CLAIMS MANAGEMENT AND PROFITABILITY OF INSURANCE COMPANIES IN NIGERIA.


CLAIMS MANAGEMENT AND PROFITABILITY OF INSURANCE COMPANIES IN NIGERIA.

ABSTRACT

The main objective of this study is to analyse the effects of claims settlement on the profitability of Nigeria Insurance industry. The study adopts descriptive and analytical method of historical and time series data. The study was conducted to cover the period from 1986 to 2011 (twenty-five years). The secondary data used for the study was obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin, 2014. The secondary data were presented in tables and multiple regression method was adopted to assess the relationship between the variables employed. T-statistics and F-statistics were used to test the hypotheses formulated in the study. The result from the analysis revealed that there is a significant relationship between claims settlement and profitability of the Nigerian insurance industry. Also, there is a significant relationship between claims settlement and premium received by insurance industry in Nigeria. It is therefore, recommended that insurance firms need to emphasize prompt payment of adequate claims for increased patronage, which is always reflected in payment of premium and profitability.

 

TABLE OF CONTENTS

Title Page              --       --       --       --       --       --       --       --       --

Declaration--        --       --       --       --       --       --       --       --

Certification--       --       --       --       --       --       --       --       --

Dedication-- --       --       --       --       --       --       --       --

Acknowledgement--       --       --       --       --       --       --       --       --

Abstract--    --       --       --       --       --       --       --       --

Table of Contents--         --       --       --       --       --       --       --       --

List of Tables--     --       --       --       --       --       --       --       --

List of Figures--    --       --       --       --       --       --       --       --

CHAPTER ONE

INTRODUCTION

1.1             Background to the Study--        --       --       --       --       --       --      

1.2             Statement of Problem--   --       --       --       --       --       --       --      

1.3             Objectives of the Study-- --       --       --       --       --       --       --      

1.4             Research Questions--      --       --       --       --       --       --       --      

1.5             Research Hypotheses--   --       --       --       --       --       --       --      

1.6             Significance of the Study--       --       --       --       --       --       --      

1.7             Scope and Limitation of the Study--   --       --       --       --       --      

1.8             Organization of the Study--      --       --       --       --       --       --      

1.9             Definition of Terms --     --       --       --       --       --       --       --      

CHAPTER TWO

  LITERATURE REVIEW

2.1     Conceptual framework -- --       --       --       --       --       --       --      

2.1.1 Concept of Claim in Insurance-- --       --       --       --       --       --      

2.1.2 Claims Management--      --       --       --       --       --       --       --      

2.1.3  Claims Payment and Premium Income--      --       --       --       --      

2.1.4 Relationship between Claims Payment and Profitability--  --       --      

2.1.5 Effect of Premium Payment in Claims Settlement and Income--  --      

2.1.6 Insurance and Profitability--      --       --       --       --       --       --      

2.1.7 Factors Inhibiting Effective Management of Claims Settlement  --      

2.2 Theoretical Framework--    --       --       --       --       --       --       --      

2.2.1 The Fraud Triangle Theory--     --       --       --       --       --       --      

2.2.2 Trigger of Coverage Theories--  --       --       --       --       --       --      

2.3 Empirical framework--       --       --       --       --       --       --       --      

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Research Design--     --       --       --       --       --       --       --       --

3.2 Sources of Data Collection--         --       --       --       --       --       --      

3.3 Data Required--        --       --       --       --       --       --       --       --

3.4 Method of Data Analysis--  --       --       --       --       --       --       --      

3.5 Model Specification--         --       --       --       --       --       --       --      

3.6 Estimation Techniques--     --       --       --       --       --       --       --      

CHAPTER FOUR

 DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Data Presentation and Analysis--  --       --       --       --       --       --      

4.1.1 Data Analysis--      --       --       --       --       --       --       --       --

4.2 Test of Research Hypotheses and Discussion of Findings     --       --      

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION, AND RECOMMENDATION

5.1 Summary of Findings--       --       --       --       --       --       --       --

5.2 Conclusion--   --       --       --       --       --       --       --       --       --      

5.3 Recommendations--  --       --       --       --       --       --       --       --      

REFERENCES --  --       --       --       --       --       --       --       -- 

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND TO THE STUDY

           Insurance industry is a subsector of the Nigerian financial system that deals with uncertainties, that is, events which are likely to occur and cause loss. It is also a service oriented industry that exist to absorb or transfer the risk of individuals, groups of people, other business ventures or government to ensure and encourage their continuous growth and development. They evolved to safeguard the financial interest of people from uncertainties by providing indemnity if an unexpected event occurs. Insurance companies are financial institutions set up to provide insurance covers to individuals and corporate bodies against possible risk occurrences, (Akpan, 2005).

          Insurance must do with managing the unknown, which itself is associated with the future. To insure, as it is commonly used is to guard against the unknown, to ameliorate risk; or to compensate the risk.

          According to Butler’s et al (2010), to insure, in a way is to make a contract that promises to pay one or somebody an amount of money in case of accident, injury, death etc. Butler’s definition links closely with the description of insurance by Akpan (2005) who defines insurance as a contract which is based on the pooling and sharing of risks of diverse persons and institutions, on the premise that institutions will suffer actual losses at a given point in time.

