Claim Management of Non-Life Insurance Companies in Ghana: Does It Impact on Profitability?

Article DOI: https://doi.org/10.57017/jaes.v17.2(76).02

Author(s):

Alhassan BUNYAMINU University of Professional Studies, Ghana
Shani BASHIRU Accra Technical University, Ghana
Ibrahim NANDOM YAKUBU Ankara Yildirim Beyazit University, Turkey
Emmanuel AGGREY University of Professional Studies, Ghana
Angelina APPIAH University of Professional Studies, Ghana
Samuel AMPONSAH TUFFOUR University of Professional Studies, Ghana

Abstract:

This study seeks to interrogate the impact of claim management on the profitability of non-life insurance companies in Ghana covering the years 2013-2020. The study employs the fixed effects and random effects techniques with data covering the period 2013-2020. Hausman test is used as an appropriate approach to conduct this study. Our work measured profitability utilizing interpretive financial tools such as return on assets (ROA) and returns on equity (ROE).

The results of our research indicates that claim ratio and retention ratio have a profound adverse impact on return on asset. In terms of return on equity (ROE), claim ratio and expense ratio negatively and significantly affect profitability. This study recommends that non-life insurance companies should institute an effective claim processing system with highly qualified, experienced, trained and technical staff to ensure efficiency in claims management.

How to cite:

Bunyaminu, A., Bashiru, S., Nandom Yakubu, I., Aggrey, E., Appiah, A., Amponsah Tuffour, S. 2022. Claim Management of Non-Life Insurance Companies in Ghana: Does It Impact on Profitability? Journal of Applied Economic Sciences, Volume XVII, Summer, 2(76): 97 – 106. https://doi.org/10.57017/jaes.v17.2(76).02

References:

[1] Agrawal 2014. Dimension of knowledge management. Global Business Review, 15(1): 179-182. https://doi.org/10.1177/0972150914528076

[2] Akotey, J., Sackey, F., Amoah, L., Frimpong-Manso, R. 2013. The financial performance of life insurance companies in Ghana. Journal of Risk Finance, 3: 286-302.

[3] Akotey, O., Abor, J. 2013. Risk management in the Ghanaian insurance industry. Qualitative Research in Financial Markets, 5(1): 26-42.

[4] Capgemini. 2011. Claims system migration & enhancement cuts costs by $15 million and improves customer relationship. Available online: https://www.capgemini.com/wp-content/uploads/2017/07/ss_Claims_ Management.pdf

[5] Afolabi, T. 2018. Effect of Claims Payments on Profitability in The Nigerian Insurance Industry. Advances in Social Sciences Research Journal, 5(4): 94-101.

[6] Bougatef, K. 2017. Determinants of bank profitability in Tunisia: does corruption matter? Journal of Money Laundering Control, 20(1): 70-78. https://doi.org/10.1108/JMLC-10-2015-0044

[7] Hasibuan, A., Sadalia, I., Muda, I. 2020. The Effect of Claim Ratio, Operational Ratio and Retention Ratio on Profitability Performance of Insurance Companies in Indonesia Stock Exchange. International Journal of Research and Review, 7(3): 223-231.

[8] Kim 2015. Relationship between claims management and firm profitability in United State of America. Academic Research International, 1(3): 315-321.

[9] Oyedokun, G., Femi, G. 2018. Effects of Claims Management on Profitability of Listed Insurance Companies in Nigeria. American Journal of Management, 18(5): 37-45. https://doi.org/10.33423/ajm.v18i5.252

[10] Olarinre, O., Shoyemi, O., Edewusi, D. 2020. eEffects of claims management on profitability of insurance firms in Nigeria. British Journal of Management and Marketing Studies, 3(4): 106-114.

[11] Panjer, H., Willmott, G. 2015. Models for the Distribution of Aggregate Claims. Transactions of the Society of Actuaries, 36: 399-452.

[12] Putra, N.D.D. 2017. Influence growth of income, assets, ratio of claim and risk-based capital on the profitability of life insurance companies in Indonesia. International Journal of Business and Commerce, 6(09): 24-42.

[13] Quist, J. 2018. Impact of Claims Complaints on Profitability of Non-Life Insurance Operations in Ghana. University of Ghana digital collections. Available online: http://ugspace.ug.edu.gh/handle/123456789/29545

[14] Rao, J., Pandey, K. 2013. A study on factors influencing claims in general insurance business in India. The Journal of Risk Finance, 14(3): 303-314. https://doi.org/10.1108/JRF-11-2012-0071

[15] Tseng, L. 2017. Why do lenient claims handling practices exist in the insurance industry? A survey study of ethical decisions by claims adjusters. Managerial Finance, 43(11): 1254-1273. https://doi.org/10.1108/MF-02-2017-0050

[16] Yamane, T. 1967. Statistics, an Introductory Analysis. New York: Harper and Row.

[17] Yakubu, I.N. 2019. Does corruption grease or sand the wheels of bank profitability in Ghana? Cogent Economics & Finance, 7(1), 1701909.

[18] Yakubu, I.N., Bunyaminu, A. 2022. Bank Profitability in Sub-Saharan Africa: Does Economic Globalization Matter? Journal of Economic and Administrative Sciences. https://doi.org/10.1108/JEAS-08-2021-0158

[19] Yusuf, T., Dansu, F. 2014. Effect of claim cost on insurers’ profitability in Nigeria. International Journal of Business and Commerce, 3(10): 2-10.

[20] Yusuf, T. 2014. Brokers and the control of postcontractual opportunism in the Nigeria insurance market. Journal of Financial Crime, 17(2): 223-239. https://doi.org/10.1108/13590791011033917

[21] Yusuf, T., Ajemunigbohun, S. 2016. Effectiveness, efficiency and promptness of claims handling process in the Nigerian insurance industry. Journal of Economics and Business, 67(2): 69-84. DOI: https://doi.org/10.12955/ejbe.v10i2.686

*** National Insurance Commission. 2018. Annual insurance industry report, 2018. Accra: National Insurance Commission .

*** National Insurance Commission. 2019. Increasing insurance penetration in Ghana: The challenges and strategies. Accra: NIC.