01 / The meaning
What it means.
On a conventional basis, a ratio below 100% indicates underwriting income exceeds the included claims and expenses; above 100% indicates an underwriting loss on that basis. Investment income and other items can still affect the insurer’s overall result. Published figures may be gross or net of reinsurance, and may include different expense treatments, so the label alone is not enough for a fair comparison.
For a business buying insurance, the ratio provides market context rather than a prediction of its premium or claim outcome. Catastrophes, reserve changes and the mix of business can move results between periods. APRA’s insurance statistics use an updated reporting framework from July 2023 and direct readers to the accompanying definitions. Comparing several years requires checking whether the measurement basis changed, rather than joining unlike numbers into one trend.
02 / Put it in context
A practical example.
Hypothetical example: On an explicitly simplified premium basis, an insurer records claims equal to 65% of earned premium and expenses equal to 30%. Their combined ratio is 95%, before considering investment returns and other excluded items.
This example illustrates the term. It does not predict a claim outcome.
03 / Read the detail
What to check.
- Check the denominator and whether results are gross or net of reinsurance.
- Check the reporting period and treatment of reserve changes.
- Check that accounting definitions match before comparing insurers or years.
04 / Start a useful conversation
A question for your broker.
Are these combined ratios calculated on a genuinely comparable basis?
05 / Connect the terms
Keep the meaning in context.
06 / Apply it to your business
Related insurance guides.
Further reading
Read the source guidance alongside the relevant policy wording.
General information only. This does not take into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate for you. Cover is subject to insurer acceptance and the policy terms, conditions, limits and exclusions. Read the Financial Services Guide and the relevant PDS (where applicable) and/or policy wording before deciding.
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