An Analysis of Claims Settlement and Insurance Companies’ Profitability in Nigeria (1981-2022)

Francis A. Bassey, Ubong E. Ankoh & Boniface C. Ekanem

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Abstract

This study analyzed claims settlement and insurance companies’ profitability in Nigeria (1981-2022). Problems arise when there is a claim report. The problems range from non-payment of claims, even when paid, it is not settled promptly and only a negligible proportion of claims are settled. On many occasions, disputes arise in claims settlement between the insured and the insurer. Violation of policy provisions can vitiate an insurance contract and is also capable of hindering claims settlement. The study is an empirical research and the secondary data used for the study were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and Annual Report of NAICOM. The regression method was used to test the hypothesis. The finding revealed that there are significant influences of total expenditure and total income on the profitability of the Nigerian insurance companies while total claims settlement and total premium income have no significant influences on profitability. It was recommended that there is a need for the insurance industry to carry out sensitization and awareness campaigns on loss control devices for the insured. This reduces the loss frequency and claims amount considerably for sustainable profit. Managers of claims and the holders of policies should be educated in reporting claims processes such as loss minimization, claims verification, investigation, evaluating the degree of the damage preceding any replacement or repair and loss evaluation. This reduces claims report frequency and enhances the profitability and premium income of insurance companies. Insurance income generated in terms of premiums should be reinvested to upsurge insurance companies’ profits.

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