The direct insurer is required to use the gross method for premium recognition.

Question

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According to generally accepted accounting principles (GAAP), direct insurers are required to recognize premiums using the gross method, which means that premiums are recorded as revenue before deducting commissions, policyholder dividends, or other expenses. This is contrasted with the net method, which recognizes revenue after deducting these expenses.

The Direct Insurer Is Required to Use the Gross Method