IMPACT OF CLAIMS MANAGEMENT ON THE PROFITABILITY OF

NIGERIAN INSURANCE COMPANY: AN EMPIRICAL STUDY OF THE

NON – LIFE INSURANCE SECTOR
Ogunnubi Micheal Olusegun

M. Sc Risk Management and Insurance (UNILAG), Lagos, Nigeria

Email: olusegunmichealayodele@gmail.com

Abstract:

Claim is the largest expenses of an insurance company. Therefore, Claims management is seen

as an essential tool of image boosting in insurance industry. Excellence in claims handling gives an

insurance company a competitive edge over its competitors. For an insurance company, claims

processing is one of its core activities. It could arguably be said to be the main reason why insurance

companies are established. Managing it more effectively and efficiently, aligning it with corporate

business objectives, and achieving real – time operational awareness are high priorities of an insurance

company. This is because claims processing touches all part of the organization, affecting competitive

positioning, customer service, fraud management, risk exposure, cost control and Information Technology

infrastructure. The objective of this research therefore, is to empirically investigate the impact of claims

management on the profitability of non – life insurance companies in the Nigeria insurance industry.

Hypotheses were tested to find out whether claims management is significantly related to profitability of

non – life insurance companies in Nigeria. The study adopts longitudinal design which follows the same

sample over time and makes repeated observations; hypotheses were tested using correlation analysis.

The study revealed that there is a significant relationship between claims management and the operating

cost of non-life insurance companies in Nigeria. However, the study revealed that there is no significant

relationship between claims management and profitability of non-life insurance companies in Nigeria. It is

recommended that the claims management department should be properly structured with highly

technical, trained and experienced staff so as to manage the claims of the insurance companies properly

as a well - managed claim leads to profitability through repeated purchase.

Keywords: Claims, Claims management, insurance, profitability, insurance fraud, total cost and

policyholders

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 1. INTRODUCTION

Insurance company core activities could be divided into three major parts – which are underwriting,

investment and claims processing. Of these core activities, claims processing is one that touches all parts

of the organization. Claims processing touches all part of the organization, affecting competitive

positioning, customer service, fraud management, risk exposure, cost control and Information Technology

infrastructure. Hence, the need for a structured claims management principles and practice.

Claims management includes all managerial decisions and processes concerning the settlement and

payment of claims in accordance with the terms of insurance contract (Redja, 2008). Insurance claims

range from straight forward domestic building and contents claims that are settled within days of

notification to complex bodily injury claims that remain open for many years (Michael, 2008) and

according to Yusuf and Abass (2013) claims payment is the defining moment in the relationship between

an insurance company and its customer. In case of a claim, measure to mitigate the loss need to be

taken immediately and have to be coordinated. This is necessary because from the polic yholders’ point of

view it is, in case of a claim, important how quickly a claim is settled as this demonstrates the

compensating function of the insurance cover to be effective. An immediate and correct way of handling

genuine claim is crucial for a successful claims management. This can only be achieved when a

functioning internal risk control or claims management department ensures that obligations are fulfilled.

Achieving all that is a daunting task, therefore for clarity of purpose, it is important for an insurance

company to have a claims management philosophy which is clearly, documented, communicated within

the claims department and reflected in the management and organization of the company (Lloyd's

Minimum Standards - Claims Management, 2014).

Okoli (2011) explains that the essence of setting up a business organization is to make profit. W ithout

profit, a business is bound to fail as it would not be able to meet some of its short – term obligations and

goals. Profit is the financial return or reward that entrepreneurs aim to achieve to reflect the risk that they

take. It is the difference that exists between revenue and cost. i.e Profit = Total Revenue (TR) – Total

Cost (TC). It has been established in literature that only customer with repeat purchases are profitable

(Nagar, 2009).

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Insurance is marketed not only as a financial mechanism to provide indemnity on covered losses, but also

to ensure peace of mind after a loss has occurred. An effective claim settlement process, which is a sub-

set of claims management, help to ease the burden of policyholders’ who had suffered a loss. Hence,

claims management hopes to influence policyholders’ to patronize and become loyal to the organization’s

offering which dovetail into repeated purchase(s). It should be noted that consumer’s commitment is

important for repeated purchases. Repeated purchases lead to revenue generation and profit ceteris

paribus (Nagar, 2009). Insurance companies therefore need to develop their claims management

philosophy into such that will not only reinforce customer’s commitment but also encourage repeat

purchases. Claims experience is a primary driver of polic yholders’ satisfaction and loyalty (Yusuf &

Abass, 2013). Policyholders’ satisfaction and loyalty lead to repeated purchases. Repeated purchases

lead to more revenue generation and profitability. Claims management, through easy claims settlement,

influence policyholders’ to patronize and become loyal to organization’s offering and this dovetail into

repeated purchases. Claims management could also help to minimize insurers’ operating cost by

avoiding payment of fraudulent claims. W hen cost is reduced and revenue generated is greater than the

cost incurred, profitability is enhanced. (TR > TC = Profit).

From the aforementioned, it could be deduce that claims management supports the insurer’s profit goal

and avoid paying for fraudulent claims. Insurance companies, just like every other company in any

industry, are set up to maximize the wealth of their shareholders. Since, insurance companies operates in

a competitive market, claims management can be an effective tool in an highly competitive market, when

the objective is to convince policyholders’ to purchase its product or influence policyholders’ to select its

products over those of competitors and avoid paying for fraudulent claims.

Statement of Problems

The insurance industry unlike its sister industry, in the financial sector, have been experiencing low

patronage. The insurance industry is also experiencing undesirable sales performance as evidenced by

low insurance coverage and the low percentage insurance industry in Nigeria contributes to the nation’s

gross domestic product (GDP) compared to what other financial industry contributes. One of the major

factors contributing to this undesirable sales performance and low patronage is the Nigeria populace

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distrust in the claims settlement practices of the Nigeria Insurance Industry (Clyde & Co., 2014; Venture

Africa, 2017). Majority of the Nigeria populace believe it is a waste of money buying insurance which they

termed as “Legalized 419” as they assume/believe they would not get their benefit when claims arises.

They would rather opt for a compulsory insurance rather than buy insurance willingly (Insurance Blitz,

2016). Insurance products belong to the “experience” goods category. In this category, customer

satisfaction is defined only after a customer experiences the services provided by the carrier. W ith the

convergence of products offerings from different insurers, policyholders’ often use quality of service as an

important differentiating factor to choose their insurance provider or rate their satisfaction with the insurer.

As an exceeding crucial point for insurance customers, claims management is a critical process that often

determines customer experiences (Yusuf & Abass, 2013). Given that the claims experience is a primary

driver for polic yholders’ satisfaction and loyalty, there is need to have a virile claims department headed

by a seasoned technocrat who will deliver high quality experience and equally cut costs and a major way

of cutting cut and enhancing profitability is by identifying genuine and fraudulent claims (Yusuf & Abass,

2013).

It has however been observed that despite insurance companies dedication of manpower and resources

to the claims department, in order to pay genuine claims and avoid fraudulent claims, fraudulent clients

are still sometimes paid while genuine claims are still, sometimes, unknowingly declined. This leads to

increased operating cost, high customer dissatisfaction and low patronage affecting the overall

profitability of insurance companies.

Therefore, this research will be focused on empirically investigating the impact of claims management on

the profitability of non – life insurance companies in Nigeria. Hypotheses are formulated to address those

factors affecting profitability – increased operating cost, high customer dissatisfaction and low patronage

thus ensuring profitability of insurance companies.

