Measuring the Services of Property-Casualty Insurance in the NIPAs Changes in Concepts and Methods

S part of the comprehensive revision of the national income and product accounts (NIPAs) that is scheduled to be released on December 10, 2003, a change in the definition of property and casualty in-surance services will be introduced. This definitional change will recognize the implicit services that are funded by investment income, will adopt a treatment of insured losses that is more consistent with the eco-nomic behavior of the insurer, and will change the treatment of reinsurance. This change is briefly de-scribed in the June 2003 issue of the SURVEY OF CURRENT BUSINESS, and some of the associated changes in the ta-bles are described in the August 2003 issue.1 The Bureau of Economic Analysis (BEA) currently measures services of the property-casualty insurance industry as its net premiums earned minus net losses incurred and dividend to policyholders, where net pre-miums and losses refer to premiums and losses net of reinsurance. However, the insurance output measured using the current definition does not include all the services provided by the property-casualty insurance companies. Property-casualty insurance companies provide three types of services: Risk-pooling, financial services relating to insured losses, and intermediation. Insur-ance provides a mechanism for consumers, businesses, and government that are exposed to property-casualty losses to engage in risk reduction through pooling. The insurer provides a variety of real services for policy-holders, such as loss settlements, risk surveys, and loss prevention plans. The insurer collects premiums in ad-vance of the loss payments and holds the funds in re-serves until the claims are paid. The insurer also provides intermediation services through the invest