Claims Payment, Risk-Based Capital as Determinants of Life Assurance Companies’ Profitability in Nigeria

Abstract

The study assessed the relationship between claims payment, risk-based capital and profitability of Life Assurance Companies in Nigeria. There are fourteen listed life insurers in the industry where data of six insurers were randomly selected from the companies` annual reports for the periods of 2011-2019. The data were made available in the Nigerian Insurers Association Digest. Ex-post factor research design was employed. Findings show that claims payment, proxied by Net Claim, Net Premium and Net Expenses and Risk-Based Capital have significant effect on profitability of life Insurance Companies in Nigeria. Four hypotheses were tested. The first hypothesis showed the p-value of 0.0095<0.005, confirming that Net Claim has significant effect on Profitability of listed Life Assurance Companies in Nigeria. The second hypothesis showed that, Net Premium has significant influence on Profitability of listed Life Assurance Companies in Nigeria with a p-value of 0.0081<0.05. The third hypothesis showed a coefficient of 0.003, p < 0.05), indicating that there is significant relationship between Expenses Ratio and Profitability of Life Assurance Companies in Nigeria. Finally, the fourth confirmed that Risk-Based Capital has significant effect on Profitability of listed Life Assurance Companies in Nigeria with a p-value 0.0089>0.05. The study therefore concluded that the life insurance companies should put in place strategies to ensure proper management of Net Claim, Net Premium, Net Expenses and Risk-Based Capital and also entrust these in the hands of experts to yield high results. The study recommended that the claim managers should work in cooperation with other sections of the insurer from the policy formation stage to its cessation to promote timely payment of genuine claims and increase the profitability of insurance firms through effective cost control.