What is a "claims ratio"?

What is a "claims ratio"?

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Claims ratio is the amount of premiums that an insurance company collects with the amount of claims they pay out. So if an insurance company is paying out too much compared to how much they take in, that might lead the company to be insolvent. So later on, the insurance company might come back and go out of business, and of course we don't want to be with an insurance company that's gonna go out of business. It doesn't happen too often, but those are things that you'd want to look at.