The Effect Of Claim Settlement On Profit Maximization In The Insurance Industries
This project work has critically highlighted the compact of claims settlements on profit maximization in insurance industry, the problems affecting effective claims settlement in Nigeria have been identified and how they can be controlled is also included in the study.
Also circumstances given rise to claims, fraudulent claims and effect of inflation on claims settlement have been discussed and ways to solve them are inductive in the study.
This study also examines the lapses and recommends some viable point (s) that can also contribute to the image of the industry.
In conclusion, for effective claims settlement to arise, the insurer and the insured must agree as to the actual amount to be paid in the event of claims taking into consideration the principles and the risk guiding the handling of insurance claims.
Table of Content
- Title page
- Certification page
- Table of content
- 1.1 Background of the study.
- 1.2 Statement of problem
- 1.3 Purpose of the study
- 1.4 Significance of the study
- 1.5 Limitation of the study
2.0 The Review Of Related Literature
- 2.1 Classes of insurance
- 2.2 Principles of insurance
- 2.3 Notification of claims
- 2.4 Investigation of claims
- 2.5 Circumstances given rise to claims
- 2.6 Claims report
- 2.7 Claim settlement under individual
- 2.8 The problems affecting effective claims settlement.
3.0 Research Design and Methodology
- 3.1 Source of Data
- 3.2 Location of Data
- 3.3 Method of Data collection
5.0 Recommendation and Conclusion
- 5.1 Conclusion
- 5.2 Recommendation.
1.1 Background of the Study
I can remember a definition which I was forced to cram in my first year by Mrs. Helen Ibeabuchi she defined insurance as an economic path towards unlimited opportunities for financial growth and fulfillment in life through protection and security. Winston Churchill once referred to insurance as “ bringing the magic of averages to the rescue of million”. This magic is the outcome of voluntary economic co-operation by human beings. Before this was the working out of the law of average which tells the probability or chance that an event will or will not happen.
Insurance is an arrangement by which one party (the insurer) promises to pay another party a sum of money if some thing unexpected should happen which causes the insured to sustain a financial loss.
The responsibility for paying such losses is then transferred from the policyholder to the insurer. In return, for accepting the burden of paying for losses when the events occur, the insurer charges the insured a price, the insurance premium the development of the insurance premium.
This development of the insurance industry in Nigeria data back to 1921.
Further more, growth was not phenomenal until the Nigeria economy of the 60’s and early 80’s often described as the “ mushroomery era” of the market, obviously, a lot of the malpractices especially on claim settlement crept into the industry, which the earlier laws of 1961 and 1965 could not effectively cope with. There were cases of insurer denying liabilities on the robbery of a car on the ground that only theft cover is granted.
The creation and maintenance of a good public image presents continuing difficulties and much still remains to be done. Also the danger of not appreciated by the public. Little general information is available in other field such as public liabilities, contractor, and all risk e.t.c.
In spite of this, the regulation of any insurance company depend to a large extent on the sort of claim service rounded by the company.
An unreliable and inefficient claims department could rain the reputation of a company once they discover that the company is reluctant to pay or delays payment without good reason of their genuine claims.
In order to guard against delay in the settlement of claims the insurance decree of 1976 list some condition under which the director of insurance may council the certificate of registration of an insurance company. Therefore, an insurance who makes it a matter of regular practice of delaying claim payment may stand the risk of having his license canceled.
1.2 Statement of Problem
The very nature of insurance makes the creation of a good image a difficult task. The theme “that insurance provide security and peace of mind” is a good one but basically we have nothing than a piece of paper to offer which promises to pay if…
“Out difficulties in promoting confidence arising from the following factors.
- Insurance is so intangible and in many cases it has to be explained on a secure public interest by legible product such as a car which can provide immediate benefit and enjoyment.
- Insurance is highly technical: A policy is a contract which has to be carefully warded and misconceptions and doubts easily arise in public minds. Many people say that policies are written I deliberate jargon.
- The need for insurance is not really recognized more insurance is sold than it’s bought.
- Insurance are not always able to accept proposals, from all the soundly elements of selection often present.
- The value of insurance, not only to the individual but also to the economy of the country, is not easily appreciated by the general public. The fact that insurance is a export is slowly becoming known but parts played by branches such as find protection and aims protection are still not widely known.
The public is slow to recognized that in many respects, insurance provide what almost amount to social services, a fact which is more readily appreciated where other industries are concerned furthermore, an unpleasant habit of non payment of premium is regrettably emerging among some policy holders most especially the co-operations and government owned companies. The Neagon for this unwholesome some development is that many of the insured out of ignorance and belief relegate insurance matters to the background in their scale of priority where expenditures are concerned.
It is quite an indisputable fact that the industry had created some image problems for itself over recent years through the operational malpractice of its member particularly some unscrupulous brokers and fraudulent agents. As a result, many people perceived insurance as a legalized robbery. With this already dented image when companies are facing serious economic and financial problems. The answer quite clearly in aforementioned is that the need of insurance as a means of protecting investments has never much more manifested than now.
It is very difficult for companies. Individuals and even government to raise new capital to invest on various project and business enterprises.
Consequently, there is utmost need for every investor to take serious steps to secure and ensure that the investment already had are prevented from loss and distraction.
1.3 Purpose / Objective of the Study
- To find out effect of unsettled claims on profit maximization in the insurance industry
- To find out weather creation of disputes on insurance contracts is one of the claim settlements on profit maximization.
