Glossary · Insurance agency commissions
Direct written premium
Direct written premium is the premium a carrier writes on its own policies before ceding any of it to reinsurers. For agencies it is the familiar number: the written premium on your policies with that carrier, often the base for growth targets in contingent agreements and the measure carriers use to rank agencies.
What it means
The NAIC’s glossary of insurance terms defines direct written premium as “total premiums received by an insurance company without any adjustments for the ceding of any portion of these premiums to the reinsurer.” Net written premium is what remains after reinsurance.
How it works: every policy an agency places adds its written premium to the carrier’s direct written premium in the period it is written. Endorsements add or subtract, cancellations subtract. Carriers report it by state and line, and many contingent and supplemental programs measure an agency’s growth as the change in its direct written premium from one year to the next.
How it shows on a commission statement
Statements show written premium line by line, usually as “premium,” “written” or “WP.” Your agency’s direct written premium for a carrier is roughly the sum of those lines for the period, including negative ones. If a contingent growth target is in play, keep that total yourself by agency code; the carrier’s year-end figure should be close to it once timing differences are accounted for.
Example
- New business written
- $240,000.00
- Renewals written
- $610,000.00
- Endorsements, net
- $18,000.00
- Cancellations and return premium
- −$46,000.00
- Direct written premium for the year
- $822,000.00
- Prior year
- $760,000.00
- Growth
- 8.2%
Commonly confused
- Net written premium is direct written premium less what the carrier cedes to reinsurers; agencies rarely see it.
- Written vs. earned premium: written premium is booked when the policy is written; earned premium accrues over the term. See written vs. earned premium.
- Net vs. gross premium on a statement is about commission deducted or not, not reinsurance. See net vs. gross premium.
Common mistakes to check
- Leaving cancellations and return premium out of your own total, so growth looks higher than the carrier’s figure.
- Measuring growth on a different agency code mix than the carrier uses.
- Confusing a statement’s net premium (after commission) with net written premium (after reinsurance).
Questions
What is the difference between direct and net written premium?
Direct written premium is what the carrier writes before reinsurance. Net written premium is what is left after the carrier cedes part of it to reinsurers.
Why does the carrier’s written premium for my agency differ from mine?
Usually timing (transaction date versus effective date), agency codes included, or endorsements and cancellations counted in a different period. Reconcile by code and month.
Sources
- National Association of Insurance Commissioners, Glossary of Insurance Terms, entry for direct written premium. Retrieved October 12, 2026.
Lapidar is commission reconciliation software for independent insurance agencies, in its founding pilot. Related: contingent commission calculator.