Alberta General Insurance Level 1 Practice Exam

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Ace your Alberta General Insurance Level 1 Exam with our comprehensive practice quiz. Tailored to mimic the real test, our quiz offers detailed explanations, expert tips, and all you need to succeed. Start your path to becoming a licensed professional today!

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How is the Loss Ratio calculated?

Incurred claims divided by earned premiums
Earned premiums divided by incurred claims
Incurred claims plus earned premiums
Earned premiums minus incurred claims

The correct answer is: Incurred claims divided by earned premiums

A loss ratio is used in insurance to measure the ratio of claims paid out to premiums collected and is expressed as a percentage. It is calculated by dividing the total incurred claims by the earned premiums. This provides insight into the profitability and risk exposure of an insurance company. The other options, B, C, and D, do not accurately calculate the loss ratio. Option B would result in a fraction that is not indicative of a percentage, while options C and D include both incurred claims and earned premiums in the calculation, which would produce a significantly different value. Therefore, option A is the most accurate and appropriate method for calculating the loss ratio.