I have a query on Combined Ratio (CR) being reported by General Insurance companies.
CR = Loss Ratio (LR) + Expense Ratio (ER)
LR = Claims Incurred (Net) / Premiums Earned (Net)
ER = (Net Comm. + Exp. of Mgmt) / Net Premiums Written
The denominators of LR & ER are different. However they are being summed to report CR. This is resulting in under-reporting of CR. As per Investopedia definition, the denominator of ER should also be Premiums Earned (Net).
Please check if I am making sense.
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