What is Gross Written Premiums?

436 reads · Last updated: November 2, 2023

Premium income refers to the total amount of premiums received by an insurance company from insurance contracts within a certain period of time. Insurance companies obtain premium income by selling insurance products to policyholders. Premium income is one of the main sources of income for insurance companies.

Definition: Total premium refers to the total amount of premiums received by an insurance company from all insurance contracts over a certain period. It is an important indicator of the business scale and market share of an insurance company. Total premium includes premiums from new policies and renewal policies.

Origin: The concept of total premium developed along with the insurance industry. Early insurance companies mainly operated on a membership and donation basis. With the rise of commercial insurance, premiums became the main source of income for insurance companies. By the late 19th and early 20th centuries, with the standardization and legal improvement of the insurance industry, the statistics and reporting of total premiums gradually became industry standards.

Categories and Characteristics: Total premium can be divided into the following categories:

New Policy Premium: Refers to the premium paid for newly signed insurance contracts. This part of the premium reflects the insurance company's ability to develop new customers.
Renewal Premium: Refers to the premium paid when existing customers renew their policies. This part of the premium reflects customer satisfaction and loyalty to the insurance company's services.
Single Premium: Refers to the premium paid in a lump sum by the policyholder, usually for long-term insurance products.
Regular Premium: Refers to the premium paid periodically by the policyholder, such as monthly, quarterly, or annually.

Specific Cases:

Case 1: An insurance company signed 1,000 new policies in 2023, with an average premium of 5,000 yuan per policy, resulting in a total new policy premium of 5 million yuan. Additionally, the company had 5,000 renewal policies, with an average renewal premium of 3,000 yuan per policy, resulting in a total renewal premium of 15 million yuan. Therefore, the company's total premium was 20 million yuan.
Case 2: A life insurance company launched a single premium whole life insurance product, where customers pay a one-time premium of 100,000 yuan at the time of purchase. In 2023, the company sold 200 of these products, resulting in a total single premium income of 20 million yuan.

Common Questions:

Question 1: What is the difference between total premium and net premium?
Answer: Total premium is the total amount of premiums received from all policies, while net premium is the amount after deducting reinsurance costs from the total premium. Net premium better reflects the actual income of the insurance company.
Question 2: Is total premium equivalent to the profit of an insurance company?
Answer: Total premium is not equivalent to the profit of an insurance company. The company's profit also needs to deduct claims, operating costs, reinsurance costs, etc.

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