Which term refers to the formula used by insurance companies to relate income from loss expenses?

The term that refers to the formula used by insurance companies to relate income from loss expenses is the loss ratio. This metric is crucial for insurers as it measures the relationship between the losses they pay out in claims and the premiums they earn from policyholders. Specifically, the loss ratio is calculated by dividing the total losses by the total earned premiums over a specific period.

A lower loss ratio indicates that an insurance company is doing well, as it means that it is paying out a smaller portion of premiums in claims, while a higher ratio may suggest that the company is experiencing higher-than-expected claims relative to its income from premiums. This ratio helps insurers assess their profitability and determine necessary adjustments to pricing, underwriting standards, and claims management strategies to maintain financial stability.

In contrast, the other terms provided refer to different aspects of insurance operations. Loss valuation generally pertains to how much a loss is assessed or calculated in monetary terms. Premium assessment involves evaluating the appropriateness of premium rates based on various risk factors, and market rate focuses on the rates charged by different insurers within the marketplace, which can vary based on competition and market conditions.