← Business Metric: Industry Specific (Consumer, Services & Financial) (all topics)
Combined ratio (COR)
What it is
The core profitability measure in general insurance - incurred claims plus expenses and commission, divided by net earned premium. Below 100% the insurer makes an underwriting profit; above it, the business loses money before investment income
Most Indian general insurers operate above 100%, so profits come from investing the float rather than from underwriting itself
Impact on industries
- An unambiguous discipline - unlike premium growth, it cannot be improved by writing more business, so it separates genuine underwriting skill from volume chasing
- Structurally weak across the industry - motor and health carry high loss ratios, and PSU, motor-focused and emerging players have struggled to contain them
- Reliance on investment income makes reported profit sensitive to equity markets - realised gains have flattered returns in years when underwriting deteriorated
- Falling interest rates create pressure to price better, since weaker investment yields remove the cushion that has masked poor underwriting