alt Hacker NewsI'm not an accountant and don't claim to have a clean answer to how it should be accounted, but I hope I can highlight the conundrum.
Suppose you run a brokerage or some kind of marketplace enabling transactions. Should all transactions passing through your platform be considered your revenue? Or only the part that stays with you for the services you provide, while deducting the component which is simultaneously directed to the transaction counterparty?
In one simple perspective, calling these revenue and inventory would make sense only in a world where you hold on to the cash and the goods for extended periods, so they need to be appropriately accounted for in your books among cash flows and balances.
So what should be the correct accounting model for an insurance service that collects premiums and holds on to your money and pays later for services once you avail them?
I imagine that so long as they are taking on the risk of how much service you might avail rather than simply putting a stop at how much you've paid them in advance, then the premiums they collect ought to be considered revenue, to balance against the as yet unknown inventory costs.
All of this might be relevant in a conversation between accountants or investment analysts, but it's pretty obvious the "study" chose this particular methodology to get a number that makes insurance companies look as bad as possible. In this context, using their methodology does more to obfuscate/mislead than to clarify. If you say that UHI has a profit margin of 15%, most people would interpret that to mean that per $1000 worth of premiums paid, they make $150, which is exactly what happens. Their argument of "they charge $1000 in premiums, but of that $800 is paid out as costs, therefore their margin is 75%" is more confusing.