What does "loss ratio" represent in the insurance industry?

The loss ratio is a critical metric used in the insurance industry to evaluate the financial health of an insurance company. It represents the ratio of claims paid to premiums earned. This measurement indicates how much of the insurance premiums collected are being utilized to pay for claims, and it is expressed as a percentage.

A lower loss ratio generally means that the company is retaining a higher proportion of premium income after paying claims, suggesting better profitability and efficiency in underwriting. Conversely, a higher loss ratio indicates that a larger portion of premium revenue is being spent on claims, which could raise concerns about the insurer's financial stability and risk management practices.

In this context, while the other options provide numbers relevant to insurance operations, they do not accurately define the loss ratio. Understanding the loss ratio is essential for insurance adjusters as it directly ties into assessing risk and determining appropriate policy terms and conditions.