2. LITERATURE REVIEW

2.1 THE CONCEPT OF CLAIMS

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The insurance mechanism was established for the purpose of bringing an individual who had suffered

loss to his/her pre-loss position. Thus, handling claims is one of the functions of insurers. For an

insurance company, claims processing is one of its core activities. It could arguably be said to be the

main reason why insurance companies are established. Claims, more than often, is the factor that

awakens the minds of the insuring public towards their insurer, as many consumers pay little attention to

their insurance coverage until they have a loss (Yusuf & Ajemunigbohun, 2015). Claim is the critical

moment of truth that shapes a customer’s overall perception of their insurer (Crawford, 2007). It is the

chance to show that the years spent paying premiums were worth the expense (Butler & Francis, 2010).

The word “claim” was derived from the Latin word, “Clamare” which means to “call out” (Kapoor, 2008)

Asokere and Nwankwo (2010) define Claims as a demand made by the insured person to the insurer for

the payment of benefits under a polic y. The insurance mechanism is such that an individual called the

insured, exchange his unknown fortuitous loss for a known cost called the premium, with the hope that

he/she will be indemnify by the insurer when he/she suffers a loss. Hence, the underlining reason for the

relationship between an insured and insurer, abinitio, is claims payment. This is why Barry (2011) defines

insurance claims as all activities geared towards monitoring insured’s compensation, restitution,

repayment or any other remedy for loss or damage or in respect of doing their obligations. Vaughan

&Vaughan (2008) define a claim as a notification to an insurance company that payment of an amount is

due under the terms of a polic y. An insurance claim, therefore, is a demand by a person or an

organization seeking to recover from an insurer for a loss that an insurance policy might cover (Brooks,

Popow, & Hoopes, 2005). Insurance claims range from straightforward domestic building and contents

claims that are settled within days of notification to complex bodily injury claims that remain open for

many years (Michael, 2008). Claims outline the benefit of the insurance promise (Kapoor, 2008).

2.2 CONCEPT OF CLAIMS MAN AGEMENT

Claims management is a concept that resulted from the operationalization of two independent concepts –

the claims concept and the concept of management. The way an insurer handles a claim often

determines to a large extent the insured’s opinion of and loyalty to the insurer (Yusuf & Ajemunigbohun,

2015). Gallagher (2012) opines that claims management involves administration of claims arising from

loss events. This was in line with Marquis (2011) assertion about insurance claims management. He

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posits that insurance claims management consists of the departmental stipulation, corporate policies and

industry practices that insurance firms use to validate polic yholder payment or reimbursement requests.

Redja (2008) outlines that the main objectives of claims management are to verify that a covered loss has

occurred for fair and prompt payment of claims and to provide personal assistance to the insured after a

covered loss occurs. Claims, being the largest single cost item for insurers (Yusuf & Ajemunigbohun,

2015) must be well managed and properly supervised to achieve the set out objectives of the insurance

company. This function is often carried out by claims personnel that include managers, supervisors,

claims representatives, customer service representatives, special investigation unit personnel, in-house

council and third-party administrators (Brooks et al, 2005). Insurers can transform the claims processing

by leveraging modern claims systems that are integrated with robust business intelligence, document and

content management systems which will enhance claims processing efficiency and effectiveness.

According to Butler & Francis (2010), key issues that assist the claims department in achieving its

objectives include understanding the customers, choosing the right claims model for the business,

developing a mutually beneficial relationship with service providers, gaining an information advantage and

taking a greater control of the claims process. The claims management process starts once an accident

has happened and usually involves repair to damaged property and/or compensation for any injuries

and/or losses caused (eg personal injury (PI), vehicle write-offs, loss of vehicle use or loss of earnings).

Organization for Economic Co-operation and Development (2004) assert that insurance claim

management is a core issue for the protection of insurance polic yholders and hence a priority concern for

insurance company. This is because from the insurance company viewpoint, claim management is a key

element in the competition between insurance providers and for the improvement of industry’s public

image. Claims management is critical to an insurer’s success. W hen done right, it solidifies customer

relationships, aids in regulatory compliance and prevents fraud (Computer Sciences Corporation, 2011).

A good claim management embraces: proactive in recognizing and paying legitimate claims; assessing

accurately the reserve associated with each claim; reporting regularly; minimizing unnecessary costs;

avoiding protracted legal disputation; dealing with claimants courteously; and whatever possible, handling

claims expeditiously (The Productivity Commission, 2002).

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Clayton (2012) posit that the measurement of claim management outcomes in W ashington is the

evaluation of the promptness, fairness, efficiency, and effectiveness of benefit decisions made by the

Department of Labor and Industries and the various self-insurers authorized to pay their own claims.

Promptness refers to how quickly key claim decisions are made; fairness refers to whether or not

decisions made are non-biased and consistent across claims; efficiency refers to whether the cost of the

W ashington s ystem produces acceptable claim outcomes in comparison to other systems; and lastly,

effectiveness refers to whether the claim outcomes meet legislative intent. To significantly improve claims

management and swiftly adapt to changing situations, insurers must make more profound infrastructure

changes that align claims processing with corporate objectives for customer service, operational cost and

risk management (TIBCO, 2011).

Claims management involves making literally hundreds of decisions. Those decisions that is most

important to achieve the best outcomes for insured and insurers. Decisions on whether their claim is

covered or not; decisions on benefits paid and primary services provided; decisions on assistance in

returning to work; decisions when there are disagreements on a claim; and decisions about the reopening

and closing of claims. Major components necessary for effective claims management process according

to AIRMIC (2009) include culture and philosophy, communications, staff or people, infrastructure, claims

procedures, data management, operations, monitoring and review. The role of claims manager in claims

process is crucial to the survival of insurance companies because the process of claims settlement is the

final point of an insurance contract and its application is to invoke the benefit of the insurance promise

(Krishnan, 2010; Kapoor, 2008).

One of the challenges of claims management, however, is the valuation of property when a loss arises.

Most time the problem is not always about the risk insured against happened or not. The dispute is about

the quantum of loss. Another challenge of insurance companies is integrating technology into the claims

management process. According to Aparna 2014, the adoption of mobile technologies by insurance

companies enables field representatives to establish virtual offices, provide service on the go, and deliver

services much more quickly. Mobile devices with the right technology also offer an extended point of

service for customers and enable insurers to promote their products and brand. Although, mobile

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technology has been adopted by some insurance companies in Nigeria for claims settlement procedures,

its relativity is still minimal.

Some other challenges according to IBM (2011) includes:

x How to deliver a superior customer experience — Nothing is more important to a customer’s

perception of an insurance company than the experience of filing a claim. Insurance

organizations need to focus on key customer interactions such as claims processing, policy

renewals, buying new products, referrals, and understand what those experiences are like for

customers. This impact retention and satisfaction.

x How to control claims payout and operational costs — Claim payouts and loss adjustment

expenses represent the largest portion of all insurance expenses. Insurers that rely on static,

manual processes to handle simple claims or rely on subjective opinion to determine subrogation

opportunities, will suffer unnecessary costs and worsened combined ratios in comparison to

competitors who take an analytics-based approach.

x How to manage risk — Detecting and avoiding unnecessary payments from fraud represents an

“easy target” for insurers to reduce risk exposure and control losses.

W ays were also suggested as a means of improving claims management. These are:

x Know your customers - To transform customer relationships, and improve retention and

profitability, insurers need to optimize every customer interaction, especially the experience of

filing of a claim. But in order to do so, they first need to understand who their customers are and

what they want.

x Improve operational efficiency – This is achieved by determining the right resource for a particular

claim based on its complexity, likelihood of fraud or churn risk. Simple, low-risk claims can qualify

for immediate payment, while more complex claims can be sent to the right person directly,

without the usual escalation process. Because claim payouts represent the largest portion of

insurance expenses, faster and more efficient claims handling through business analytics can

generate dramatic benefits for an insurer’s bottom line.

