In the insurance industry, a written premium is the amount of insurance premiums that an insurance company has collected or is expected to collect from its policyholders. The written premium is an important metric for insurance companies, as it is a key source of revenue and helps to cover the cost of claims and expenses.
The written premium is typically calculated on an annual basis and may be reported on a gross or net basis. Gross written premium refers to the total premiums collected or expected to be collected, before any deductions for reinsurance or other expenses. Net written premium refers to the premiums collected or expected to be collected, after deducting reinsurance and other expenses.
The written premium is often used in conjunction with other financial metrics, such as the combined ratio, to evaluate the financial performance of an insurance company. The combined ratio is the ratio of claims and expenses to premiums and is used to measure the profitability of an insurance company.
By understanding the concept of written premium in the insurance industry, individuals and businesses can make informed decisions about choosing insurance coverage and evaluating the financial performance of insurance companies. It’s always a good idea to carefully review the terms and conditions of an insurance policy and consult with a financial professional before purchasing insurance coverage.