Go to WSRB
Go to BuildingMetrix

About the Company 

Who we are and how we serve insurers, agents and Washington state residents  

CEO Perspective

Engaging thought leadership on key insurance industry issues from our CEO 

Meet the Team

Get to know the team behind WSRB’s trusted data and excellent customer service 


Learn about the benefits of working at WSRB and apply for open positions  

Underwriting Property

A guide to key risks in Washington state: fire, wildfire and earthquakes.

Help Center

Self-serve articles on how to use our products. Available 24/7. 

Commercial Property

Information on Loss Costs, policy rating and assessment tools 

Industry Toolkit

Links to help you work smarter and serve your customers.  

Protection Classes

The evaluation process explained from start to finish.


News on emerging risks as well as our latest products. 


In-depth content on essential insurance topics.


Weekly newsletter covering the P&C industry, curated by our experts. 


What are Loss Costs and Loss Cost Multipliers?

November 7, 2017

Our blog series, The Basics of Commercial Lines Ratings, offers a refresher course on the fundamentals. In Part 1, we looked at the components needed for developing a commercial property rate. In Part 2, we explore loss costs and loss cost multipliers.

Loss cost

The words used to define loss cost  (LC) can differ between sources, but all the definitions have the same meaning. The International Risk Management Institute (IRMI) considers loss cost “pure premium.” Overhead costs and profit loading are not included, only “actual or expected cost to an insurer of indemnity payments and allocated loss adjustments expenses.” (You can read IRMI’s full definition of loss costs here.)

Loss Costs and Loss Cost MultipliersTo use a loss cost correctly, it's important to understand what it includes, and what it excludes


WSRB's Essential Guide to Commercial Property Risk Assessment


WSRB defines loss costs as the portion of a company’s rate component covering only losses, along with the costs associated with settling those losses.

The largest component of a loss cost is the provision for losses and loss adjustment expenses. This includes the payment the insurer makes to the insured under the terms of the insurance contract. This payment provides for future loss adjustment expenses such as:

  • Fees for expert witnesses.
  • Salary and overhead for outside legal counsel.

Loss Cost Multiplier

The loss cost multiplier (LCM) is a company’s expense provisions. Each company must determine its own expense provisions, including those for underwriting profit and contingencies. Then, the company needs to file these provisions with the Washington Office of the Insurance Commissioner.

In addition to profit and contingencies, a company-filed loss cost multiplier includes expenses such as:

  • Commission paid to agents and brokers.
  • Sales and marketing expenses.
  • General company expenses for rent, payroll and employee benefits.
  • Taxes, licenses and fees.


Multiply the loss cost by the company’s loss cost multiplier to determine that company’s rate.

LC x LCM = Rate

WSRB does not provide rates. Rather, we provide our subscribing companies with Advisory Prospective Loss Costs. You can find specific loss costs for commercial properties by logging into the Subscriber portion of our site and selecting the Loss Cost tab. Along with the loss cost, you’ll also get a commercial property report for your risk file.

Loss costs and loss cost multipliers are straightforward. Part 3 in our series deals with something that’s not so straightforward: coinsurance. 

Terry Krueger was WSRB's Senior Subscriber Services Analyst until her recent retirement. She joined WSRB in 2005 after many years in the insurance industry, where she worked in both commercial lines rating and underwriting. Terry is a natural problem solver, a lover of bowling and puzzles and the author of some of our most popular educational blog posts.



Like our blog? Check out InsuranceEDGE. We curate the week’s must-read stories from top industry sources. You stay informed and save time.


You May Also Like

These stories on policy rating

blog listing blog sign up

Sign up for our blog