Definition

The difference between the premiums collected and the claims paid out by an insurer. It indicates how well an insurer is managing its risk and costs.

What to consider

  • Invest in preventive measures.
  • Monitor the effectiveness of mitigation strategies.
  • Continuously update procedures based on new risks.

Real world scenarios

  • A manufacturing company implements quality control to reduce defective products and loss claims.
  • A retailer installs security systems to mitigate theft losses.
  • An office adopts ergonomic solutions to reduce injury-related claims.

Related terms

Insurance & Financial Protection