The price the customer pays is more than the pure cost of expected claims. Gross premium is the total premium charged to the policyholder, including loadings for expenses, profit, contingencies, and any commissions. It is the amount that appears on the bill.

Actuaries start with the pure premium needed to cover expected losses and loss adjustment expenses, then add expense and profit loads to arrive at the gross premium. Competition, regulation, and marketing strategy influence the final figure. Discounts and surcharges modify the gross premium for individual risk characteristics.

Gross written premium is a top-line measure of an insurer’s volume. Changes in gross premium volume affect both revenue and the capital required to support the business. Understanding the components of gross premium helps explain rate changes to customers and regulators.

• Total premium charged to the policyholder
• Includes pure premium plus expense and profit loads
• Subject to discounts and surcharges
• Key measure of insurer volume