---
title: "What Is a Combined Ratio in Insurance? — Lapidar"
url: https://getlapidar.com/glossary/combined-ratio/
description: "A combined ratio is a carrier’s loss ratio plus expense ratio. What over or under 100% means, and why it can move commission schedules. Worked example."
last_modified: "Mon, 12 Oct 2026 21:13:11 GMT"
source: getlapidar.com (HTML converted to Markdown at the edge)
---

Glossary · Insurance agency commissions

# Combined ratio

A combined ratio is a carrier’s loss ratio plus its expense ratio. Under 100% means the carrier made an underwriting profit; over 100% means it paid out more in losses and expenses than it took in. Commission is part of the expense ratio, which is why carriers watch what they pay agencies.

By Lapidar, the team building it · October 12, 2026 · Also called combined loss and expense ratio; underwriting ratio

## What it means

The NAIC’s [glossary of insurance terms](https://content.naic.org/glossary-insurance-terms) describes the combined ratio as “an indication of the profitability of an insurance company, calculated by adding the loss and expense ratios.” The same glossary defines the expense ratio as the “percentage of premium income used to attain and service policies.”

How it works: the loss ratio measures claims against earned premium; the expense ratio measures the cost of getting and servicing business, including agency commission, against premium. Add them. The ratio leaves out investment income, so a carrier can run a combined ratio over 100% and still be profitable overall.

## How it shows on a commission statement

You will not find a combined ratio on a commission statement. It matters for commission indirectly: carriers under pressure on their combined ratio may cut commission schedules, tighten contingent agreements or drop supplementals. When a carrier announces a rate change, check that new statements apply it only from the date and lines in the notice.

## Example

Combined ratio for an invented carrier · EX-43204Example data

**Earned premium**
$10,000,000.00

**Incurred losses and loss adjustment expense**
$6,600,000.00

**Loss ratio**
66.0%

**Expenses, including $1,300,000 agency commission**
$3,000,000.00

**Expense ratio**
30.0%

**Combined ratio, 66.0% + 30.0%**
96.0%

Example data. Carriers figure the expense ratio on written or earned premium depending on the report; this example uses one premium for both for simplicity.

## Commonly confused

- **Loss ratio** is only the claims side; the combined ratio adds expenses. See [loss ratio](https://getlapidar.com/glossary/loss-ratio/).
- An agency’s own loss ratio decides its contingent commission; a carrier’s combined ratio is the carrier’s result and does not usually enter that calculation directly. See [contingent commission](https://getlapidar.com/glossary/contingent-commission/).
- **Commission rate** is one of the costs inside the expense ratio. See [commission rate](https://getlapidar.com/glossary/commission-rate/).

## Common mistakes to check

- Reading an agency loss ratio as if it were the carrier’s combined ratio.
- Assuming a combined ratio over 100% means the carrier lost money overall, ignoring investment income.
- Missing a commission schedule change that followed a carrier’s poor underwriting year.

## Questions

### What does a combined ratio over 100% mean?

The carrier paid more in losses and expenses than it earned in premium, an underwriting loss. Investment income may still leave it profitable overall.

### Does the combined ratio affect agent commission?

Indirectly. Commission is part of the expense ratio, so carriers with a high combined ratio may lower commission schedules or tighten contingent programs. Your own commission is still set by your agreement.

## Sources

- National Association of Insurance Commissioners, [Glossary of Insurance Terms](https://content.naic.org/glossary-insurance-terms), entries for combined ratio and expense ratio. Retrieved October 12, 2026.

Lapidar is [commission reconciliation software for independent insurance agencies](https://getlapidar.com/), in its founding pilot. Related: [insurance loss ratio calculator](https://getlapidar.com/tools/insurance-loss-ratio-calculator/).

In this entry

1. [What it means](https://getlapidar.com/glossary/combined-ratio/#meaning)
2. [On a commission statement](https://getlapidar.com/glossary/combined-ratio/#on-statement)
3. [Example](https://getlapidar.com/glossary/combined-ratio/#example)
4. [Commonly confused](https://getlapidar.com/glossary/combined-ratio/#confused)
5. [Common mistakes](https://getlapidar.com/glossary/combined-ratio/#mistakes)
6. [Questions](https://getlapidar.com/glossary/combined-ratio/#faq)
7. [Sources](https://getlapidar.com/glossary/combined-ratio/#sources)

All 46 terms, from account current to written premium.

[Glossary A–Z](https://getlapidar.com/glossary/)

Check whether a carrier’s commission change hit only the lines and dates it announced.

[See a sample report](https://getlapidar.com/sample-report/)

## Reconciling statements is the hard part.

Check whether a carrier’s commission change hit only the lines and dates it announced. [See a sample report](https://getlapidar.com/sample-report/), or read [how the founding pilot works](https://getlapidar.com/pilot/).

[Open an account — founding pilot](https://app.getlapidar.com/signup)

[See a sample report](https://getlapidar.com/sample-report/)