What does Expense Ratio mean? Read on to discover the definition & meaning of the term Expense Ratio - to help you better understand the language used in insurance policies.
The percentage of premium used to pay all the costs of acquiring, writing, and servicing insurance and reinsurance. There are two methodologies to measure the expense ratio; a trade basis, which is expense divided by written premium and on a statutory basis when the expense is divided by earned premium. Most typically, the ratio is calculated using written premium. Expense ratios are an integral part of retrospective rating basic premiums.
We hope the you have a better understanding of the meaning of Expense Ratio.