Claims Management and Profitability of Insurance Companies in Nigeria
CHAPTER ONE
RESEARCH AIMS & OBJECTIVES
The objective of this study therefore was to critically examine the effect of efficient and prudent claim settlement procedures on the profitability of insurance products in the company; Leadway Assuance Company Ltd. Plc -Nigeria.
More specifically, the study:
Reviewed current literature on service marketing vis-à-vis literature on claims settlement.
Established the relationship between the claims settlement and customer repurchase of insurance.
Examined the customer‟s perception of existing trend of claims settlement system in the company through questionnaire and interviews to both the company‟s staff and their clientele.
Finally, gave recommendations on the best way to settle claims that would ensure customer satisfaction and increase premium growth.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
The services literature highlights the nature of service marketing. It tries to position some of the differences in the nature of services versus physical products, which are believed to create special challenges for services marketers and for consumers buying goods.
OVERVIEW OF INSURANCE IN NIGERIA
This segment focuses on the specifics of the insurance industry in Nigeria. It establishes the historical antecedence of insurance in Nigeria, highlights on the effect of insurance claims settlement on the demand of insurance products in Anglophone West Africa with particular reference to The Republic of Nigeria.
HISTORICAL BACKGROUND OF INSURANCE AND INSURANCE CLAIMS IN NIGERIA
Insurance has developed in response to a demand for risk protection. This demand has arisen out of the creation of liabilities by statute like Employers Liabilities Act (1880) and the Workmen‟s Compensation Act (1897 as amended in 1906).
Claims settlement or compensation for a loss dates as far back as the history of insurance. In fact, it is the only reason the consumer (insured) buys an insurance product. Man‟s first experience with insurance was in the field of marine. Records, however, show that modern marine insurance was practiced in 1347. In this early form, vessel or cargo would be pledged against a loan and should the vessel not successfully complete the journey; the loan would not be repayable. (Iruku, 1977)
Another ancient maritime practice that has survived many generations virtually unchanged is that of “general average.”
The mode of its operation is when certain cargo is jettisoned (thrown overboard) during a journey in an attempt to save the voyage. If the journey proves successful; the owners of the cargo that was not jettisoned and was saved will contribute proportionately towards a fund out of which the unfortunate ones who lost their cargo would be paid a claim (Fisher, et al, 2005).
In West Africa, methods of spreading risk by the extended family system, age, groups, clans, religious groups among other social devices is called Susu or Esor which dates back to the pre colonial era (Coker, 2006).
However, due to developments and modernization, this state of affairs is no longer ideal and adequate hence the need for more acceptable form of compensation.
As early as the 1920s, the British, representing agencies for insurance companies then operating in Great Britain, introduced conventional insurance to the West Africa sub region. These agencies later were transformed into insurance companies whiles for example in the case of Nigeria, the government formed their own indigenous insurance company to take care of their growing insurance needs after independence. Based on this principle above, the various classes of insurance then developed due to occurrence of unforeseen losses hence the need for financial protection against losses. (Iruku, 1977).
Today, Nigeria has quite a bit of vibrancy in the insurance industry serving the needs of both local and foreign stakeholders, thus the need to uphold the customer in high esteem and attend to their requirements with speed and efficiency. The customer in this age of globalization is hailed as “The King” thus satisfying their requirements means an organization will continue to stay in business and vice versa.
Insurance has even been hailed as a possible solution to the catastrophic food crises affecting third world nations like Nigeria.
Gormley (2008) in an article titled “Industry can help avert price disaster ” published in the “Insurance Day” stated that a study by the French Agricultural Research Centre for International Devevelopment, said, “insurance industry could play a major part in solving the underlying problems causing rising food prices. According to them the lack of access to risk management services and insurance for farmers in some of the worlds poorest countries has been a major factor stifling growth and crop productivity”. In this article, he referred to the United Nations (UN) as saying that “the environment does not favour their operations and does not provide any security for the risks they would take in investing more in the sector. Increased availability of insurance, among other services could curb rocketing food prices”.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
This chapter focuses on the description of the techniques adopted in this research work. It entail the description of the research design, the identification of the data gathering techniques and data processing methods to be adopted, among others, in extracting meaning from the data to be gathered in the course of the research work. The limitations of the approaches adopted also form an essential part of this chapter.