2.3 CONCEPT OF PROFITABILITY

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Okoli (2011) explains that the essence of setting up a business organization is to make profit. W ithout

profit, a business is bound to fail as it would not be able to meet some of its short – term obligations and

goals. Profit is the financial return or reward that entrepreneurs aim to achieve to reflect the risk that they

take. It is the difference that exists between revenue and cost. i.e Profit = Total Revenue (TR) – Total

Cost (TC). Profit is an excess of revenues over associated expenses for an activity over a period of time.

Every business should earn sufficient profits to survive and grow over a long period of time. Thus, profit is

the main reason for the continued existence of most business organization. Owolabi and Obida (2012)

pointed out that the concern of business owners and managers all over the world is to devise a strategy

of managing their day to day operations in order to meet their obligations as they fall due and increase

profitability and shareholder’s wealth. Profit is one of the key measures of organizational performance

(Yusuf & Dansu, 2014). It is the index to the economic progress, improved national income and rising

standard of living.

Ayele (2012) defines profit as the difference between total earnings from all assets and total expenditure

on managing entire asset-liabilities portfolio. No doubt, profit is the legitimate object, but it should not be

over emphasized. Management should try to maximize its profit, keeping in mind the welfare of the

society. Thus, profit is not just the regard to owners but it is also related with the interest of other

segments of the society. Profit is the yardstick for judging not just the economic, but the managerial

efficiency and social objectives also. Profit is important to investors and management as sources of

dividends and growth while to the insured and regulators, profit provides additional security against

insolvency (Yusuf & Dansu, 2014). According to Owolabi and Obida (2012), profits are essential, but all

management decision should not be profit centered at the expense of the concerns for customers,

employees, suppliers or social consequences. It should be noted however that only customer with repeat

purchases is profitable (Nagar, 2009). Though profitability is an important yardstick for measuring

efficiency, the extent of profitability cannot be taken as a find proof of efficiency. Sometimes satisfactory

profits can mark inefficiency and conversely, a proper degree of efficiency can be accompanied by an

absence of profit. This is why Owolabi and Obida (2012) pointed out that profitability is the relationship of

income to some balance sheet measure which indicates the relative ability to earn income on assets. It

was further outlined that irrespective of the fact that profitability is an important aspect of business, it may

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be faced with some weakness such as window dressing of the financial transactions and the use of

different accounting principles.

It should be noted at this point that profit and profitability are two different words though they are used

interchangeably. Profit is the financial return or reward that entrepreneurs aim to achieve to reflect the risk

that they take while Profitability is ability to continually make profit from all the business activities of an

organization, company, firm, or an enterprise for over a long period of time. It shows how efficiently the

management can make profit by using all the resources available in the market. It measures management

efficiency in the use of organizational resources in adding value to the business (Owolabi & Obida, 2012).

Ayele (2012) clarifies profitability ratio as a class of financial metrics that are used to assess a business’s

ability to generate earnings as compared to its expenses and other relevant costs incurred during a

specific period of time. Al-Shami (2008) and Malik (2011) agree on a number of ratios for the

measurement of profitability. These include Return on Assets (ROA), Return on Equity (ROE) and Return

on Invested Capital (ROIC). ROA is an indicator of how profitable a company is relative to its total assets.

It shows how efficient the management uses its assets to generate earnings. W hereas ROE measures

how much profit a company generates with shareholders’ investment. ROIC is a measure used to asses a

company’s efficiency in allocating the capital under its control in profitable investments.

3. RESEARCH METHODS

Research Design is the framework that guides the researcher in the process of collecting and analyzing

data (Bryman & Bell, 2011). Essentially, this study is based on longitudinal design which follows the

same sample over time and makes repeated observations. In longitudinal design, changes in the

variables of study at different points in time are studied and related to variables that might explain why the

changes occurred. According to Fabayo (2009) a population is a set of existing units (people, objects,

events, etc.) that we wish to study. The population of the study is the total number of non – life insurance

companies in the Nigeria insurance market. There are 41 of these companies operating in Nigeria

according to 2015 Nigeria Insurers’ Association (NIA) Insurance Digest. This research study adopted

stratified sampling technique for this research by drawing out ten (10) of the forty one (41) insurance

companies transacting non-life business in Nigeria. The researcher further divided the selected ten (10)

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 insurance companies transacting non-life business (Strata) into market leaders and market laggards. This

is achieved based on the member companies ranking in order of premium from direct non-life business as

reported in the 2015 Nigeria Insurers’ Association (NIA) Insurance Digest. The selected non – life

insurance company are Leadway Assurance Co. Ltd, Custodian & Allied Insurance, Mutual Benefits

Assurance Ltd, NEM Insurance Plc, AIICO General Insurance Co. Ltd, Great Nigeria Insurance Plc,

Nigerian Agricultural Insurance Corporation, NICON Insurance Plc, Guinea Insurance Plc, Investment &

Allied Insurance Plc. The secondary data extracted from the Nigeria Insurance Digest which contains the

reports of all member companies, is observed for a period of 10 years. The data gathered for this

research study were statistically presented and analyzed using tables, percentages, frequencies etc. in

order to summarize, present and describe the data collected. Correlation coefficient with the aid of SPSS

were used to test the hypotheses formulated to determine the presence of a relationship as well as the

direction, strength and association of the relationship among the study variables.

4. DAT A PRESENTATION AND DISCUSSION OF RESULTS

Raw data collected without adequate analysis is of no value and it is based on the above premises that

orderly presentation and analysis of data is a necessity. In order words, this section supplies analysis of

data collected through annual report and account of the selected insurance companies in order to

ascertain the impact of claims management on the profitability of non – life insurance companies in

Nigeria using a case study of selected insurance companies. The data were collected from Nigeria

Insurance Digest and correlation analysis method was adopted in analyzing the data and testing the

hypothesis.

4.1 DESCRIPTIVE ST ATISTICS AND INTERPRETATIONS

LEADW AY INSURANCE PLC

NET PAT MGT TOTAL SHAREHOL NET TOTAL

CLAIMS EXPENSE ASSET DERS’ PREMIUM INVESTME
S INVESTMEN WRITTEN NT
T
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 587,173 520,495 1,466,120 16,486,566 9,424,104 4,979,717 814,476
2007 907,213 1,027,246 1,376,937 27,788,770 18,255,887 1,413,630 1,446,143
2008 3,419,767 1,107,246 2,141,410 27,374,517 12,338,998 2,755,837 2,993,980

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2009 907,213 1,002,470 607,917 36,393,297 11,654,142 10,483,694 520,903
2010 3,419,767 1,401,854 1,703,592 39,140,808 11,519,633 9,007,954 12,464,470
2011 5,253,887 1,043,477 2,199,095 42,578,984 11,286,405 14,292,183 14,634,667
2012 6,137,722 673,568 2,692,872 66,324,686 11,986,525 24,032,679 13,277,084
2013 3,307,850 1,718,079 3,668,907 60,883,828 15,467,171 14,548,825 36,120,567
2014 4,016,821 2,809,577 3,862,968 48,756,807 15,962,793 6,025,811 28,303,046
2015 4,425,413 6,379,933 3,618,484 44,250,068 20,305,202 4,534,828 27,554,308
Table 1: Extracted from Nigeria Insurance Digest 2006 - 2015

