What accounts for the high underwriting losses in the Ghanaian insurance industry?

Abstract

PurposeThis research explores to answer the question: What accounts for the substantial underwriting losses in the Ghanaian insurance industry?Design/methodology/approachThirty-four (34) insurers' audited financial reports covering the period of 2007 to 2017 were analysed through dynamic panel regression to uncover the underlying causes of high underwriting losses in the Ghanaian insurance industry.FindingsThe findings indicate that efforts at increasing market share by overtrading add no value to insurers underwriting profitability. The underwriting risk suggests that the industry charges disproportionately too small premiums for the risks it underwrites. This may indicate under-pricing by some insurers to grow their customer base.Practical implicationsThe findings have implications for managerial efficiency and risk management structures that align compensation with underwriting efficiency.Originality/valueThe association between managerial preference and the underwriting performance of insurers in emerging markets has rarely been researched. This study responds to this knowledge challenge.