What happens to the portion of the written premium associated with past coverage periods?

The portion of the written premium that is associated with past coverage periods is recognized as earned revenue. When an insurance policy is written, the total premium is collected upfront, but this premium is not recognized as revenue until the coverage period begins. As time passes and the coverage is utilized, the insurer recognizes that portion of the premium as earned.

In essence, once the policyholder has received coverage for a past period, the premium allocated to that timeframe is deemed "earned" and reflects the insurer's obligation having been fulfilled. Recognizing this revenue is important for maintaining accurate financial records and providing a true representation of the insurance company’s financial performance.