        The normal activities of daily life carry the risk of enormous financial loss thus, the emergence of insurance industry to cushion the effect of risk or loss occurrences to enhance productivity.

       However, despite the relevance of this industry, there is a false notion held by the masses that the Nigeria insurance industry does not effectively pay claims or liabilities and this notion has had an adverse effect on the profitability of the industry.

      Claims management in insurance industry is an organized and efficient method of handling and settling claims accrued to an insured under an insurance policy as speedily and practicable, as it is the bedrock upon which the general operation of insurance industry rest on. Claims are demands made by an insured for the benefit, right, compensation or indemnity which he is entitled to under an insurance contract.

      The ability and willingness of an insurance company to settle claims may be an acid test to its efficient operation. Butler (2010) concurring with this asserts that claims management is central to insurance industry because it determines the operational efficiency and profitability of this subsector of the Nigerian financial system.

      Poor and bad claims management is prejudicial to the insurance subsector and may jeopardize the entire operation of the industry. Butler (2010) states that a bad impression received on the settlement of claims or a blatant withholding of loss payment may give rise to a general loss of business, court action, regulatory censure or even withdrawal of license to carry out further operations. Thus, the profitability of the Nigerian Insurance industry is anchored on its ability to effectively and efficiently manage and settle claims when due to build public confidence in its operations.

1.2     STATEMENT OF THE PROBLEM

     Insurance industry is one of the key players in the financial sub-sector of the economy. As an integral part of this sector its paramount roles, functions or obligations are the provision of coverage against risks or losses and the settlement of claims as at when due, to enhanced economic efficiency.

      The Nigerian insurance industry over the years has under-performed its roles in the financial subsector of the economy when compared to its counterpart in other parts of the world. The major factor that has caused this is poor claims management.

      Poor claim management is exhibited in the following ways: the inability to settle claims properly to stimulate the interest of the populace, the failure to live up to expectation in payment of claims has led to poor public perception of the industry, high and fraudulent claims by insurance claimants which has hit the reserve base of the industry, low level of professionalism ethical standard and lack of commitment to the insurance profession about payment of claims.

     These myriads of lapses in the system operation are encapsulated in poor claims management which has affected the profitability of the Nigerian Insurance Industry adversely. This state of affairs has aroused the concern of the researcher to investigate the relationship between payment of claims and profitability of the insurance companies in Nigeria.

1.3     OBJECTIVES OF THE STUDY

     The main objective of the study is to investigate the relationship between payment of claims and performance of insurance companies in Nigeria.

Other specific objectives are:

       i.            To examine the effect of payment of claims on profitability of the insurance companies.

     ii.            To assess the gap between payment of premium and payment of claims.

  iii.            To examine the process of payment of claims.

  iv.            To examine the intervention of government in payment of claims by insurance companies in Nigeria.

1.4     RESEARCH QUESTIONS

       i.            What is the effect of payment of claims on profitability of insurance companies?

     ii.            What is the gap between premium and claims in the Nigerian insurance sector?

  iii.            What is the process of payment of claims?

  iv.            How is government intervening in payment of claims by the insurance companies?

1.5     RESEARCH HYPOTHESES

Ho:     There is no significant relationship between claims settlement and profitability of the Nigerian insurance industry.

Hi:     There is a significant relationship between claims settlement and profitability of the Nigerian insurance industry.

Ho:     There is no significant relationship between claim settlement and premium received by insurance industry in Nigeria.

Hi:     There is a significant relationship between claim settlement and premium received by insurance industry in Nigeria.

1.6     SIGNIFICANCE OF THE STUDY

      It is hoped that the findings of this study will be of immense benefit to the government and the Nigerian Insurance industry in addressing claims management problem and revamp its operations to stimulate and instil the public interest and confidence in its services to enhance profitability.

     The study will form a very useful information resource base for future researchers, the students, the government, the insuring public and the insurance companies on issues of claims management in the industry to enable them to know their strength, weaknesses and challenges and how to improve and overcome them to enhance their profitability. Finally, the research work will add to already existing literature on the research area.

1.7     SCOPE AND LIMITATION OF THE STUDY

     This study is designed to cover the Nigerian Insurance Industry in relation with claims management and profitability. It will also examine some measures adopted in claims management.

     However, a study like this cannot be carried out without some limitations. The most obvious problems faced by the researcher is that of obtaining reliable data on claims issues and claims settled in print like textbook in the library. Funds were not sufficiently available for this study due to poor economic situation in the country.

      However, the researcher has been on top of the problems and the findings made in this study are valuable, authentic and valid for consideration.

1.8     ORGANIZATION OF THE STUDY

     The research project is divided into five chapters with introductory chapter focusing on the background to the study, statement of the problem, objectives, scope and limitations of the study, research hypotheses, research questions and definition of terms used in the research study.

.

CLAIMS MANAGEMENT AND PROFITABILITY OF INSURANCE COMPANIES IN NIGERIA.



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