04 Expense Premium Claims Premium Defining the Problem: Understanding the Friction Gap The impact that imperfect processes, systems, and business practices have on both the loss and expense. The Friction Gap refers to unnecessary expenses and operational inefficiencies arising from outdated processes, fragmented systems, and excessive manual intervention. The friction gap is not just about transaction efficiency. It also refers to the impact on underwriting quality, business selection, management visibility and claims results that is impacted by friction. It negatively affects two critical performance metrics which impact the combined ratio: Loss Ratio: Represents the proportion of earned premiums used to pay claims. Expense Ratio: Represents operational and administrative costs as a percentage of premiums earned. The Friction Gap When insurers fail to address these inefficiencies, they remain trapped in costly cycles of high operational expenses and suboptimal loss experience. Combined Ratio Expense Ratio Loss Ratio = + Bridging the Friction Gap: Revolutionizing P&C Insurance Operations