Page 38 - Insurance Times September 2020

to comprehend the comparative status, like a computer called invaluable life today gets assigned with some nominal
keeps hanging. value. Thus, it has become a norm to measure and assess
all economic activities / events in nominal values. It is so
These examples, which constitute only the tip of the iceberg, ubiquitous and common, so much so that, when some one
suggest that the best and safe thing for an average person refers to the most popular indicator of economic activity,
is to avoid any attempt to understand insurers and the GDP of a country, the reference is for nominal GDP
insurance. Something similar to throwing the baby out with unless otherwise mentioned / qualified. Measuring and
the bath water. No surprise, society's attitude towards assessing them in real terms is an exception and occupies a
insurance sector is ice cold. Precisely it is this dilemma, secondary place. This is true of many economic activities,
which provoked me to think of improvements in comparative including insurance.
method of study, so that a beginning can be made towards
presenting the facts in the understandable realm of average Ease and convenience are the hall marks of this practice.
reader. Developing and maintaining measurements in real terms is
difficult and inconvenient. It is this tendency of avoiding the
Comparison normally takes three forms. First, comparing the inconvenience and the difficulty, is behind the failure to
same subject / phenomenon over a period of time, second, realise the organisational slide into problems to which past
comparing same subject or phenomenon amongst the generations have been the witnesses. Yes, nominal
peers, and the third, comparing the subject or phenomena comparisons are also meaningful and useful. But at times
with other subjects / phenomena. Context could be the they may not convey true and complete story. Also, the smart
additional dimension of comparison. The logic and rationale and clever ones, in the absence of measurements in real
behind these comparisons, is not only to review and assess terms, can use the same for misleading the reader. Hence
past performance, plan future progress and prepare for comparisons in real value terms along with the nominal value
improving efficiency but also to gain knowledge and comparisons, are necessary to know the true, correct and
understanding of all dimension of the economic activity and complete facts as well as status. Slowly we have to evolve
its role in our life. Now let us examine possible scope for up- and adopt such parameters.
gradations, in each one of the four areas mentioned above.
The basic insurance value (Gross Domestic Premium) is a
Measurements in Nominal vs Real product of number of policies issued / number of persons
insured / sum insured (persons/property/income) /
Terms. indemnity offered and the rates of premium charged. Except
The day, human beings gifted themselves with money as a for some internal analysis in performance reviews, the
means of exchange and bid good-bye to the barter system, interplay of these factors in the final value rarely gets
unknowingly they introduced themselves to a novel concept presented to the general readers. Falling rates of premiums
of nominal value. Over the years this concept percolated and may fail to disclose the service expansion in terms of
spread across all dimensions of human life, so that even so increased coverage and vice-versa. Similarly rising rates of
premium may conceal the contraction or lack of growth in
the service and vice-versa.

Therefore sum-insured, number of persons covered, number
of policies issued and derivative parameters based on such
factors should necessarily form part of the reportage. Even
if some of them are available today, they are not presented
in a manner and format in which they should be. The format
and manner of their presentation should be such that it
facilitates easy and intelligible reading. Such a step will also
take the operational transparency to the next level. In India
life insurers use sum insured as one of the service
parameters and general insurers have not been using it to
the same extent, despite being making lot of noises about
the gap in insured and uninsured values (Under insurance).

34 The Insurance Times, September 2020