting commissions. Note that in asset management "expense ratio" means something else: the yearly fee a fund charges, as a share of the money invested.
Where does it come up in case interview prep?
Related terms
- Loss ratioClaims as a share of premiums earned.
- Combined ratioLoss ratio plus expense ratio. Below 100 percent means an underwriting profit.
- ReinsuranceInsurance for insurance companies.
- Float (insurance)Premiums an insurer holds and invests before it pays claims.
- PersistencyThe share of policies still in force and paying after a set time.
- TakafulIslamic insurance built on mutual help, where members share each other's losses.