The difference between written, earned and unearned premium, and why loss ratios use earned premium.
Written premium is the full premium on policies issued in a period, booked when the policy is written. It measures sales.
Premium is earned evenly as coverage is provided. A $12,000 annual policy earns about $1,000 a month. Earned premium measures the coverage actually delivered and is the right denominator for loss ratios.
The difference is the unearned premium reserve — premium collected for coverage not yet provided. It is a liability for the insurer and is what comes back to the insured if a policy cancels pro-rata.
A fast-growing book writes more premium than it earns, so its expense ratio on a written basis looks lower while its loss ratio on an earned basis catches up later. Reading both figures together avoids misleading conclusions.