- To find out weather claim settlement involving policy holder on default has any effect on profitability in insurance industry.
- To find out the effect of claims concerning third party insurance and profit maximization.
- To find out the effect of prompt settlement on claims on profit maximization in insurance industry.
And that is why the research has decided to come up with the following questions.
- What is the effect of unsettled claim on profit maximization in insurance industry?
- What is the cause of disputes among the insurer and the insured on claim settlement in insurance industry?
- What is the effect of claim settlement on profit maximization on the side of policyholders in case of default and on the uneducated public?
- What is the effect of claim concerning third party insurance and profit maximization?
- What is the effect of prompt settlement claims on profit maximization in insurance industry?
1.4 The Significance of the Study
The misconception about insurance practice in Nigeria gives professional concern especially, in relation to claim settlement. Average Nigerians believe that an insurance is tend to interpret the rules to their own advantage by rejecting claims when one of these rules is not complied with by the insured. In Nigeria, the insurers operate the rules strictly like their colleagues in developed countries yet their image has been dented because the average Nigeria seems not to understand the practice of insurance.
The important of this study will enable the insuring public to know the concept behind insurance practice and the rules guiding both the insurer and insured during the negotiation of claims. It is the aim of this study to state clearly that insurance industry is not set up to collect premium only but to reduce the risk where by the insured is given peace of mind that in the event of damage or loss to his or her property, certain sum of money will become payable.
This study will also enlighten the general public that the insurers do investigated public policy where there is suspicious of fraudulent and exaggerate claims in the present competitive environment coupled with world wide recession, the implication for the insurance industry has been substantial drop in premium income for most classes of business and increasing incidence of claims. Therefore, insurance would not allow an insured person to take advantage of this economic recession by gaining that of their misfortune by deliberately damaging their property in order to claim the insurance money.
There have been allegations of malpractices, against the insurers. This research work would delve into such topics to determine whether they are factual.
1.5 Limitation of Study
The scope of this study covers Lagos and mainly Enugu areas. The researcher tends to reach Lagos area because it is center of insurance and other commercial activities in Nigeria. The city has the largest force in the country, following the view that where insurance is mostly needed.
Majority of the office of insurance companies are situated in Lagos and this will enable the researcher to have access to information and statistical data of gross figure and claims paid so far.
Limited are the areas of collection of data for this research study. The researcher encountered difficulties from the insurance companies chosen because they refuse to release their premium figure and claims settlement figures. One was offered to the Nigeria Insurance Association, the body that is responsible for the collection of data for insurance industries. Time factor and distance also contributed to the limit of the research work.
Recommendations and Conclusion
This research had stated the recognition of the need to understand the meaning of underwriting and claims.
It briefly explains the underwriting process and claim handling procedure as it affects profitability and prompt claim settlement.
This project work further to evaluate the value and qualities of various insurance policies, claim procedure, underwritten by sovereign trust insurance company in particular to how it has really affected the company’s profit claim settlement and declaration of profit to his share holders. The literature view started with a brief history of general business as practiced to Great Britain and how its started and developed in Nigeria and there after highlighting some of the problems associated with claim settlement. It ended with a review of the various documents required for understanding in gathering data for research, secondary source of information were colleted through personal interviews, library and desk research annual report etc Television, educating the insuring public with their rights and obligations housing claims in the contract of insurance. The analysis of the information gathered, the reconsideration was beyond that of qualitative education of under writing and claims procedure and documentation to a consideration of solvency position of the company. This is appreciating the fact that the need to settle the claims and when due should not jeoperalize the solvency position of the insurance company at any given time.
From the analysis done, it shows that the various problem encountered by the company in the view of providing profit and maximizing it to the interest of claim settled as when due under writing and claim administration has reflected to a considerable extent of low level of awareness of the insuring public still view insurance companies as a form of serving rather than means of protection. Also indemnity was the problem of adjournment and procrastination at Nigeria high courts in relation to the processing of necessary documents but are important in the claim settlement process. The company’s organizational structure has not enquired the company’s ability to settle a shareholders and clients obligation. It is well arranged and has not created a significant bottleneck in the claim process but however, the problems of inadequate communication which at times causes delay should be looked into.
Also noticed was at increase in general trend in claim by the company’s policyholder and the out cry of the neglect by shareholders as indicated by that rate at which claims are increasing is far greater than the rate of growth of items that can easily provide a cushion for it finally, if the company can pay special attention to their investors taking the pain to explain how insurance contract is being done and maintained and efficient underwriting and claim settlement will be a thing of ease and joy towards the parties concerned.
Based on what the research findings, the following recommendations are suggested in order not only to improve the performance, of servings trust insurance company limited but, to improve the entire insurance industry in Nigeria.
- Educating the insuring public will go a long way in solving the problem encountered by insurance in attempt to ensure efficient underwriting and prompt settlement of claims and profit maximization of the company.
- The insurance industry as a whole should try and set up committee to look into common problems associated to insurance companies and their shareholder and settlement of claim with main view of finding solution to them.
- Above all will recommend that efficient handling and settlement of claims promptly will in the short run reduce the level of profitability but in the long-run, the insurer will earn a reputation for himself from the insuring public have high business turnover, continually increasing gross premium income raising invisible income and thus substantial profit generation. Thus, it will have shown that efficient claim administration is necessary in any insurance company, it should not be assured that by settling claims, there would be a consequent reduction in profitability.
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