LOSS RO A RO E RO I ER
RATIO
2006 0.117913 0.031571 0.05523 0.639055 0.294418337
2007 0.641761 0.036966 0.056269 0.710335 0.97404342
2008 1.240918 0.040448 0.089735 0.369824 0.777045232
2009 0.086536 0.027545 0.086018 1.924485 0.057986908
2010 0.379639 0.035816 0.121693 0.112468 0.189120859
2011 0.367606 0.024507 0.092454 0.071302 0.153866977
2012 0.255391 0.010156 0.056194 0.050732 0.112050429
2013 0.227362 0.028219 0.111079 0.047565 0.252178922
2014 0.666603 0.057624 0.176008 0.099268 0.641070223
2015 0.975872 0.144179 0.314202 0.23154 0.797932
Table 2: Field Study, 2017
Although 2012 was the year with the highest claims payment, the loss ratio for that year was not the
highest. The year with the highest loss ratio was 2008. This is because loss ratio takes into consideration
the net premium earned for each year. It is a ratio that shows how much claims was paid from the net
premium earned. The lowest Loss Ratio was experienced in 2009. 2012 was the year with the highest
total assets. However, the Return on Assets (total assets when compared in relation to the PAT) shows
that 2012 was the year with the lowest ROA. The highest ROA was experienced in 2015. 2015 was the
year with the highest shareholders’ equity and it is also the year with the highest Return on Equity. 2006
is the year with the lowest shareholders’ equity and it is also the year with the lowest ROE. Although,
2013 was the year with the highest total investment, it wasn’t the year with the highest Return on
Investment. Year 2009, the year with the lowest total investment experienced the highest ROI with 2008
experiencing the lowest ROI. Year 2007 was the year with the highest expense ratio while year 2009 was
the year with the lowest expense ratio. The expense ratio is the ratio that shows the relationship between
the company’s net premium and the expense incurred in acquiring the net premium. The mean of the loss
ratio, ROA, ROE, ROI and E/R are 0.495959931, 0.043703106, 0.115888283, 0.425657358, and
0.424971 respectively. The aforementioned are depicted in the chart below

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 2.5

1.5

0.5

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

LOSS RATIO ROA ROE ROI ER

Graph 1: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of Leadway Insurance
CUSTODIAN AND ALLIED INSURANCE
NET PAT TOTAL SHAREHOL NET TOTAL
MGT
CLAIMS ASSET DERS’ PREMIUM INVESTME
EXPENSE
INVESTME WRITTEN NT
S
NT
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 173,316 576,148 329,727 5,596,537 3,034,941 1,381,583 266,342
2007 302,733 916,952 534,913 5,664,176 4,564,904 2,232,603 662,320
2008 696,432 1,559,551 650,217 11,941,319 8,944,159 3,169,309 1,225,405
2009 696,432 2,032,217 782,188 14,135,877 11,133,800 3,596,489 1,295,136
2010 1,457,634 1,980,229 901,788 16,004,196 12,029,586 5,320,717 10,489,143
2011 1,457,634 1,308,776 886,813 18,013,383 12,420,210 4,732,284 3,235,954
2012 2,062,456 822,674 1,137,455 24,340,553 12,039,647 6,579,191 16,733,604
2013 3,411,509 2,065,076 1,752,675 29,176,148 10,082,795 10,284,842 16,066,502
2014 3,484,692 2,197,842 1,812,400 27,574,450 10,494,326 4,426,287 18,451,574
2015 2,596,481 2,801,671 1,999,057 27,874,257 11,968,436 5,746,710 15,144,854
Table 3: Extracted from Nigeria Insurance Digest 2006 – 2015

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 LOSS RO A RO E RO I ER
RATIO
2006 0.125447 0.102947 0.189838 2.163189 0.238659
2007 0.135596 0.161886 0.20087 1.384455 0.239592
2008 0.219743 0.130601 0.174365 1.272682 0.20516
2009 0.193642 0.143763 0.182527 1.569115 0.217487
2010 0.273954 0.123732 0.164613 0.188788 0.169486
2011 0.308019 0.072656 0.105375 0.404448 0.187396
2012 0.313482 0.033798 0.06833 0.049163 0.172887
2013 0.331703 0.07078 0.204812 0.128533 0.170413
2014 0.787272 0.079706 0.209431 0.119114 0.409463
2015 0.45182 0.100511 0.234088 0.184992 0.347861
Table 4: Field Study, 2017
The lowest loss ratio was experienced in year 2006 and the highest loss ratio was experienced in 2014
which are the also the year with the lowest and highest net claims payments. The lowest ROA was
experienced in 2012 and the highest ROA was experienced in 2007 even though 2006 had the lowest
total assets. The lowest ROE was in 2012 and the highest in 2015. The lowest ROI was in 2012 and the
highest ROI was in 2006 which was the year with the lowest total investment. The lowest E/R was
experienced in 2010 and the highest in 2014. The mean of the loss ratio, ROA, ROE, ROI and O/M are
0.314067891, 0.102038025, 0.173425032, 0.746447857 and 0.235840423 respectively. The following are
depicted in the chart below

2.5

1.5

0.5

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

LOSS RATIO ROA ROE ROI ER

Graph 2: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of Custodian Insurance

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 MUTUAL BENEFIT
NET PAT TOTAL SHAREHO NET TOTAL
MGT
CLAIMS ASSET LDERS’ PREMIUM INVESTM
EXPENSE
INVESTME WRITTEN ENT
S
NT
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 58,220 702,220 336,030 5,164,930 4,035,689 1,839,552 89,470
2007 93,294 1,037,682 448,296 9,948,002 8,997,967 2,084,487 515,763
2008 49,142 -1,554,521 1,050,855 9,928,188 4,264,402 905,684 259,772
2009 49,142 212,531 182,020 5,609,414 2,158,771 1,086,380 316,941
2010 1,059,487 758,450 1,148,049 9,844,995 5,075,991 2,943,685 5,075,494
2011 1,059,487 763,828 1,633,272 12,199,778 5,839,820 5,285,482 4,197,322
2012 1,354,066 -475,292 2,251,591 13,893,809 4,984,335 4,559,148 7,610,737
2013 1,684,865 530,083 2,432,720 14,448,462 3,305,130 4,448,312 8,567,961
2014 1,259,128 2,243,768 2,656,433 14,488,600 5,548,649 5,283,657 7,977,595
2015 1,087,324 652,613 2,690,917 15,798,729 6,201,262 4,581,656 7,021,543
Table 5: Extracted from Nigeria Insurance Digest 2006 - 2015
LOSS RO A RO E RO I
ER
RATIO

2006 0.031649 0.135959 0.174003 7.848664 0.182669

2007 0.044756 0.104311 0.115324 2.011936 0.215063
2008 0.05426 -0.15658 -0.36453 -5.98417 1.160289
2009 0.045235 0.037888 0.09845 0.67057 0.167547
2010 0.359919 0.077039 0.149419 0.149434 0.390004
2011 0.200452 0.06261 0.130796 0.18198 0.309011
2012 0.297 -0.03421 -0.09536 -0.06245 0.493862
2013 0.378765 0.036688 0.160382 0.061868 0.546886
2014 0.238306 0.154864 0.404381 0.281259 0.502764
2015 0.237321 0.041308 0.105239 0.092944 0.587324
Table 6: Field Study, 2017
The company’s loss ratio was at the lowest in 2012, the year in which the company experienced losses
and at the highest in 2013. The company’s ROA was at its lowest in the year 2008 with a negative ratio
and the highest in 2014. The company ROE was also at its lowest in 2008, a year the company
experienced losses and at the highest in 2014. The company ROI is at the highest in 2006, the year with
the lowest total investment and lowest in 2012. The expense ratio of the company was at the lowest in
2009 and highest in 2008. The mean of the loss ratio, ROA, ROE, ROI and E/R are 0.188766257,

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 0.045988201, 0.087810224, 0.52520296 and 0.455542006 respectively. The following is depicted in the
chart below.

