effect OF CLAIM SETTLEMENT ON PROFIT MAXIMIZATION IN THE INSURANCE INDUSTRIES
EFFECT OF CLAIM SETTLEMENT ON PROFIT MAXIMIZATION IN THE INSURANCE INDUSTRIES
THE EFFECT OF CLAIM SETTLEMENT ON PROFIT MAXIMISATION IN THE INSURANCE INDUSTRIES, IN ABSTRACT
This research work has critically highlighted the compact of claims settlements on profit maximisation in the insurance business, as well as the challenges affecting effective claims settlement in Nigeria and how they might be controlled.
In addition, the paper discusses the situations that give birth to claims, fraudulent claims, and the influence of inflation on claim settlement, as well as possible solutions.
This study also investigates the flaws and suggests some viable point (s) that can help to improve the industry's image.
Finally, in order for effective claims settlement to occur, the insurer and the insured must agree on the actual amount to be paid in the case of a claim while keeping in mind the principles and risk guiding the processing of insurance claims.
1.0 INTRODUCTION TO CHAPTER ONE OF THE EFFECT OF CLAIM SETTLEMENT ON PROFIT MAXIMISATION IN THE INSURANCE INDUSTRIES
1.1 BACKGROUND OF THE STUDY
Mrs. Helen Ibeabuchi characterised insurance as an economic path towards endless chances for financial prosperity and fulfilment in life through safety and security, which I was required to memorise in my first year.
Winston Churchill once said, “Bringing the magic of averages to the rescue of millions.” This magic is the result of human beings' deliberate economic cooperation. Prior to this, the law of averages was applied to determine the likelihood or possibility that an event will or will not occur.
Insurance is a contract in which one party (the insurer) promises to pay another party a quantity of money if something unforeseen occurs, causing the insured to incur a financial loss.
The policyholder's liability for such losses is subsequently passed to the insurer. In exchange for carrying the burden of paying for losses when the occurrences occur, the insurer charges the insured a fee, the insurance premium development.
The insurance industry in Nigeria has been developing since 1921.
Furthermore, growth was not spectacular until the Nigerian economy of the 1960s and early 1980s, which is often referred to as the “mushroomery era” of the market; obviously,
a lot of malpractices, particularly in claim settlement, crept into the industry, which the earlier laws of 1961 and 1965 could not effectively deal with. There have been reports of insurers denying liability for a car robbery on the grounds that only theft coverage is provided.
The formation and maintenance of a positive public image offers ongoing challenges, and much work still to be done. There is also the risk of not being acknowledged by the general population. There is little broad information available in other fields such as public liabilities, contractors, and all risk, to name a few.
Regardless, the regulation of any insurance company is heavily dependent on the type of claim service provided by the company.
An untrustworthy and ineffective claims department can tarnish a firm's reputation when customers discover that the company is unwilling to pay or delays payment on legitimate claims.
To avoid claims settlement delays, the insurance decree of 1976 specifies several conditions under which the director of insurance may revoke an insurance company's certificate of registration. As a result, an insurance company whose normal practise is to delay claim payment may face having his licence revoked.
1.2 STATEMENT OF THE PROBLEM
The nature of insurance makes it tough to create a positive image. The idea “that insurance provides security and peace of mind” is a wonderful one, but all we have to give is a piece of paper that promises to pay if…
“The following factors contribute to difficulties in promoting confidence.”
a. Insurance is so intangible that it sometimes has to be justified in terms of a secure public interest by a readable product such as a car that can bring instant benefit and delight.
a.Insurance is extremely technical: A policy is a contract that must be carefully drafted, and public misconceptions and doubts are common. Many people believe that policies are written in jargon.
a. The necessity for insurance is underappreciated; more insurance is sold than purchased.
b. Insurance companies are not always able to accept offers from all of the soundly selected aspects that are frequently present.
c. The general public does not understand the importance of insurance, not only to the individual but also to the country's economy. The fact that insurance is an export is gradually becoming understood, but the roles that branches such as find protection and aims protection play are still not commonly known.
The public is slow to recognise that, in many ways, insurance provides what amounts to social services, a fact that is more readily appreciated in other industries; additionally, an unfortunate habit of nonpayment of premiums is regrettably emerging among some policy holders,
most notably cooperatives and government-owned companies. The reason for this unwholesome trend is that many insured people, due to ignorance and belief, reduce insurance matters to the bottom of their priority list when it comes to spending.
It is undeniable that the sector has harmed its reputation in recent years as a result of operational misconduct on the part of its members, particularly some unethical brokers and fraudulent agents.
As a result, many people saw insurance as a form of legalised robbery. When organisations are facing major economic and financial issues,
their image is already tarnished. The answer is pretty evident in the preceding: the necessity for insurance as a measure of protecting investments has never been greater than it is now.
It is quite challenging for businesses. Individuals and even governments are raising additional funds to engage in a variety of projects and economic ventures.
As a result, every investor must take substantial precautions to secure and ensure that their existing investments are protected from loss and distraction.
1.4 SIGNIFICANCE OF THE STUDY
Professionals are concerned about the misconceptions concerning insurance practise in Nigeria, particularly in respect to claim settlement. Ordinary Nigerians feel that insurance companies tend to construe the regulations in their favour by rejecting claims when one of these restrictions is not followed by the insured.
In Nigeria, insurers follow the rules as scrupulously as their counterparts in industrialised countries, but their reputation has suffered because the average Nigerian does not grasp the practise of insurance.
The significance of this study is that it will assist the insuring public to understand the concept underlying insurance practise and the rules that guide both the insurer and the insured during claim negotiation.
The purpose of this study is to demonstrate unequivocally that the insurance sector is not set up solely to collect premiums, but to decrease risk by providing the insured with peace of mind that, in the event of damage or loss to his or her property, a specific quantity of money will become payable.
This study will also inform the general public that insurers investigate public policy where there is suspicion of fraudulent and exaggerated claims. In the current competitive environment,
coupled with a global recession, the implication for the insurance industry has been a significant drop in premium income for most classes of business,
as well as an increase in the incidence of claims. As a result, insurance would not allow an insured person to profit from the economic downturn by purposefully harming their property in order to claim the insurance money.
Malpractice claims have been made against the insurers. This research would explore into such topics to establish their veracity.
1.5 PURPOSE/OBJECTIVE OF THE STUDY
1. Determine the impact of unresolved claims on profit maximisation in the insurance business.
2. Determine whether the creation of disputes on insurance contracts is one of the profit maximisation claim settlements.
3. Determine whether claim settlement involving policyholders in default has any effect on insurance sector profitability.
4. Determine the impact of third-party insurance claims on profit maximisation.
5. Determine the impact of rapid claim settlement on profit maximisation in the insurance business.
As a result, the research team chose to pose the following questions.
1. What effect does an unresolved claim have on profit maximisation in the insurance industry?
2. What causes claims settlement disagreements between insurers and insureds in the insurance industry?
3. What effect does claim settlement have on profit maximisation on the part of policyholders in the event of default, as well as on the general public?
4. What is the impact of a third-party insurance claim on profit maximisation?
What effect does rapid claim settlement have on profit maximisation in the insurance industry?