Page 40 - Insurance Times September 2020

such areas, which only an open mind can identify, where Very often they are compared with those very performance
synchronisation amongst reporting of different sectors is parameters in the previous / previous corresponding period.
required and possible.
Comparison with the similar performance parameters of the
Use and Misuse of Aggregation peer organisations is another dimension on which they try
to report. Concerned Regulator too, at periodic intervals
No doubt insurance is a business of aggregation. This unique
report such performance parameters. Managements of the
business attribute of the insurance sector does not liberate
the sector from the concept of segmental reporting. Concept organisations do the same reporting, with a difference that
the positive ones getting highlighted and the negative ones
of segmental reporting is a financial tool developed by
getting downplayed. All this is very fine to get some idea
accountants to assess the segmental performance and it is
about the performance of the organisation.
an anti-dote for deficiencies of aggregation. Segmental
report is part of the annual reporting for the insurers too.
It endows insurers' reports with high level of transparency. Those few in the relevant field who are familiar (being
The reporting practice in this regard so far, has been on reasonably literate in the relevant activities) do make some
product based segments. A better and scientific sense (if not complete) out of such reportage. But for others
segmentation has to be peril based. and the common man who may not be so literate, these
reporting mean nothing. They do not make much sense. It
is said and literally true that you can take the horse to the
It can also be based on the subject matter of insurance -
person, property (-passive at rest, active at rest, passive in water but you cannot make it drink. Though making sense
out of reading, requires a real thirst in the reader, yet
transit, active in transit), liability and income. Often statistics
otherwise also it is possible to make reporting more
is compared to a bikini. It conceals the vital. Similarly current
product based segmentation though provides detailed meaningful to every one.
breakups, it does not bringout the vital intelligence to guide
right decision making. This is a radical suggestion, but is Reporting the performance by comparing it with some
based on logical and rational thinking. It is not the insurance benchmarks is one such way. The best example in this regard
product which decides the outcome. It is the frequency and is the reportage on rainfall. In addition to the annual
variation, it is always compared with the longterm average.
severity of the peril and / or the nature and susceptibility of
the subject matter insured that decides the outcome. In view of this, readers understanding becomes more
meaningful than its mere comparison either with previous
period or with that of peer/s. The period comparisons have
We need to establish the linkage of outcome with the peril
a limited purpose of flagging the performance of some
and / or with the nature of subject matter insured. This
should improve not only the quality of reporting but also the specific period. Peer comparison is effective only in an
quality of rating. It will also significantly upgrade the intensely / fiercely competitive market.
transparency of the industry. The opposition / resistance to
On the other hand comparison with the benchmark /
this suggestion can only be due to the difficulty involved in standard has a much broader and general purpose. Equally
achieving such segmentation. It is challenges of this kind, enlightening / illuminating example in this regard is the
which afford opportunities and prove to be the turning practice of checking the BP or sugar level against the more
points in the course of creative history. Apart from its value
scientifically set benchmarks. Therefore developing
in facilitating true and objective assessment of performance,
standards and bench marks and presenting the performance
its role in comparative analysis by synchronised reporting
against those standards or benchmarks can add substantially
needs to be realised. It carries in it the most potent seeds to the reporting quality.
of product simplification too.
Currently this exercise of setting benchmarks exists in a
Acceptable Standards / Bench Marks limited way in organisational target setting exercise. In
'Single digit', 'double digit', 'negative' are some of the addition, some kind of bench marks set by the regulator, are
growth adjectives frequently observed in the reports of found with regard to 1. Expense ratio, and 2. Solvency. There
business correspondents of media organisations informing are also some benchmarks in the citizens charter
the readers on business growth of insurers. Similarly claims commitments / regulatory prescriptions (Service standards
ratio, expense ratio, profitability, and solvency are other for policy issuance, claim settlement, grievance redressals).
parameters on which such reports often speak eloquently. It is necessary to raise this exercise to the next level.

36 The Insurance Times, September 2020