IMPACT OF CLAIMS COMPLAINTS ON PROFITABILITY OF NON-LIFE INSURANCE OPERATIONS IN GHANA

ABSTRACT

The purpose of the study was to determine the relationship between number of claims complaints and non-life insurer profitability in Ghana between 2010 and 2016. The focus was to find the impact of claim complaints on profitability of insurance firms in Ghana using panel data regression. The study randomly sampled 12 operating insurers and used secondary data from the National Insurance Commission (NIC) during the period 2010-2016 of the selected insurers. The study revealed that complaints correlated negatively with ROA, premium growth, claims incurred, investment yield, leverage and the lag of ROA. The study however revealed complaints was correlated positively with liquidity. The model indicated that 64% variation in ROA was explained by the independent variables. The panel fixed effect estimation result of the study revealed that there exist a significant and negative relationship between complaints and profitability of insurance companies in Ghana. The study concluded that increased number of complaints reduces ROA, lag of ROA, investments yield, growth of premium and claims incurred significantly. Empirically, complaints on the average reduce ROA by 31.3% annually. Increase in complaints however was found to increase the liquidity base of insurance companies. The study forecast that the performances of high claims paying Ghanaian non-life insurance companies would be less profitable and suggests all claims issues must be investigated before payment is made. Other variables that impacted positively on ROA were investments, growth and leverage even though their impact was insignificant except investments yield. Amongst others, the study recommended that complaints should be handle with the need attention in order to retain customers and protect long-term stream of profit because of its negative impact.

Keywords: complaints, claims, Ghana, non-life insurance firms, premium, profitability.