HOW TO COLLECT DATA
According to Easter by-Smith, et al (2004), the two main methods of collecting data for a detailed research analysis are the qualitative and the quantitative methods. Qualitative techniques, which basically handle the non-measured features or characters associated with the research topic, are strategies which the researcher adopts when they have close ties with members of the organisation concerned so that they can gain all sorts of insight into people and situations they require. Some qualitative techniques are interviews, observations and diary methods.
CHAPTER FOUR
DATA ANALYSIS AND DISCUSSION OF RESULTS
INTRODUCTION
In this chapter, the responses from claimants were categorized according to sex, age, educational background and marital status. This was followed by the presentation and analysis of data according to the research questions. The data are presented using cross tabulations.
CHAPTER FIVE
CONCLUSIONS ANDRECOMMENDATIONS
INTRODUCTION
Claims management is considered to be one of the most valuable possessions of any insurer. It is one aspect of insurance practice, the handling, which can make or mar the image of Insurance Company. In fact, one of the principal functions of Insurance is the settlement of claims because it is the fear that a loss might occur that induces individuals and economic institutions to take out Insurance policies.
The problem of running an effective claims administration that would satisfy the customers, thereby earning the confidence of the customers and consequently inducing repurchase
There was therefore a need to carry out a research with a view to finding out a more efficient and effective method of handling claims that will meet customers‟ satisfaction and in turn, redeem the sinking image of the insurance companies in the eyes of the insuring public, pave way for better performance and hence contribute to the economic development of Nigeria.
The emphasis here was to investigate the relationship between fast claims settlement and the profitability of insurance products.
Due to the constraints of time, the inability to measure the level of demand using the total profitability figures of the selected company and the fact that the total amount of claims settled as reflected on their financial statements is not a true reflection of the extent of customer satisfaction in the claims service provided by the insurers, the researcher relied more heavily on the responses from the insured who were randomly picked from the company‟s clientele.
CONCLUSIONS
Even though the demand for certain insurance policies might have been affected by contractual and legal requirements such as Bond, Motor, Workmen‟s Compensation Insurances etc, the results of the analysis of data as presented in chapter four showed that prompt and satisfactory claims settlement has positive effects on the profitability of insurance products and vice versa. This confirmed the supposition by the researcher that the dented image of the insurance industry in the West African sub-region and the consequent effects on the economies of Nigeria may not be unconnected with the poor claims administration. This inference drawn from the results of the analysis of the study data is supported by opinions strongly held by some authorities;
In a paper presented before the Image Committee of the Chartered Insurance Institute of Nigeria (CIIN), Irukwu (2000) concluded that, “claim settlement must be done promptly and equitably because the best form of advertisement for insurance companies is prompt claims settlement.” Several years earlier, Green (2000) in his write up in Annals of the Society of Chartered Property and Casualty Underwriters stated that, “Public perception of the industry (Insurance) is bound to affect the attitudes of the insuring public”. According to him, “Any industry, whose market is affected by public opinions as insurance, certainly must learn, as much as it can, about the forces affecting public opinions if it is to operate successfully.”
RECOMMENDATIONS
The problem of claim settlement has plagued the Insurance industry in Nigeria for a long time giving it a poor image. This poor image is due to the complex and peculiar nature of the insurance business.
However, there is the need to improve on the image of Insurance Company, which will lead to the growth of the company and the insurance industry as a whole.
From this research findings and conclusions, it has been established that claims administration affects the profitability of insurance products. Consequently, measures directed at running efficient and effective claims administration would go a long way in addressing the image problem of the industry.
It is in line with this that the following recommendations are made:
Claims must be settled promptly and equitably in order to earn the confidence of customers and to retain their loyalty. Reducing documents required to process a claim and minimize correspondence and claims communication and reporting could do this.
REFERENCES
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