Non-Life insurance services: Measurement issues

Non-life insurance (NLI) services are not explicitly charged for by the financial corporations and thus cannot be observed for an individual consumer. The output of these services is thus measured indirectly as per recommendations of latest international standard, the System of National Accounts, 2008. In supply-use balancing exercise for the NLI services as a product, the reconciliation is achieved by allocating output of these services to industries and final consumers using appropriate indicator, which may be taken as the sums insured. This paper mainly discusses the measurement of NLI services output and its uses by the insurer industries and final users and related issues in the Indian national accounts statistics. Such insurance corporations mainly provide intermediation of transfers between policy holders and insurance companies. Problem of supply-use imbalance results from the convention of taking NLI premiums payable by the enterprises and household policy holders into account while estimating intermediate consumption and final consumption. The imbalance can be overcome if the premiums/insurance charges payable by the industries and household policy holders are replaced by the allocated insurance service output (imputed insurance service charges) as is expected in the Supply-Use Table reconciliation exercise. The current practice in the Indian national accounts of taking premiums paid as an intermediate input of the industry using NLI service is examined critically for the supply-use imbalance that results. Weaknesses in the current practice and plausible solution of the problem are discussed.