Definition for : Annual Premium Equivalent

For most Insurance policies, Premiums are paid on an annual basis. There are, however, some policies on which a single Premium is paid at the start of the policy, especially in the life Insurance sector. This makes it difficult to compare volumes of new business from one insurer to the next solely on the basis of Premium Income on new policies, because the proportion of single Premium policies varies from one insurer to the next. The APE makes this type of comparison possible because, by agreement, 10% of the amount of single Premiums are factored into the calculation of Premiums generated by new business.

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