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AN APPRAISAL OF THE INSURANCE COMPANIES APPROACH TO CLAIM SETTLEMENT


CHAPETR ONE

1.0   INTRODUCTION 

1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study

CHAPETR TWO

2.0   LITERATURE REVIEW

 

CHAPETR THREE

3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1 Introductions

4.2 Data analysis

CHAPTER FIVE

5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation

Appendix

 

Abstract

The objective of this research work is to look into the performance of the Nigerian insurance industry viz a viz the procedure and approach to claim settlement. Individuals hold diverse opinion about this industry and the general impression is that the insurance industry has failed to win the confidence of the insuring public. Often times, people make remark such as “unwilling to settle claim but always willing to collect premium and use its small prints in the policy to decline its liability”. It is the belief about the industry is allowed to continue and not corrected that the industry will totally collapse and the after effect will be over bearing on the economy. When we consider the importance of insurance in the economic development of any nation, it is therefore the intention of the researcher to find out if this allegation is true or otherwise, proffer solution and make recommendation that will help to solve these problems.

 

 

 

 

CHAPTER ONE

INTRODUCTION

  • Background of the study

Insurance is the equitable transfer of the risk of loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. It involves pooling of funds from many insured entities [known as exposures] to pay for the losses that some may incur. Insurance as a modern concept for solving risk related problems depends on co-operation of a large number of people for it’s success. The general insurance industry in India has gone around a full circle in its history over the years. Having started in the a private sector way back in the nineteenth century, the industry received a major jolt just over thirty years ago, when it underwent a major acquisition through a process of nationalisation. The private industry then became a public industry. Five large general insurance companies including a reinsurer, came into existence to handle the entire market business in India. Business of all the private insurers was merged into four direct writing companies. Incidentally, life insurance business of 245 Indian and foreign insurers was taken over earlier, in the year 1956, to form the Life Insurance Corporation of India. Changes in the Government policies brought about liberalisation in the insurance industry in the year 2000 and the insurance business was thrown open to private enterprise to compete with the existing public sector insurers. Foreign players are now permitted to enter the market but only with a maximum of 26% participation in the equity. There are now only 8 general insurers in the private sector but the number should increase in the coming years. These new players are now gradually increasing their share of the total market premium and have been able to get to over one fourth of the total gross premium income in India. The Insurance Regulatory & Development Authority {IRDA} oversees the insurance business in India. The IRDA regulations have now carved out an essential role for the actuaries in general insurance business. Each insurer must have an Appointed Actuary {AA}, who is a Fellow of the Actuarial Society of India aged not over 70 years. The IRDA approves the appointment each year. As of now, the AA is required only to certify the IBNR & IBNER claim reserves but it is evident that this role is set to expand in the near future. Only one transfer of business has recently occurred on the life side in the new environment. However, similar developments should be expected in the future as private players would be aiming to increase their market shares in the face of stiff competition. The general insurance market in India has for long been regulated by premium tariffs for most of the business. These tariffs are set to be abolished mostly by the end of this year, which should make the business very competitive and, inter alia, considerably enlarge the scope for actuarial input. The appraisal value exercise in connection with acquisition or merger should now be expected to become important. Further, Indian non – insurance entities currently have major participation in the equity of of almost all the new players – they are permitted to hold as much as 74% of an insurer's shareholding. Thus, any new business house or financial company including banks, which may get interested in participating in insurance business, would need to seek a study of insurance profitability through a detailed appraisal value exercise. Thus, the actuary will have a major and essential role to play in this field. Since risk is an unavoidable event in every business venture, there will be need to understand events in like, there will be also need to understand what risk entails for. Example walking in the street imposes a danger of being knock down by a vehicle. Since risk is ever present it cannot be eliminated but can be prevented. Even men own habits, occupation, relationship with others, the society and his political activities are sources of danger.

