Gross Written Premium Basics and Beyond

Gross written premium is a crucial concept in the insurance industry, and understanding its basics can make a big difference in your business or personal finances.

Gross written premium (GWP) is the total amount of premium income received by an insurer for a specific period. It's the total premium written before any adjustments or discounts are applied.

GWP is a key performance indicator for insurers, as it reflects the volume of business they're handling. In fact, the GWP of an insurer can be a major factor in determining its profitability and competitiveness in the market.

A higher GWP doesn't always mean more profit for the insurer, though. Other factors like claims frequency and severity, operating expenses, and investment income can also impact profitability.

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Gross Written Premium is an accounting term used in the insurance industry to describe the total amount of premium collected from customers, minus cancellations and returns.

It's calculated by taking the gross premiums for a business and subtracting any cancellations and return premiums. This is the most common definition of Gross Written Premium, seen in 4 SEC filings.

Gross Written Premium is also known as the total premium recorded, excluding cancellations, refunds, commissions, and surcharges. This is the most popular definition of the term, found in multiple SEC filings.

Here's a breakdown of the different definitions of Gross Written Premium, as defined in SEC filings:

Medical expense insurance had a gross written premium of £5,750,693 in 2016, which increased to £6,939,962 by 2019.

The gross written premium for income protection insurance was £1,459,309 in 2016, and decreased to £1,407,718 by 2019.

Motor - Personal had the highest gross written premium in 2016 at £8,222,365, and remained one of the top categories in 2019 with a premium of £10,897,516.

Other General Liability had a significant decrease in gross written premium from £4,134,170 in 2016 to £1,578,212 in 2019.

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The top categories for gross written premium in 2019 were Motor - Personal, Property - Commercial, and Property - Personal, with premiums of £10,897,516, £14,927,592, and £9,021,908 respectively.

Here is a breakdown of the top categories for gross written premium in 2019:

Professional Indemnity had a gross written premium of £4,824,796 in 2016, and increased to £7,479,174 by 2019.

Employers' Liability had a gross written premium of £1,244,194 in 2016, and increased to £1,410,390 by 2019.

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Written premiums are the total amount customers agree to pay for insurance policies sold during an accounting period. This can be as simple as a customer paying $1,000 in premiums for a new contract.

In the insurance industry, premiums are like sales for retailers. Insurance companies sell as many premiums as possible and use the money to cover losses and expenses, hopefully with enough left to turn a profit.

Written premiums are the principal source of an insurance company's revenues and appear on the top line of the income statement. They are the total amount customers are required to pay for insurance coverage on policies issued by a company during a specific period of time.

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Here are some key facts about written premiums:

Premium is the amount customers agree to pay for insurance coverage, calculated as the total amount charged for policies that have already become effective, regardless of what portions have been earned.

Insurance companies generate revenue from premiums, which are like sales for retailers - they sell as many premiums as possible and use the money to cover losses and expenses.

The amount of premium charged can vary, but it's typically a fixed amount per policy, as seen in the example where customers pay $1,000 in premiums for each new contract sold.

In the insurance industry, written premium is an accounting term that describes the total amount customers are required to pay for insurance coverage on policies issued by a company during a specific period of time.

This total amount is the principal source of an insurance company's revenues, making premiums a crucial aspect of their business.

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Premiums are paid in advance, but insurers don't consider them as profit until the full obligation is fulfilled.

Written premiums are what policyholders pay upfront, and they sit in the insurer's bank account until they're earned.

Insurers can only change the status of premiums from unearned to earned when their full obligation is fulfilled, which means the risk has been covered for the entire period.

This is why premiums paid in advance are initially considered unearned, and they become earned as the policy period progresses.

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Written premiums are the total amount customers pay for insurance coverage during a specific period. This amount is a crucial part of an insurance company's revenues.

Written premiums can be measured in two ways: gross or net. The gross figure shows the total amount collected, while the net figure shows how much the company gets to keep after expenses.

Earned premiums are what an insurance company actually books as earnings, but they're not the same as written premiums. It's like the difference between what you pay for a service and what the provider actually earns.

Consider reading: Net Premium Valuation

The principal source of an insurance company's revenues is written premiums, which appear at the top of the income statement. This is where the company's financial story begins.

Here's a breakdown of the key differences between written and earned premiums:

Gross Written Premium is a key concept in the insurance industry. It's defined as the total premium payable by a policyholder, less any tax/levy and cancellations/refunds.

The definition of Gross Written Premium can vary slightly depending on the context. For instance, it can be the gross premiums for a subject business less cancellations and return premiums, or the premium recorded in the accounts of a company according to an insurance contract, before the subtraction of the commission, expenses of taking insurance and ceded premiums in reinsurance.

Here are some common ways Gross Written Premium is calculated:

It's worth noting that Gross Written Premium is a critical metric for insurance companies, as it directly affects their revenues and profitability.

In the world of insurance, understanding what Gross Written Premium (GWP) means is crucial. It refers to the total premium recorded, excluding cancellations, refunds, commissions, and surcharges.

GWP can be calculated in different ways, but most commonly, it's the total premium recorded in the accounts of a company according to an insurance contract, before the subtraction of the commission, expenses of taking insurance, and ceded premiums in reinsurance.

Insurance companies report GWP in their financial statements, and it's a key metric used to assess their performance. GWP is calculated net of all commissions, which means it's the premium earned by the insurance company before deducting any commissions paid to agents or brokers.

Here's a breakdown of the different ways GWP can be defined:

Note: The frequency of each definition is based on the number of SEC filings where it was seen.

The insurance industry is cyclical, which means it follows the ups and downs of the business cycle.

Written premiums are the top source of revenue for insurance companies, making up their income statement.

Insurance companies have to compete with numerous participants for market share, and they primarily do this by offering lower prices.

Excess underwriting capacity in the industry can lead to downward pressure on prices.

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The insurance industry is cyclical, meaning it goes through ups and downs along with the business cycle. This cyclical nature affects the prices of insurance premiums.

Written premiums are the top source of revenue for insurance companies, appearing on the income statement. Insurers can exercise pricing power in premiums when there's a shortage of capacity in the industry.

The industry is highly competitive, with many participants vying for market share primarily based on price. This competition can lead to pressure on prices when there's excess underwriting capacity.

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