Page 39 - Insurance Times September 2020

to know, where these inputs are used best. This argument
definitely holds good for organisations operating in a
particular sector. Can this argument be used, with equal
force, to compare organisations engaged in dissimilar
economic activities ? Will such comparison not yield absurd
results ? Comparison of an insurance entity, with a
manufacturing entity, or other service organisation like a
telecom company can only land us in a realm of confusion.

Even comparison with another service organisation in the
financial field like a bank or a mutual fund too would take
us no-where. This is equally true of the comparison involving
two insurers, one a life insurer and another a non life insurer.
In all such cases we are attempting to compare oranges with
apples. In other words we are comparing the
incomparables. While acknowledging the absurdities which
may crop-up in such primary comparisons, we can not ignore
the need for and utility of such comparison for the purpose
of assessing efficiency in use of scarce economic inputs.
Therefore it is necessary to develop tools and mechanisms
Similarly one of the leading banker predominantly discloses for meaningful inter-sectoral comparison.
the number of customers served. Yes there are practical
problems in operationalising some such disclosures, but they Only, these tools and mechanisms of comparison may have
are not insurmountable. Economists, long back, recognised to be slightly different from the ones used for intra-sectoral
the weaknesses of depending merely on nominal values and comparison. It is possible to evolve such tools of higher level
for better comprehension, they started presenting the GDP / grade to facilitate the comparison of dissimilar
of a country at current prices as well as constant prices with organisations / organisation which are significantly different
reference to a base year. We need to explore the possibility / engaged in significantly different activities. All
of such a measure for reporting insurance values. organisations use the same inputs (Land, labour, capital and
entrepreneurship). The difference is only in the proportion
Inevitable Comparison of Apples with of these inputs. The proportion of land / material will be
Oranges relatively high in a manufacturing organisation. If all
organisations irrespective of its nature, develop
Being part of Indian insurance industry, I was always curious
measurements based on the input factors or common
to know the value of its contribution to our society. Following
factors, meaningful inter-sectoral comparison gets
questions kept on popping up regularly. Is it, as good as that
facilitated. Current practices may also have to be modified
of bankers? How does it compare with that of a
to some extent to facilitate such comparison.
manufacturing industry ? Where do we stand in comparison
with other services and particularly with other financial For example : while manufacturing organisations, separately
services ? Satisfying answers to quench the curiosity were not present the marketing and sales expenses as part of their
simply available, though some rough measures could have reporting, the same is not the practice in insurance industry.
been used to facilitate some judgment of approximate kind. Wages paid to the workers in manufacturing industry are
But definitely beyond the capability of an average man. separated from the compensation given to other employees.
Moreover a few drops of water given to a highly thirsty But in some sectors including financial sector such practice
creature instead of quenching the thirst, is more likely to does not exist.
increase the emotional and psychological gravity of the thirst.
Thus hampering the process of comparison. May be
No two human beings are exactly alike, nor are two comparable and the corresponding cost of blue collar
organisations. That is not an excuse for avoiding peer equivalent employees of such organisations have to be
comparison of economic activities of such entities, because segregated. If a comparison has to be facilitated suitable
all of them use same economic inputs and society is entitled modifications have to be adopted. There could be several

The Insurance Times, September 2020 35