Question

Given below are two statements :
Statement I : The performance and potential of insurance sector is assessed using insurance density as an indicator. 
Statement II : The performance and potential of insurance sector is assessed using insurance penetration as an indicator. 
In the light of the above statements, choose the most appropriate answer from the options given below.

• A. Both Statement I and Statement II are correct
• B. Both Statement I and Statement II are incorrect
• C. Statement I is correct but Statement II is incorrect
• D. Statement I is incorrect but Statement II is correct

Answer 1

The Correct Option is A

To determine the correct answer for the given statements regarding the assessment of the insurance sector, let's analyze each statement:

1. Understanding "Insurance Density":
   • Insurance Density is calculated as the ratio of premium (in USD) to total population. It indicates the average amount spent on insurance by each individual.
   • Insurance density gives insight into how much of the population's income is being allocated to insurance products.
   Given this understanding, Statement I: The performance and potential of the insurance sector is assessed using insurance density as an indicator is correct.
2. Understanding "Insurance Penetration":
   • Insurance Penetration is measured as the ratio of total insurance premiums to the Gross Domestic Product (GDP) of a country. It indicates the extent to which the insurance sector is integrated into the economy.
   • Higher insurance penetration implies that insurance is a significant part of the economic activities of a country.
   Given this understanding, Statement II: The performance and potential of the insurance sector is assessed using insurance penetration as an indicator is also correct.

Both insurance density and insurance penetration are standard measures used internationally to evaluate and compare the insurance sectors in different countries. Therefore, they are both involved in assessing the performance and potential of the insurance sector.

Conclusion: Both Statement I and Statement II are correct. Hence, the most appropriate answer is Both Statement I and Statement II are correct.