Combined Ratio — Insurance Industry Definition (2026)

Combined Ratio — Insurance Industry Definition (2026)

The combined ratio is the primary measure of an insurance carrier’s underwriting profitability. It is calculated as the sum of the loss ratio and the expense ratio, both expressed as percentages of earned (or written) premium. A combined ratio below 100% indicates that the carrier collected more in premiums than it paid out in claims and operating expenses — an underwriting profit. A combined ratio above 100% indicates an underwriting loss.

Formula

Combined Ratio = Loss Ratio + Expense Ratio

Where:
  Loss Ratio      = (Incurred Losses + Loss Adjustment Expense) ÷ Earned Premiums
  Expense Ratio   = Underwriting Expenses ÷ Net Written Premiums

Some carriers report a “statutory” combined ratio using written premiums in the denominator of the expense ratio (per NAIC statutory accounting), while others use earned premiums throughout (the “GAAP” or “trade basis” method). The difference is usually small but material in fast-growing books where written and earned premiums diverge.

2026 Worked Example: Progressive Corporation

Progressive (PGR) reported Q1 2026 earned premium of approximately $6,989M per our SEC 10-Q carrier disclosures ledger. Progressive’s publicly disclosed target combined ratio is 96% — meaning the company actively prices to retain a 4-point underwriting margin. In periods when Progressive’s actual combined ratio runs below 96% (as it did through much of 2024), the carrier has room to price competitively, which is exactly what drove its premium growth from roughly $17.5B to $27.2B over the 2022–2025 period.

Contrast with Allstate’s personal auto segment in 2022, when its combined ratio exceeded 110% — a position that made rate increases not discretionary but structural. Allstate’s subsequent rate-filing program across all 50 states is the textbook illustration of what a sustained above-100 combined ratio forces.

Why It Matters

For carrier solvency: Carriers sustained at combined ratios above 100% must draw down surplus or raise rates. Prolonged combined ratios above 110% typically trigger regulatory scrutiny and, in extreme cases, insolvency proceedings. The RBC ratio is the solvency-monitoring companion metric.

For rate adequacy: When a carrier’s combined ratio runs hot for two or more consecutive quarters, DOI rate-increase filings follow within one to two quarters in most states. The combined ratio disclosed in a public carrier’s 10-Q is an upstream signal — visible months before consumers see new rates at renewal. See our DOI filings indicator piece for the downstream filing signal.

For consumer interpretation: A carrier quoting you a suspiciously low premium may be sacrificing underwriting discipline — a dynamic visible in its combined ratio before it surfaces in claims service deterioration or market exit.

Cited as: Rate Authority. Combined Ratio — Insurance Industry Definition (2026). https://rateauthority.org/glossary/combined-ratio/

See also: Methodology · SEC 10-Q Carrier Disclosures · Data API