GWP reports the amount of premium an insurance company has written out over a certain period.
For people who are trying to figure out how health insurance companies conduct their business, GWP is a key concept.
What is GWP in insurance?
GWP is the total premium income for a given time, usually a fiscal year, that reports the value of insurance policies issued by an insurer. Also, it may include money from new issues, renewals, and extra covers, before which some modifications may have been made.
What does the company’s insurance write-up look like?
For instance, if an insurer issues 1,000 health policies at an annual premium of ₹10,000 each, its GWP from these policies would be ₹1 crore. The calculation is simple:
GWP = The total premiums written during the period.
However, I would say that GWP is a different issue from profit. We see that a company may write large volumes of business yet at the same time experience great loss and expense.
What is the role of GWP in health insurance?
Health care coverage is growing in importance as medical treatments are getting more expensive and people are paying more attention to financial protection. GWP reports are of value to insurers and analysis in this field.
A growing GWP report indicates that an insurer is issuing more policies, entering into new markets, reaching out to new customers, or putting forth products that have higher premiums. Also, it is a tool that companies use to compare the scale of their business to that of competitors.
For example, as an insurer’s GWP grows greatly over many years, that may be a sign of increasing demand for their products or successful expansion via agents, brokers, corporate partnerships, and digital platforms.
GWP vs Net Premium
One issue which causes confusion is the distinction between gross and net premium.
GWP is the premium written which is before the fact of deductions, also net premium is what is left to the insurer after we factor in reinsurance and other adjustments.
Therefore, GWP is used to look at business volume, which in turn gives net premium, which in turn gives a different picture of the insurer’s retained business.
Does Performance Improve with Higher GWP?
Not necessarily.
Here is a key point to note. A high GWP may indicate a large volume of business for the insurer, but it does not in itself mean the company is more profitable or efficient.
Suppose that two companies have the same GWP. One may report lower claims and operating expenses, while the other is paying out much more in claims. Using GWP alone to make a comparison would mask this.
That is to say, GWP should be looked at in conjunction with the claim ratio, loss ratio, combined ratio, net premium, and profitability.
Perceiving GWP as a Customer
As a customer, when you go to buy health insurance, GWP isn’t the first thing that catches your eye. To each of us, what is important is coverage, exclusions, waiting periods, premiums, which hospitals are included, and claim processes.
Still, we see that what the GWP presents us with gives a better picture of how the insurance industry functions. It also brings to light that the size of a company’s business is but one piece of the story.
Conclusion
Gross Written Premium is a key indicator of an insurer’s size. In health insurance, it reports the total premium value, which is a result of policies issued in a given time.
However, GWP is not a direct indicator of profit or service quality. To truly assess an insurer, you must look at a range of financial and customer-based metrics.
In short, GWP reports what business has been underwritten, but it does not tell the full story of that business’ performance.
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