YOU ASK:
What is the definition of Loss Costs?
WE ANSWER:
Loss Costs refer to the percentage or portion of the premium that is used to pay for claims, as well as the cost for verifying, appraising and administering those claims.
Loss costs serve as one of the factors in the premiums computation process, as the insurance company would want to predict the approximate amount it would have pay for claims if it agrees to cover a certain risk.
Of course, to be profitable, premiums must be greater than loss costs and other related expenses related to a particular policy, a particular client or a particular line.
Insurance companies usually make use of a pre-determined loss cost multiplier to compute for the premium rates.
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