10
8
6
4
2
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-2
-4
-6
-8

LOSS RATIO ROA ROE ROI ER

Graph 3: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of Mutual Benefit Insurance

NEM INSURANCE PLC

NET PAT TOTAL SHAREHOL NET TOTAL
MGT
CLAIMS ASSET DERS’ PREMIUM INVESTME
EXPENSE
INVESTME WRITTEN NT
S
NT
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 44,090 8,772 178,666 1,022,814 369,484 818,272 82,875
2007 203,984 399,808 829,085 5,158,799 3,951,772 2,501,802 91,937
2008 713,686 461,676 597,444 4,997,941 4,037,646 3,738,691 147,262
2009 713,686 857,032 -25,576 5,558,149 4,695,651 4,148,960 163,211
2010 1,659,404 833,854 16,476 7,031,641 5,651,578 5,291,401 3,246,575
2011 1,659,404 1,297,646 976,151 8,238,384 6,670,812 7,525,020 3,609,350
2012 2,879,691 434,075 1,294,309 7,580,146 4,316,427 9,066,054 4,934,032
2013 2,965,052 368,908 1,526,006 9,627,877 4,685,323 7,936,798 6,854,323
2014 2,568,166 1,507,179 1,586,748 10,977,314 5,900,713 7,936,798 7,018,834
2015 3,799,062 685,460 2,139,140 12,087,666 6,207,334 8,270,205 7,333,463
Table 7: Extracted from Nigeria Insurance Digest 2006 - 2015

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 LOSS RO A RO E RO I E/R
RATIO
2006 0.053882 0.008576 0.023741 0.105846 0.218345
2007 0.081535 0.0775 0.101172 4.348717 0.331395
2008 0.190892 0.092373 0.114343 3.135065 0.1598
2009 0.172016 0.154194 0.182516 5.251068 -0.00616
2010 0.313604 0.118586 0.147544 0.256841 0.003114
2011 0.220518 0.157512 0.194526 0.359523 0.129721
2012 0.317634 0.057265 0.100563 0.087976 0.142764
2013 0.373583 0.038317 0.078737 0.053821 0.19227
2014 0.323577 0.137299 0.255423 0.214734 0.199923
2015 0.459367 0.056707 0.110427 0.09347 0.258656
Table 8: Field Study, 2017
The company’s highest loss ratio was in 2015 and the lowest in 2006, which were also the years with the
highest and lowest claims payment respectively. The lowest ROA was in year 2006, the year with the
lowest total asset and the highest was in 2011. The company’s highest ROE was experienced in 2014
and the lowest in 2006. The company’s highest ROI was experienced in 2009 and the lowest in 2013.
The company’s highest expense ratio was experienced in 2007 and the lowest in 2009. The mean of the
loss ratio, ROA, ROE, ROI and E/R are 0.250660813, 0.089832995, 0.130899262, 1.390706146 and
0.162982416 respectively. The chart below depicts the aforementioned.

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-1

LOSS RATIO ROA ROE ROI ER

Graph 4: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of NEM Insurance

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Electronic copy available at: https://ssrn.com/abstract=3126220

 AIICO GENERAL INSURANCE CO. LTD
NET PAT TOTAL SHAREHOL NET TOTAL
MGT
CLAIMS ASSET DERS’ PREMIUM INVESTM
EXPENSE
INVESTMEN WRITTEN ENT
S
T
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 56,029 483,702 1,105,700 8,704,155 5,869,964 2,696,973 385,366
2007 149,915 -304,709 1,435,129 12,969,425 6,310,977 3,088,404 576,233
2008 785,050 620,708 1,936,751 7,293,941 4,812,215 3,088,404 576,233
2009 785,050 913,287 1,172,609 30,631,006 5,751,632 3,615,547 488,076
2010 1,792,021 1,144,508 838,515 34,939,873 18,024,734 4,904,819 4,403,499
2011 1,792,021 1,332,464 1,916,455 29,377,856 10,242,571 16,128,960 1,153,478
2012 1,804,470 1,247,963 1,123,751 34,868,088 11,589,876 15,730,457 5,936,612
2013 1,775,471 -930,157 1,370,567 41,718,939 10,642,161 5,012,795 6,518,658
2014 2,323,027 2,131,893 2,407,914 12,625,200 11,634,729 4,500,457 7,774,653
2015 1,523,430 966,465 2,639,439 13,990,177 9,444,775 4,835,581 8,578,587
Table 9: Extracted from Nigeria Insurance Digest 2006 - 2015

LOSS RO A RO E RO I E/R
RATIO
2006 0.020775 0.055571 0.082403 1.255176 0.409978
2007 0.048541 0.023494 0.048282 0.528795 0.464683
2008 0.254193 0.085099 0.128986 1.077182 0.627104
2009 0.217132 0.029816 0.158787 1.871198 0.324324
2010 0.365359 0.032757 0.063497 0.259909 0.170957
2011 0.111106 0.045356 0.130091 1.155171 0.118821
2012 0.114712 0.035791 0.107677 0.210215 0.071438
2013 0.354188 -0.0223 -0.0874 -0.14269 0.273414
2014 0.516176 0.16886 0.183235 0.274211 0.535038
2015 0.315046 0.069082 0.102328 0.11266 0.545837
Table 10: Field Study, 2017
The company’s loss ratio was at the highest in 2014, the year with the highest claims payment and the
lowest was in the year 2006 which was also the year with the lowest claims payment. The highest ROA
was in 2014 and the lowest in 2013. The company’s highest ROE was in 2014 and the lowest in 2013
even though the company’s shareholders’ investment was at the highest in 2010. The company’s ROI
was at the highest in 2006, though that was the year with the lowest total investment accumulation and at
the lowest in 2013. The company’s highest expense ratio was in 2008 and the lowest was in 2012. The

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 mean of the loss ratio, ROA, ROE, ROI and O/M are 0.2317227, 0.052353027, 0.091788323,
0.660182456 and 0.354159388 respectively. The following is depicted in the chart below

1.5

0.5

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

-0.5

LOSS RATIO ROA ROE ROI ER

Graph 5: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of AIICO Insurance

GREAT NIGERIA
NET PAT TOTAL SHAREHOLD NET TOTAL
MGT
CLAIMS ASSET ERS’ PREMIUM INVESTM
EXPENSES
INVESTMENT WRITTEN ENT
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 15,299 -155,355 301,245 6,931,183 5,967,390 425,252 200,642
2007 32,681 90,249 264,771 6,882,672 6,059,241 748,216 351,556
2008 234,320 -295,634 336,976 3,898,414 3,188,982 704,217 88,435
2009 234,320 -2,288,756 405,871 2,135,598 1,362,975 801,956 837,023
2010 263,549 19,158 71,825 2,427,782 5,366,034 1,017,539 942,194
2011 263,549 143,800 380,586 2,685,712 4,262,540 1,154,831 942,194
2012 13,157 903,096 501,780 2,787,000 5,352,912 1,188,542 1,331,699
2013 13,157 903,096 501,780 2,787,000 5,352,912 1,188,542 1,331,699
2014 474,112 -101,697 817,522 4,495,885 5,318,376 1,118,889 2,867,667
2015 474,112 -101,697 817,522 4,495,885 5,318,376 1,118,889 2,867,667
Table 11: Extracted from Nigeria Insurance Digest 2006 – 2015
LOSS RO A RO E RO I E/R
RATIO
2006 0.035976 -0.02241 -0.02603 -0.77429 0.708392

