Direct Premium Written
The total amount of premiums that an insurance company collects directly from policyholders during a specific period, before accounting for reinsurance costs. This metric measures the gross revenue an insurer generates from selling policies.
Example
“ABC Insurance Company reported direct premium written of $2.3 billion for the quarter, representing a 12% increase from the previous year.”
Memory Tip
Think 'Direct Payment Written down' - it's the money written down (recorded) from direct customer payments.
Why It Matters
Direct Premium Written indicates an insurance company's growth and market share, which affects the stability and competitive pricing of your coverage. Companies with growing direct premiums often offer more competitive rates and better service as they expand their customer base.
Common Misconception
Many people think Direct Premium Written represents the insurer's profit, but it's actually gross revenue before expenses, claims, and reinsurance costs. A company can have high direct premiums but still lose money if claims exceed expectations or operational costs are too high.
In Practice
State Farm might collect $850 million in Direct Premium Written during Q1, including $300 million from auto policies, $400 million from homeowners coverage, and $150 million from other lines. This represents total customer payments before State Farm pays $200 million to reinsurers for coverage of their own risk.
Etymology
Insurance industry terminology combining 'direct' (straight from customer without intermediary markup) with 'premium written' (insurance contract revenue recorded when policy is issued, from Latin 'praemium' meaning reward).
Common Misspellings
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Related Terms
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See Also
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