Final answer:
Dylan is using the reduction of premium option by having the insurer apply his dividend to his next year's premium payment, which helps lower his out-of-pocket costs.
Step-by-step explanation:
When Dylan tells the insurer to keep the dividend and apply it to his next premium, he is utilizing the reduction of premium option. This dividend option is one where the policyholder allows the insurance company to use the dividend to lower the cost of the next year’s premium. It is a common way to make insurance more affordable by reducing out-of-pocket expenses for the policyholder.