Determinants of Claims Settlement in Insurance Industry: A Panel Data Analysis of Nigeria’s Insurance Sector

Abstract

This article investigates key determinants of Claims Settlement in the Insurance industry in Nigeria. The empirical analysis is anchored on a panel data of all the fifty six (56) underwriting institutions in Nigeria. Variables examined includes: premium income, insurance claims, management expenses, assets, Insurance funds, underwriting profit, and investment income of underwriters. Two econometric models, fixed effect and random effect models were estimated. The Hausman’s specification test was performed to select the appropriate model for the study. The results shows that Gross Premium, Underwriting profit, Insurance Funds and Management Expenses were the main drivers of Insurance Claims Settlement in the Nigerian Insurance industry, with a negative correlation of Claims Settlement to Management Expenses at eighty one percent. The study recommends that, though other factors are essentially important, the management expenses of insurance institutions must be kept reasonably low in order to achieve an experience of efficiently adequate Insurance claims settlement in Nigeria.