If you’re a business owner or HR leader, you probably focus on keeping employees safe and managing your workers’ comp premium. But there’s a number behind the scenes that plays a big role in how much you pay—your loss ratio.
Many employers don’t track it. But they should.
Your workers’ comp loss ratio is the amount your insurer pays out in claims compared to what you pay in premium.
For example:
If you pay $160,000 in annual premium and your insurer pays out $80,000 in claims, your loss ratio is 50%.
It’s a simple equation:
Total Claims Paid ÷ Total Premium Paid = Loss Ratio
But the implications for your business are anything but simple.
A high loss ratio signals risk to your insurer. It tells them they’re paying out more in claims than they’re bringing in from your premium.
That makes it harder to get competitive pricing when your policy renews. In fact, some insurers may decide not to offer renewal at all if your ratio stays too high for too long.
While your ex-mod looks at multiple factors, claims frequency and severity—which directly impact your loss ratio—are the biggest drivers. A higher loss ratio over time often leads to a higher ex-mod, which then increases your premium.
Your loss ratio doesn’t just show how much is being paid—it reflects how well your team is:
If your ratio is high, it could point to gaps in any of those areas.
Let’s look at two real-world examples from parcel delivery companies we worked with in New Jersey:
| Company | Loss Ratio Before | Loss Ratio After |
|---|---|---|
| Parcel Co. A | 113% | 48% |
| Parcel Co. B | 121% | 49% |
They didn’t hire a full-time safety manager or invest in expensive new programs. They worked with loss control experts to:
The good news: you can take action now. Here are a few areas that make a big impact:
Even one step can help you regain control of your claims—and your costs.
If you're unsure where your loss ratio stands or how to improve it, you’re not alone.
At Kinetic, we partner with your insurance agent to monitor and improve this number. We’ll help you understand what’s driving it—and what you can do to bring it down before your next renewal.