A loss rate is the frequency with which losses are incurred. It is very important for insurance companies to have a robust understanding of the loss rates for their policyholders. These rates will have a dramatic impact on the insurer's continued viability. If they are too high, the insurance company will not be able to operate at a profit.
Insurers calculate their loss rates by figuring out what their number of losses are for a specific period of time. If loss rates are too high, then insurers may have to either increase premiums or decide not to renew policies that are too risky. Both of these are strategies that can help to offset any loss rates that are too high. Actuaries are the professionals who usually determine loss rates on behalf of insurance companies.
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