The combined ratio measures an insurance carrier's overall profitability on its underwriting business by adding together the loss ratio and the expense ratio. The loss ratio reflects claims payments as a percentage of premium, while the expense ratio captures the carrier's operational costs (commissions, salaries, overhead) as a percentage of premium. A combined ratio below 100% means the carrier is making an underwriting profit; above 100% means they are losing money on underwriting before investment income.
For roofing contractors, the combined ratio is relevant because it affects carrier appetite for writing roofing risks. When the roofing segment of a carrier's book has a combined ratio well above 100%, the carrier typically responds by raising rates across all roofing accounts, tightening underwriting standards, increasing deductibles, or exiting the roofing market entirely. This is why roofing insurance rates can increase industry-wide even if your individual loss history is clean: the overall market's combined ratio for roofing is driving the change.
Understanding the combined ratio helps you make sense of the broader insurance market dynamics that affect your premiums. During hard market cycles, when industry combined ratios are high due to catastrophic losses, severe weather events, or increased litigation, roofing contractors face premium increases, reduced coverage options, and stricter requirements. During soft markets, when combined ratios are favorable, you have more negotiating leverage and carrier options. Your broker can provide context on current market conditions and how the combined ratio for roofing classes is trending among the carriers they work with.