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 2007 0.043679 0.013112 0.014894 0.256713 0.35387
2008 0.332738 -0.07583 -0.0927 -3.34295 0.478512
2009 0.292186 -1.07172 -1.67924 -2.7344 0.506101
2010 0.259006 0.007891 0.00357 0.020333 0.070587
2011 0.228214 0.053543 0.033736 0.152622 0.32956
2012 0.01107 0.324039 0.168711 0.678153 0.422181
2013 0.01107 0.324039 0.168711 0.678153 0.422181
2014 0.423735 -0.02262 -0.01912 -0.03546 0.730655
2015 0.423735 -0.02262 -0.01912 -0.03546 0.730655
Table 12: Field Study, 2017
Great Nigeria Plc. has the highest net claims in the year 2014 and 2015 and the lowest net claims in 2012
and 2013 respectively. The company lowest PAT was in 2009 and highest in 2012 and 2013 respectively
which was the year with the lowest claims payment. 2006 was the year with the highest total asset and
2009 was the lowest. The company’s shareholder investment was at the highest in 2007 and lowest in
2009. The company’s net written premium was at the lowest in 2006 and highest in year 2012 and 2013,
which was also the year with the lowest net claims payment. The company’s total investment was at the
highest in 2014 and 2015 and at the lowest in 2008. The highest management expenses for the company
was in 2014 and 2015, the years with the highest claims payment and total investment and the lowest
was in 2010.
The company’s loss ratio was the lowest in 2012 and 2013. This could be due to the fact that the lowest
claims payment was made in those years. The highest loss ratio was in 2014 and 2015, the year with the
highest loss ratio. Year 2011 was the year with the highest ROA with year 2009 being the year with the
lowest ROA. The highest ROE was in 2012 and 2013 and the lowest in 2009. The company experienced
the highest ROI in 2012 and 2013 and the lowest in 2008. The company had the highest expense ratio
2014 and 2015 and the lowest in 2010. The mean of the loss ratio, ROA, ROE, ROI and E/R are
0.206140843, -0.049258132, -0.144659519, -0.51365936 and 0.475269381. The following is depicted in
the chart below

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 1
0.5
0
-0.5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

-1
-1.5
-2
-2.5
-3
-3.5
-4

LOSS RATIO ROA ROE ROI ER

Graph 6: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of Great Nigeria Insurance

NIGERIA AGRICULTURAL INSURANCE

NET PAT TOTAL SHAREHOLD NET TOTAL
MGT
CLAIMS ASSET ERS’ PREMIUM INVESTM
EXPENSES
INVESTMENT WRITTEN ENT
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 8,861 151,656 291,523 3,410,675 2,990,516 511,869 66,579
2007 8,871 190,539 291,523 3,620,519 3,181,056 488,269 68,008
2008 88,443 187,343 6,432 6,172,446 5,668,397 752,795 75,451
2009 88,443 386,565 1,128,820 11,800,380 5,668,397 798,935 75,451
2010 8,871 55,161 560,358 6,756,420 5,256,747 810,517 3,332,345
2011 171,862 231,390 175,202 7,267,662 6,740,977 1,117,377 3,727,224
2012 193,297 -156,122 395,779 7,442,950 6,687,564 925,556 3,727,224
2013 686,872 685,892 189,743 7,170,821 6,004,549 717,584 5,609,488
2014 42,910 394,950 74,432 8,668,734 7,764,182 1,039,360 7,723,500
2015 3,495 -194,264 1,104,912 8,540,096 7,050,515 864,783 7,422,334
Table 13: Extracted from Nigeria Insurance Digest 2006 - 2015

LOSS RO A RO E RO I E/R
RATIO

2006 0.017311 0.044465 0.050712 2.277835 0.569527

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 2007 0.018168 0.052628 0.059898 2.801715 0.597054
2008 0.117486 0.030352 0.03305 2.482976 0.008544
2009 0.110701 0.032759 0.068197 5.123391 1.412906
2010 0.010945 0.008164 0.010493 0.016553 0.691359
2011 0.153808 0.031838 0.034326 0.062081 0.156798
2012 0.208844 -0.02098 -0.02335 -0.04189 0.427612
2013 0.957201 0.09565 0.114229 0.122274 0.264419
2014 0.041285 0.04556 0.050868 0.051136 0.071613
2015 0.004041 -0.02275 -0.02755 -0.02617 1.277675
Table 14: Field Study, 2017
The company’s highest loss ratio was experienced in 2013, the year with the highest claims payment and
lowest in 2015, the year with the lowest claims payment. The company’s ROA was at the highest in 2013
even though the company had the highest total asset in 2009 and lowest in 2015 even though the
company had the lowest total asset in 2006. The company’s ROE was at the highest in 2007 even though
the company’s highest shareholders’ investment was in 2014 and lowest in 2015 with 2006 being the year
with the lowest shareholders’ investment. The company’s highest ROI was experienced in 2009 even
though the company’s total investment was in 2014 and lowest in 2015 with 2006 being the year with the
lowest total investment accumulation. The highest expense ratio was in 2009 and lowest in 2008. The
mean of loss ratio, ROA, ROE, ROI and E/R are 0.163979144, 0.029769295, 0.037087522, 1.286990102
and 0.547750717 respectively. The following is depicted in the chart below.

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-1

LOSS RATIO ROA ROE ROI ER

Graph 7: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of Nigeria Agricultural Insurance

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 NICON INSURANCE PLC
NET PAT TOTAL SHAREHOL NET TOTAL
MGT
CLAIMS ASSET DERS’ PREMIUM INVESTM
EXPENSE
INVESTME WRITTEN ENT
S
NT
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 123,830 2,420,681 1,602,339 33,664,583 8,071,410 3,513,626 710,290
2007 123,830 2,420,681 1,602,339 33,664,583 8,071,410 3,513,626 710,290
2008 746,035 508,493 929,641 25,667,426 15,598,654 1,164,524 650,058
2009 746,035 2,070,664 762,599 39,891,313 15,598,654 2,780,473 47,285
2010 259,483 -60,252 1,053,640 58,120,864 11,821,621 1,343,514 6,528,237
2011 259,483 -60,252 1,053,640 58,120,864 11,821,621 1,343,514 6,528,237
2012 359,483 -60,252 1,053,640 58,120,864 11,821,621 1,343,514 6,528,237
2013 359,483 -60,252 1,053,640 33,430,522 11,821,621 1,097,033 6,528,237
2014 484,880 -11,362,126 872,203 10,201,601 16,589,592 851,493 3,285,851
2015 484,880 -11,362,126 872,203 10,201,601 16,589,592 851,493 3,285,851
Table 15: Extracted from Nigeria Insurance Digest 2006 - 2015
Nicon Insurance Plc. highest net claims were in 2008 and 2009 and lowest in 2010 and 2011. The
company’s highest PAT was in 2006/2007 and lowest in 2014 and 2015 even though the company paid
the most claims in 2008 and 2009. The company’s total asset was at the highest in 2010, 2011 and 2012
and lowest in 2014 and 2015. The company’s shareholders’ investment was at the highest in 2014 and
2015 and lowest in 2006 and 2007. The company’s net written premium was at the highest in 2006/2007
and lowest in 2014 and 2015. The company highest total investment was in year 2010, 2011, 2012 and
2013 while the company’s lowest total investment was in year 2006 and 2007. The company’s highest
management expenses was in 2006/2007 which was also the year with the highest PAT and the lowest
was in 2009 even though more claims were paid in that year.
LOSS RO A RO E RO I E/R
RATIO
2006 0.035243 0.071906 0.299908 3.408018 0.456036
2007 0.035243 0.071906 0.299908 3.408018 0.456036
2008 0.640635 0.019811 0.032599 0.782227 0.798301
2009 0.268312 0.051908 0.132746 43.79114 0.27427
2010 0.193138 -0.00104 -0.0051 -0.00923 0.784242
2011 0.193138 -0.00104 -0.0051 -0.00923 0.784242
2012 0.267569 -0.00104 -0.0051 -0.00923 0.784242
2013 0.327687 -0.0018 -0.0051 -0.00923 0.960445

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 2014 0.569447 -1.11376 -0.68489 -3.45789 1.024322
2015 0.569447 -1.11376 -0.68489 -3.45789 1.024322
Table 16: Field Study, 2017
The company’s highest loss ratio was in 2008 which was one of the year in which the company had the
highest net claims. The company’s lowest loss ratio was in 2012. The company’s ROA was at the highest
in 2006/2007 and lowest in 2014 & 2015 which were the year with the lowest total assets. The company’s
ROE was at the highest in 2006/2007 which were the years with the lowest shareholders’ equity and
lowest in 2014/2015 which were the years with the highest shareholders’ investment. The company’s
highest ROI was in year 2009 and the lowest were in 2014/2015. The highest expense ratio was in 2014
and 2015 and the lowest was in 2009. The mean of loss ratio, ROA, ROE, ROI and O/M are
0.309985759, -0.201690031, -0.062501575, 4.443669495, 0.734645712 respectively. This is depicted in
the chart below.

