Written Premium
The total premium for policies bound during a period, regardless of whether it has been collected or earned.
What It Is
Written Premium is the total premium associated with policies bound during a specific period. It is recognized at the moment the policy is bound for the policy term, regardless of whether the insured has paid the premium or whether the policy term has begun. Written premium is the standard top-of-funnel revenue measure in insurance, used by carriers, MGAs, and brokerages to track production, growth, and book composition.
Written premium differs from earned premium, which represents the portion of written premium attributable to coverage that has elapsed, and from collected premium, which represents cash actually received. A 12-month policy bound on July 1 with 120,000 dollars of premium produces 120,000 dollars of written premium on July 1, but only 60,000 dollars of earned premium by December 31, and collected premium that depends on the billing schedule.
For brokerages, written premium drives commission accruals, contingent compensation calculations, production reporting, and many incentive plans, which is why the precision of written premium recognition is a recurring focus in agency accounting.
Why It Matters for Brokers
Written premium is the metric that links policy operations to agency financial statements. Inaccurate or late posting of written premium distorts producer statements, contingent compensation accruals, and management reporting. It also affects E&O premium, since most carriers rate agency E&O on written premium volume by line. Reconciliation between AMS-recorded written premium, carrier-recorded written premium, and commission statements is one of the operational disciplines that separates well-run brokerages from those carrying unresolved variances on their books for months.
Real-World Example
An agency binds a 12-month commercial package with 240,000 dollars of annual premium effective March 15. The AMS records 240,000 dollars of written premium on the bind date and accrues commission at the producer's contractual rate. The carrier's monthly statement shows the same written premium and a matching commission, posting cleanly. A separate package bound the same week shows a 1,500 dollar premium variance on the carrier statement; Commission Reconciliation surfaces the variance, which traces to a missed endorsement that adjusted exposure mid-term.
Common Mistakes
- 1Posting written premium based on the policy effective date rather than the bind date, which distorts production reporting in months with significant future-dated bindings.
- 2Recording installment premium as written premium when only the first installment has been billed, which understates true bound production volume.
- 3Failing to true up written premium for endorsements and audits, leaving carrier and AMS records out of sync and producing unreliable contingent compensation accruals.
- 4Confusing written premium with collected premium in producer compensation discussions, which creates misalignment between commission accruals and cash to the agency.
How brokerageaudit.com Handles This
Submission Intake records written premium at bind and ties it to the policy of record. Commission Reconciliation matches carrier statement-level written premium and commissions against AMS records, surfaces variances, and supports clean accruals for producer compensation and contingent income.