01 / The meaning
What it means.
The expenses can include acquisition and administration costs, while claims costs are generally analysed separately. Ratios prepared using different accounting periods, gross or net figures, or written premium, earned premium and insurance revenue are not automatically comparable. Read the accompanying definitions before comparing insurers or combining an expense ratio with another measure.
This is an insurer performance measure, not a fee directly charged to a business policyholder. A lower ratio does not establish that a policy has broader cover, a stronger claims service or a better fit for the business. Your quoted premium can reflect the risk, cover, excess, insurer pricing and other charges. Assess the proposal and service terms directly rather than using one industry statistic as a purchasing decision.
02 / Put it in context
A practical example.
Hypothetical example: a business owner sees two insurers report different expense ratios. One uses a different reporting basis, so the owner checks the definitions instead of assuming the lower percentage means its quotation must be cheaper.
This example illustrates the term. It does not predict a claim outcome.
03 / Read the detail
What to check.
- Identify the exact expenses and denominator used in the ratio.
- Compare reporting periods and gross versus net presentation.
- Keep insurer performance measures separate from your policy charges.
04 / Start a useful conversation
A question for your broker.
Are these expense ratios calculated on the same basis, and what do they actually measure?
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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