50

40

30

20

10

0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-10

LOSS RATIO ROA ROE ROI ER

Graph 8: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of NICON Insurance

GUINEA INSURANCE
NET PAT TOTAL SHAREHOL NET TOTAL
MGT
CLAIMS ASSET DERS’ PREMIUM INVESTME
EXPENSE
INVESTMEN WRITTEN NT
S
T
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 12,417 90,928 185,942 1,324,642 679,736 669,296 15,310
2007 23,796 92,605 142,003 4,053,981 3,513,186 244,808 53,989
2008 42,027 75,348 48,096 4,090,872 3,337,995 900,583 199,441

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2009 166,989 260,406 122,482 4,221,637 3,297,364 1,049,877 18,011
2010 42,027 -106,002 285,344 4,090,759 3,141,183 1,339,835 2,475,939
2011 166,989 -655,741 329,128 3,803,653 2,647,717 1,017,768 1,574,710
2012 281,268 50,090 732,445 3,958,154 2,562,012 1,030,395 2,448,192
2013 324,281 39,835 534,652 4,213,959 2,982,953 985,182 2,535,327
2014 243,517 -81,898 750,143 4,564,728 2,896,428 850,603 2,491,567
2015 269,135 -7,227 705,954 4,116,103 2,899,952 617,517 2,450,932
Table 17: Extracted from Nigeria Insurance Digest 2006 - 2015
Guinea Insurance Plc has the highest net claims in 2013 and the lowest in 2006. The company’s PAT
was at the highest in 2009 and lowest in 2011 even though the company paid more claims in 2013. The
company’s total asset was at the highest in 2014 and lowest in 2006. The highest shareholders’
investment was in 2007 and the lowest was in 2006. The company’s net premium written was at the
highest in 2010 and lowest in 2015. The company’s total investment was at its highest in 2013 and lowest
in 2006. The highest management expenses for the company were in 2014 and lowest in 2008.
LOSS RO A RO E RO I E/R
RATIO
2006 0.018552 0.068643 0.13377 5.939125 0.277817
2007 0.097203 0.022843 0.026359 1.715257 0.580059
2008 0.046666 0.018419 0.022573 0.377796 0.053405
2009 0.159056 0.061684 0.078974 14.45816 0.116663
2010 0.031367 -0.02591 -0.03375 -0.04281 0.21297
2011 0.164074 -0.1724 -0.24766 -0.41642 0.323382
2012 0.272971 0.012655 0.019551 0.02046 0.710839
2013 0.329158 0.009453 0.013354 0.015712 0.542694
2014 0.286287 -0.01794 -0.02828 -0.03287 0.881896
2015 0.435834 -0.00176 -0.00249 -0.00295 1.143214
Table 18: Field Study, 2017
The company’s loss ratio was the highest in 2015 even though the company made more claims payment
in 2013 and the lowest was in 2010 even though the lowest claims payment was made in 2006. The
company’s ROA was highest in 2006 which was the year with the lowest total asset and lowest in 2011.
The company’s ROE was at the highest in 2006 which was the lowest year in shareholders’ equity
accumulation and lowest in the 2011. The company’s ROI was at the highest in 2009 and lowest in 2011.
The company’s expense ratio is at the highest in 2015 and lowest in 2008. The mean of loss ratio, ROA,
ROE, ROI and O/M are 0.184116944, -0.002431087, -0.001759538, 2.203146217 and 0.107858056
respectively. This is depicted in the chart below.

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 16
14
12
10
8
6
4
2
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-2

LOSS RATIO ROA ROE ROI ER

Graph 9: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of Guinea Insurance

INVESTMENT AND ALLIED INSURANCE PLC

NET PAT TOTAL SHAREHOL NET TOTAL
MGT
CLAIMS ASSET DERS’ PREMIUM INVESTME
EXPENSE
INVESTMEN WRITTEN NT
S
T
‘000 ‘000 ‘000 ‘000 ‘000 ‘000 ‘000
2006 11 41,025 164,598 3,106,119 14,631,935 68,231 89,305
2007 63,933 304,656 164,598 7,435,974 14,631,935 201,982 438,100
2008 41,423 356,999 172,758 14,994,180 14,631,935 379,823 425,331
2009 41,423 85,594 405,683 15,120,126 14,493,259 440,593 182,020
2010 910,203 85,594 405,683 15,120,126 14,493,259 440,593 13,613,427
2011 910,203 -715,003 158,394 353,569 -946,495 37,927 327,138
2012 910,203 -715,003 158,394 353,569 -946,495 37,927 327,138
2013 4,838 -205,708 169,499 354,285 -955,259 4,399 327,138
2014 4,838 -205,708 169,499 354,285 -955,259 4,399 327,138
2015 4,838 -205,708 169,499 354,285 -955,259 4,399 327,138
Table 19: Extracted from Nigeria Insurance Digest, 2006 – 2015
LOSS RO A RO E RO I E/R
RATIO
2006 0.018552 0.068643 0.13377 5.939125 0.277817
2007 0.097203 0.022843 0.026359 1.715257 0.580059

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 2008 0.046666 0.018419 0.022573 0.377796 0.053405
2009 0.159056 0.061684 0.078974 14.45816 0.116663
2010 0.031367 -0.02591 -0.03375 -0.04281 0.21297
2011 0.164074 -0.1724 -0.24766 -0.41642 0.323382
2012 0.272971 0.012655 0.019551 0.02046 0.710839
2013 0.329158 0.009453 0.013354 0.015712 0.542694
2014 0.286287 -0.01794 -0.02828 -0.03287 0.881896
2015 0.435834 -0.00176 -0.00249 -0.00295 1.143214
Table 20: Field Study, 2017
Investment and Allied Insurance Plc made the highest net claims payment in 2010, 2011 and 2012 and
the lowest in 2006. The company’s PAT was at the highest in 2008 and lowest in 2011 and 2012. The
company’s total asset was at the highest in 2009 and 2010 and lowest in 2011 and 2012. The company’s
shareholders’ investment was at the highest and at the same figure in 2006, 2007, 2008, 2009, 2010 and
lowest with the same figure at 2011, 2012, 2013, 2014 and 2015. The company’s highest net premium
written was in 2009 and 2010 and lowest with the same figures in 2013, 2014 and 2015. The total
investment was at the highest in 2010 and lowest in 2006. The company’s highest management
expenses was in the year 2009/2010, the years with the highest accumulation of total assets and the
lowest was in 2011/2012 which were also the years with lowest shareholders’ investments.
The company’s loss ratio was at the highest in 2010 and lowest in 2006, the year with the lowest claims
payment. The company’s ROA was at the highest in 2007 and lowest in 2011 and 2012. The company
had a negative ROA from 2011 – 2015. The company’s ROE was at the highest in 2011 and 2012 even
though the company’s shareholders’ equity was low in these years and at the lowest in 2009 and 2010.
The company’s ROI was at the highest in 2008 and lowest at 2011 and 2012 with negative figures. The
company’s highest expense ratio for the year under review was in 2013, 2014 and 2015 and lowest in
2008. The mean of the loss ratio, ROA, ROE, ROI and O/M are 5.38826368, -0.569706557,
0.221670691, -0.378703544, 12.94699914 respectively. This is depicted in the chart below.

