“The significance of productivity can be derived from its definition. Given that productivity equals production increase of an enterprise beyond the institutional increase, thus, being more productive means being more profitable and competitive.” Dr. Kurdbacheh stated.

With regard to profitability and productivity and their differences, the Head of IRC, said: “One of the other uses of the term productivity instead of profitability, is that when we use productivity index for assessing performance, since such an index is based on fixed prices (excluding inflation effect), we will not be under a state of money illusion and will not regard any profit increase as better performance. Nevertheless, this illusion is quite common in the use of the term ‘profitability’.”

With reference to APO Productivity Databook 2019 and in explicating the significance of the productivity in securing better growth and welfare, he stated: “During the past 50 years, the productivity share of the annual growth of GDP in the prosperous Asian countries, has been annually 30% in average while this figure, in the same period, has been almost zero in the resource-based economy of Iran.”

“The insurance industry negligence in dealing with productivity is not unique to Iran and it is a global issue.” he added, referring to a 2019 report from McKensey & Company, “This report entitled ‘The Productivity Imperative in Insurance’ indicates that the increasing cost ratio (including selling, general and administrative expenses) as of revenues in the insurance companies, compared with the decrease in the same ratio in other top players from other industries during 2012-2017, has been mainly due to the global insurance industry negligence toward productivity.”

“According to this report, the successful management of costs by big insurance players is largely due to the benefits of scales and in smaller companies is attributable to their process management (using simple operating models in entirely standardized segments, IT developments and etc.)” he added.

“Based on McKensey’s report, in order to improve productivity, the insurance industry requires moving from traditional approaches and paying more attention to organizational excellence by the means of measures such as optimization of special segments like underwriting, claim management, developing present capacities, simplifying the structures, changing the operating environments, and entering into new realms like bancassurance, M&A, capturing various fields, and corporate agility.”    

The Persian full text of the presentation is available at this link.