Earlier in our blog, I explained the definition of insurance premium in a very easy way. Today, I will be giving you the easiest definition of gross written premium, which is also referred to as gross premium written.
Gross Written Premium – Definition
The usual definition of gross written premium that you will come across on the internet is as follows;
Gross written premium is the revenue generated by an insurance company before making deductions such as payments to reinsurers, commissions and other deductions.
Gross Written Premium – Easy Definition
When you buy an insurance policy, you pay an agreed amount of premium to the insurance company. Insurance premium is paid for the service given to you by the insurance company. In order for the insurance company to provide you insurance service, the company should make some expenses. The insurance companies pay for these expenses by the aid of insurance premiums collected from their customers.
Gross written premium excludes all the expenses or deductions made by the insurance company. It is the raw total of all the insurance premiums paid to a certain company. When an insurance company calculates their gross written premiums, they think like they have no expenses, commissions or deductions.
From your point of view as a customer, you can think like that; You pay $1000 to an insurance company to get your car insured, this $1000 goes directly to the gross written premiums of the insurance company like they do not have any expenses while giving you that service, or like the insurance company does not pay any commission fees.
This is, arguably, the easiest definition of the concept of gross written premium. If you have any comments or questions, you can write from the comment section below.