Operating Cost Ratio

The share of revenue an insurer spends on administration and selling -- salaries, technology, broker commissions, overhead -- as a percentage, distinct from the medical loss ratio (which captures claims). Also called the SG&A or administrative expense ratio. A lower operating cost ratio signals scale and operating efficiency; managed-care giants compete hard to drive it down because, with the medical loss ratio largely set by claims, administrative leverage is a key lever on the remaining margin. Watch it fall as membership grows -- fixed costs spread over more members -- and rise when an insurer invests in a new market or absorbs an acquisition.

Related terms

Accounts Payable · Adjusted EBITDA · Adjusted EBITDA Ex-SBC · ADR · ARPU · Average Length Of Stay

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