What does the gross premium include that the net premium does not?

The gross premium is the total amount that an insured individual pays for an insurance policy, and it encompasses all relevant costs associated with providing that insurance. This includes not only the expected claim costs (which the net premium reflects) but also additional factors such as administrative expenses, commissions paid to agents, marketing costs, and a margin for profit.

In contrast, the net premium calculates only the portion needed to cover anticipated claims based on the mortality rate and does not factor in these other expenses or profit margins. Thus, the gross premium provides a more comprehensive view of what the insurance company charges for the policy, capturing all operational costs and expected profits that support the company's financial health and ability to pay claims.

While government taxes and the cost of claims are components associated with the insurance process, they are not the only factors considered in the gross premium. The distinction is crucial for understanding the overall pricing strategy of insurance products and the business model of insurance companies.