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7. Combined Ratio

Combined Ratio

200%
100% 126.96%
101.92% 123.64
0%
2018 2017 2016
2018 2017 2016

Combined ratio shows how an efficient insurance company is to select the policy as well as
control the underwriting expense. The lower the ratio the better efficiency it indicates. A ratio
below 100 % represents a measure of profitability and the efficiency of an insurance firms

underwriting efficiency. Ratios above 100 % denote a failure to earn sufficient premiums to cover
expected claims in insurance company. Besides that, the graph shows a decline combined ratio
where there is decreases in combined ratio from 123.64% to 126.96% to 101.92%. Unfortunately,

it shows that the insurance company fail to earn enough premium to cover expected claim
because the ratio above 100%. The suggestion to lower the ratio so that the insurance do not

face failure where the investors should generally stick to investing in low-cost and disciplined
insurers.

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