Loss ratio
The loss rate is one of the fundamental economic indicators that make the performance of private health insurance companies measurable. Together with the administrative expense ratio and acquisition expense ratio, it enables you to determine what proportion of the insured's premium income flows directly into insurance benefits or retirement provisions .
Business indicators for private health insurance companies
The individual key figures used can either be used to evaluate corporate security and financial feasibility, or to depict the growth of an insurance company in figures. The loss rate is one of the key figures that primarily represent the company's performance. Other key figures in this area are the administrative expense ratio and the closing expense ratio . All three values flow into the so-called insurance business result ratio. The relationship between the acquisition cost ratio, administrative expense ratio and loss ratio can be used to assess how efficiently a company operates. In addition, this ratio can be used to assess whether the contribution calculation of a company in the private health insurance sector was sufficient or whether the contributions need to be adjusted. For a solid assessment, net interest , equity ratio and surplus utilization ratio also play an important role. A solid assessment can only be made by looking at all the relevant quotas for the individual company.
Relationships between individual odds
The calculation of an insurance company is essentially based on three different types of expenses: on the one hand, the costs of running the company and managing the contracts must be covered; on the other hand, money must also be spent on acquiring new insured persons. Here, on the one hand, the acquisition expense ratio can be determined as a key figure, and on the other, the administrative expense ratio. The majority of the expenses, usually well over 80%, are used for insurance benefits and retirement provisions. The loss ratio provides information about the proportion of these expenses in relation to premium income. The insurance company also generates interest income from the capital invested. If the net interest rate is above 3.5%, a large part of this net interest income flows into the retirement provisions for the benefit of the insured. The expenses must be covered solely from the premium income and the earnings of less than 3.5% of the net interest. Private health insurances are tied to the so-called equivalence principle , which means that they have to calculate a separate premium for each insured person, based on the individual cost risk that exists for the individual insured person. The income generated in this way must be able to cover all expenses and, in order to secure the company in the long term, should also serve to generate a surplus.
These business transactions result in further quota values that are important for assessing the performance of an insurance company in the private health insurance sector. Acquisition expense ratio and administrative expense ratio flow together with the loss ratio in the insurance business profit ratio. The net return as a key figure indicates the total amount of capital gains achieved, the surplus utilization rate, on the other hand, indicates what proportion of the investment income exceeding 3.5% net interest benefits the insured in the form of retirement provisions. Insurers also use part of the total premium income to finance premium relief - either a reimbursement of part of the insurance premiums paid during the financial year if an insured person is free from claims or a lump sum for all insured persons if the insurer's business results were correspondingly good.
In recent years, a model that is based on the bonus-malus system of motor vehicle insurance has become increasingly popular : the contributions of an insured person for whom the insurer has not received any benefits are continuously reduced every year, and only when a benefit is used upgraded a small amount. Regardless of the type of model used to reduce the contributions of the insured, the RfB ratio indicates the proportion of premium income that was used to finance contribution reductions. In relation to the individual financial year of the insurer, the so-called RfB feed rate applies, which indicates how much money has been added to finance premium relief. In addition, like any private company, the insurance company naturally also has equity. The equity ratio indicates how high the equity of the insurance company is in relation to the total assets generated. The equity ratio for private health insurance companies is typically relatively low, usually around 5%. Another important figure is the number of people fully insured in the company's private health insurance tariffs. From an actuarial point of view, the calculation is more favorable for a large number of insured people, since the individual risk is distributed among a larger number of insured persons and higher premium income is achieved overall . A large number of insured persons can therefore have a positive effect on the contribution stability.
The loss rate as an assessment criterion for the insured
The loss ratio can be used to assess the performance of an insurance company, as it indicates what part of the premium income flows back to the insured in the form of benefits and retirement provisions. From an economic point of view, however, a sole assessment of the different loss ratios is problematic, since the loss ratio as an isolated value does not allow a solid assessment. It can only be seen in connection with other business indicators of the company. In addition, if the loss rate is viewed in isolation, a wrong picture of the economic situation can arise very quickly: A high loss rate can not only indicate a high level of performance of the insurance for the insured, but also, depending on the overall situation, possible imputed deficiencies or too few The insurance company has undergone rigorous health checks and is a signal that premium increases will occur. This is particularly true if a large part of the claims ratio results from actual insurance benefits and not from the accumulated old-age provisions, which are also included in the claims ratio.
Assessment of the performance of an insurance company from the loss rate depending on other key figures
Since an isolated consideration of the loss rate as a performance criterion is not sufficient, further key figures have to be included in the assessment. This potentially creates a realistic overall picture for the insured's assessment of the company. Depending on a high loss rate, the following criteria should also be met:
- The ratio of insurance benefits and retirement provisions in the claims ratio should be in favor of retirement provisions if possible.
- A high number of fully insured persons can have a positive effect on the contribution stability and the contribution amount.
- A high net return speaks for a successful business of the company also on the capital market; However, the surplus utilization rate must also be taken into account here .
- A high RfB rate indicates that insured persons for whom the insurer is exempt from payment can expect higher premium repayments.
- The insurance company's equity ratio should generally not be higher than 5% - a low equity ratio usually means that a large part of the income goes to the insured in the form of retirement provisions and insurance benefits. However, if the equity is too low, security and financial viability can be jeopardized.
If all these values are seen in connection with the loss rate, the result is easily comparable and meaningful data that can be compared with one another by individual insurers.
Individual evidence
- ↑ Stratego: The loss ratio of private health insurance companies , accessed on May 2, 2013