I have recently been reminded of some of the nonsensical insurance idiosyncrasies that veterans of the industry take for granted. Several of these involve math—and bad math in particular.
Executive SummaryAgency consultant Chris Burand reviews some fuzzy math that's widely accepted among property/casualty insurance carriers.
1. Combined Ratios
Combined Ratio = Loss Ratio + Expense Ratio. A ratio is a fraction. Sometime around the fourth grade most kids learn that to add fractions the denominators must be common.