Gross written premium (GWP) is a measure of the total amount of premiums collected by an insurance company during a specific period, before any expenses and commissions are taken into account
. It is the sum of all premiums charged, regardless of the risk the insurer takes
. Gross written premium is an essential metric for insurance companies, as it indicates their financial health, the size of their customer base, and their ability to pay claims during a disaster
. It is often used to compare the performance of different insurance companies
. Key aspects of gross written premium include:
- Total premiums collected : Gross written premium represents the total amount of money an insurer collects from its customers in exchange for insurance policies
- Direct and assumed premiums : Gross written premium includes both direct premiums written (the premiums on all policies the company's insurance subsidiaries) and assumed premiums written (the premiums that the insurance subsidiaries have received from other insurance companies)
- Net premiums written : Net premiums written is gross written premium (direct written premium plus assumed written premium) less ceded reinsurance, which gives an indication of the level of sales for risks that the company retains for itself
- Management decision-making : Management can use gross written premiums to track productivity by dividing gross written premiums by the total number of insurance employees
- Forecasting : In forecasting, companies use net written premiums to gauge potential revenues from policies sold, which can help management plan for the future in terms of company scalability and employee capacity
In summary, gross written premium is a crucial metric in the insurance industry, providing insights into a company's financial health, customer base, and performance compared to other insurance companies. It can be used to make informed management decisions and forecast future revenues.
