What is the full form of APE in Insurance?
The APE full form in insurance is Annual Premium Equivalent. This is the sum of the initial premium amount of the new annual premium policy, which is added to one-tenth of the premiums on the new single premium policies. This is the common sales measure calculation that insurance companies use.
APE = Annualized regular premium of an insurance policy + 10% of a single premium.
Significance of Annual premium equivalent
Annual premium equivalent describes sales that include both single and regular premium business. Single premium insurance policies need a single, lump-sum payment from the consumer or policyholder. Regular premium policies are annualized by multiplying the premium amount by the number of payments made throughout the billing cycle.
Advantages of APE:
The insurance industry uses the annual premium equivalent calculation to compare new business achieved during a certain period. A single-payment premium effectively stretches a sale over an extended period. In contrast, a recurring premium entails distinct annual premiums. The APE metric compares single premium payments to recurring payment premiums. This procedure aids in accurately comparing sales between policies with two distinct types of premiums.