Which statement about underwriting loss and period metrics is correct?

Which statement about underwriting loss and period metrics is correct?

• A. Underwriting loss occurs when premiums earned exceed losses and underwriting expenses.
• B. Underwriting loss occurs when premiums earned are equal to losses and underwriting expenses.
• C. Underwriting loss occurs when premiums earned are greater than incurred losses and expenses.
• D. Underwriting loss occurs when premiums earned during the period are less than incurred losses plus underwriting expenses.

Answer: (D)

Underwriting loss happens when the costs of claims and underwriting exceed the revenue earned from premiums in the period. In period metrics, the underwriting result is earned premiums minus incurred losses minus underwriting expenses. If the result is negative, it’s an underwriting loss; if positive, an underwriting profit; if zero, breakeven. The correct statement captures that relationship: premiums earned during the period are less than incurred losses plus underwriting expenses. Incurred losses include both paid claims and reserve for claims, while underwriting expenses cover acquisition costs and other underwriting-related costs. The other statements describe profit or breakeven scenarios, not a loss.

Underwriting loss happens when the costs of claims and underwriting exceed the revenue earned from premiums in the period. In period metrics, the underwriting result is earned premiums minus incurred losses minus underwriting expenses. If the result is negative, it’s an underwriting loss; if positive, an underwriting profit; if zero, breakeven. The correct statement captures that relationship: premiums earned during the period are less than incurred losses plus underwriting expenses. Incurred losses include both paid claims and reserve for claims, while underwriting expenses cover acquisition costs and other underwriting-related costs. The other statements describe profit or breakeven scenarios, not a loss.