We’ve Reviewed Hundreds of Benefits Renewals. Here’s the One Number Employers Never Ask For.

Every year the renewal letter arrives. A percentage increase, a paragraph of explanation, and a deadline. Most employers read the increase, wince, negotiate a point or two, and sign.

Almost no one asks for the number that produced the increase in the first place.

That number is your claims loss ratio.

What a claims loss ratio actually is

Your claims loss ratio is the share of your premium dollars that came back to your employees as paid claims. Divide claims paid by premium paid over the same period.

• $45,000 in claims on $60,000 in premium is a 75% loss ratio.
• $66,000 in claims on $60,000 in premium is a 110% loss ratio.

Think of it as the fuel gauge on your benefits plan. It doesn’t tell you where you are going, but it tells you precisely how much of what you paid for is being used.

Your carrier already calculates it. You are allowed to see it.

Insurers track this ratio continuously for every experience-rated group, and it is the largest single input into your renewal. When a carrier proposes an 18% increase, the loss ratio is usually the reason, even when the letter does not say so.

Here is the part that surprises people. You can simply ask for it. In most cases it is available on request, and a good broker will already have it in hand before renewal season begins.

Reading the number

Sterling works with three broad bands when we review a plan. These are general guidance rather than a formula, and they shift with group size, benefit line, and the carrier’s own target.

• Below 70%. You are likely overpaying. Your employees are not using anywhere near what you are funding, which opens room to renegotiate rates, revisit pooling, or redirect that spend into coverage people actually want.
• Between 70-100%. You are broadly where the carrier expects you to be. The conversation moves from price to plan design and trend.
• Above 100%. Claims exceeded premium. Expect an increase at renewal, and start planning for it now rather than reacting to a letter six weeks before your effective date.

An increase is an outcome. A loss ratio is a diagnosis.

What knowing it changes for you

• You can forecast next year’s cost instead of learning it from a letter.
• You can defend the increase to your leadership team with evidence, or challenge it with the same evidence.
• You can tell whether your plan is underused (a communication problem) or overused (a design and funding problem).

Three questions to bring to your next renewal

1. What was our claims loss ratio over the last 24 to 36 months, broken out by benefit line?
2. Which claims are pooled, and which are sitting in our own experience?
3. If our ratio is below the carrier’s target, what are we getting in return for the difference?

Next steps

If you do not know your current claims loss ratio, you are negotiating your renewal without the number the other side is using.

Ask Sterling for your claims loss ratio at your next renewal.

We will pull it, break it down by benefit line, and show you what it means for your plan and your budget well before the renewal letter arrives.