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 45
40
35
30
25
20
15
10
5
0
-5 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

LOSS RATIO ROA ROE ROI ER

Graph 10: Loss Ratio, Return on Assets, Return on Equity, Return on Investment and Expense
Ratio of Investment and Allied Insurance
4.2 TEST OF HYPOTHESES
After a careful and systematic analysis of the data obtained for the purpose of this research work, the
following hypotheses were tested using correlation analysis with the aid of Statistical Packages for Social
Sciences (SPSS) 20.0.
Hypothesis 1:
There are no significant relationship between claims management and profitability of non – life insurance
companies in the Nigeria insurance industry.
Correlations
Descriptive Statistics
Mean Std. Deviation N
LOSS RATIO 7.7336640 16.24417055 10
PROFITABILIT
10.9798872 14.21037844 10
Y
Correlations
LOSS PROFITABILI
RATIO TY
Pearson Correlation 1 -.448
LOSS RATIO Sig. (2-tailed) .194
N 10 10
Pearson Correlation -.448 1
PROFITABILIT
Sig. (2-tailed) .194
Y
N 10 10

The table above shows the correlations between loss ratio (which is used to measure claims
management) and profitability of selected non-life insurance companies in Nigeria. From the correlation

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result of hypothesis one, loss ratio has a moderate negative correlation with a correlation coefficient (r)
of -0.448 with profitability. Also, since the p-value is .194 which is greater than 0.01, thus it is not
significant at 1%. Loss ratio negatively influences profitability. This means that as the loss ratio
increases, the profitability of the selected non-life insurance company is expected to decrease. The p-
value(0.194) being greater than the alpha value(0.01) means that the null hypothesis that there is no
significant relationship between claims management and profitability of non – life insurance companies
in Nigeria is accepted while the alternate hypothesis which states there is a significant relationship
between claims management and profitability of non – life insurance companies in Nigeria is rejected.
Hypothesis 2:
There are no significant relationship between claims management and operating cost of non – life
insurance companies in the Nigeria insurance industry.
Correlations
Descriptive Statistics
Mean Std. Deviation N
LOSS RATIO 7.7336640 16.24417055 10
EXPENSE
16.8224543 39.61217243 10
RATIO
Correlations
LOSS RATIO EXPENSE RATIO
**
Pearson Correlation 1 .997
LOSS RATIO Sig. (2-tailed) .000
N 10 10
**
Pearson Correlation .997 1
EXPENSE
Sig. (2-tailed) .000
RATIO
N 10 10
**. Correlation is significant at the 0.01 level (2-tailed).
The table above shows the correlations between loss ratio (which is used to measure claims
management) and expense ratio (which is used to measure operating cost). From the correlation result of
hypothesis two, loss ratio has a strong positive correlation with a correlation coefficient (r) of 0.997 with
expense ratio. Also, since the p-value is .000 which is less than 0.01, thus it is significant at 1%. This
implies that claims management positively influences the operating cost of the selected non – life
insurance companies. This means that as loss ratio increases so does the expense ratio. Thus, the null
hypothesis that there is no significant relationship between claims management and operating cost is
rejected while the alternate hypothesis which states there is a significant relationship between claims
management and operating cost is accepted.

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 5. SUMM ARY OF FINDINGS, RECOMMENDATIONS AND SUGGESTIONS FOR FURTHER
STUDIES
This research study empirically investigated the impact of claims management on the profitability of non –
life insurance companies in Nigeria using a case study of selected insurance companies. The summaries
deduced from the major findings of the study which resulted from the analysis of data are as follows:
i. Findings from the study revealed that a company with a high claims payment might have a low
loss ratio and a company with a low claims payment may have a high loss ratio. This is because loss ratio
is ratio of the claims paid in relation to the premium received.
ii. Findings from the study revealed that loss ratio negatively influences profitability. This means that
as the loss ratio increases, the profitability of the selected non-life insurance company is expected to
decrease.
iii. Findings from the study revealed that there is no significant relationship between claims
management and profitability of non – life insurance companies in Nigeria. This implies that despite
efforts put in by an insurance company to manage its claims appropriately, a catastrophic event could still
frustrate such efforts and negatively affect the profitability of such company. Also, an insurance company
with a high claims could still have a lot of profit from investments which could cushion the impact of the
high claims payment thereby not affecting the company’s profitability.
iv. Findings from the study revealed that claims management positively influences the operating cost
of the selected non – life insurance companies. This means that as loss ratio increases so does the
expense ratio.
v. The research study found out that there is a significant relationship between claims management
and operating cost of the selected non – life insurance companies.
vi. The research study found out that effective and efficiency claims management would improve
service delivery to consumers, insurance patronage and revenue generation of non – life insurance
company in the Nigeria insurance industry.
Based on the findings of this study, the following recommendations are hereby offered:

i. The finding shows that claims negatively affect the profitability of selected non – life insurance

companies. Therefore, it is recommended that insurance companies empower their underwriting staffs

through proper trainings and seminar so as to avoid adverse selection. This is in line with Yusuf T. O and

Dansu F. S (2014) suggestion that Nigerian insurers should pay due attention to their underwriting

activities to ensure objective risk selection and management and Tribuzio (2009) who postulated that a

good claims system all starts with the right selection of risk.

ii. It is recommended that the claims management department should be properly structured with

highly technical, trained and experienced staff so as to manage the claims of the insurance companies

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properly as a well - managed claim leads to profitability through repeated purchase. This is in line with

Yusuf T. O and Abass O. A (2013) assertion that excellence in claims handling gives an insurance

company a competitive edge over its competitors therefore the head of claims should be part of top

management team, staff in claims department must be exposed to training and insurance companies

must internalize organizational philosophy on claim handling process. Nagar (2009) also asserts that only

customer with repeat purchases are profitable.

iii. It is recommended that insurance companies should have a proper documentation for claims and

a well-structured strategy in place before the occurrence of claims. This is in line with Yusuf T.O and

Ajemunigbohun S. S. (2015) suggestion that claims manager should put forward strategic plans to

ensuring that insurance claims complaint files are properly kept, monitored and handled for needs that

may warrant its usefulness in the future.

iv. It is recommended that insurance companies annex their efforts with that of other experts (claims

analysts, law enforcement agencies etc.) in the field of claims management and government so as to

have the best results. This is in line with Yusuf T.O and Ajemunigbohun S. S. (2015) suggestion that

government should ammonize their resources and technical know-how with the Nigerian insurance

industry in ensuring that insurance claims are well designed to curtail fraudulent claims experienced in the

past.

v. Finally, it is recommended that insurance in a bid to make profit, should not forget the main

reason for their existence which is bringing the insured back to his/her pre-loss position by paying

genuine claims. Hence, all efforts should be made to pay genuine claims promptly as this will increase the

confidence of the general public in insurance and the industry as a whole.

6. CONCLUSIONS

From the aforementioned findings, the research study concludes that loss ratio is better parameter to

show if a company’s claims management process is effective. This is because a company who pay high

claims might have a low loss ratio compared to a company who pays lower claims with a high loss ratio.

Loss ratio put into consideration the amount of net written premium accumulated by the company in its

calculation.

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It could be concluded from the findings of the study through correlation analysis that loss ratio negativel y

influences profitability. This means that as the loss ratio increases, the profitability of the selected non-life

insurance company is expected to decrease although there is no significant relationship between claims

management and profitability of selected non – life insurance companies. An insurance company with a

high claims could still have a lot of profit from good investments which could cushion the impact of the

high claims payment. It could also be concluded that claims management positively influences the

operating cost of the selected non – life insurance companies. This means that as loss ratio increases so

does the expense ratio.

Based on the findings from the correlation analysis, it could also be concluded that there is a significant

relationship between claims management and operating cost of the selected non-life insurance

companies. This is so because claim is the largest single cost item for insurers. Therefore, a high claims

payment could increase the operating cost of an insurance company and vice versa. The study also help

to make conclusion that claims management improve insurance patronage and revenue generation in the

non – life sector of the Nigeria insurance industry.

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