The taste of good insurance transaction lies in the manner in which a claim is handled. This is why it is referred to as the acid test for insurance [Ogwo, Enwereuzor, Nwite, Ibeabuchi and Eche, 2000] one of the principal functions of an insurance company is the settlement of claims. It is infact the fear that a claim might occur that induces individual and economic institutions to take out insurance policies.

Therefore, the payment of claims can be said to be the major function of an insurance company. The acid test of viability of any insurance company is prompt settlement of claim and it is also a veritable cheapest means of advertisement.

Notwithstanding, the positive roles which the insurance industry plays in the social and economic development of our country, the industry still does not enjoy a good public image. The public sees the industry wrongly as dupes [Eche, Enwereuzor, Ibeabuchi, Nwite and Ogwo 1999[. They believe that the insurers are good at extorting money from them in form of premium but they are reluctant in settling claims when the time comes.

The most important reasons for this impression is that there is a low level of insurance awareness in our society. The public are not properly educated on the scope, function and limitations of insurance transactions especially in the issue that may cause disputes that arises in an insurance contract has to do with settlement of claims. So an important factor that distinguished a good insurance company is it’s claim settlement services. It does not mean an insurer should be over libral in order to edge itself out of market.

When the policy has been issued, the risk for the peril insured against is covered. The contingence against which protection is given or not materialized when the loss insured against actually occurs, the insured has got to make a claim on the insurer for indemnification of loss and admitted genuine claims should be settled promptly for an insurance company to maintain a good public image [M.N. Mishra 2002]. But if loss does not occur, no payment would be made to the insured. The appraisal value of a company is the sum of the present values of the future earnings streams generated by the operations of the company at appropriate discount rates. It is a practical calculation of the present value of a company's projected streams of net earnings from all sources at appropriate risk discount rates. The appraisal value is a practical calculation. The purpose and context of the valuation is critical. Depending on the context of valuation, qualitative judgment on issues such as proven track record of results, quality of management, organization and systems and their ability to cope with growth, and potential market profitability and growth all need to be considered

It is therefore, obligatory on the part of the insurer to compensate the insured [their client] whenever there’s loss on the item insured against as long as the insured abides to the condition stated in the contract or policy.

Frequently, of course, claims are settled following negotiations between insured and insurer, or parties acting on their behalf such as assessors and loss adjusters. The reported cases have been concerned with whether an insurer can reopen a settlement, but it conceivable that an insured could do so on the ground of misrepresentation undue influence by the insurer [John Birds 1997] this though would be difficult to show. The first and most important point to make is that the notification of a claim is the responsibility of the insurer.

Worthy of mention, is that public should appreciate that insurance is not a charity. The shareholders of an insurance company should look forward in making profit just like any other shareholders in other commercial enterprise.

However, the interest of the policy’s is to satisfy their profit motive. They are obviously in business just because they are policyholders. The insurers should appreciate that claim settlement is their shop windows.

1.2   STATEMENT OF THE PROBLEM

Unwilling to educate public properly on the scope, functions, and limitations of insurance as well as the basic rules that govern insurance transactions especially on the issue of claim settlement and how to abide by the rules and regulations guiding insurance company.

1.3   OBJECTIVES OF THE STUDY

The broad objective of this study is to appraise the approach of insurance companies to claim settlement in the Nigerian insurance companies.

The specific objectives include the following.

  1. To find out if approach of insurance companies to claim settlement is effective.
  2. To find out if insurance companies are capitalizing on the ignorance or illiteracy of the insuring public towards claim settlement.
  3. To find out if the issue of under settlement is common.

1.4 RESEARCH HYPOTHESES

To aid the completion of the study, the following hypotheses were formulated by the researcher

H0:  the approach of insurance company to claim settlement is not effective

H1: the approach of insurance company to claim settlement is effective

H02: the issue of claim under-settlement is very rampant among Nigeria insurance company

H2: the issue of claim under-settlement is not rampant among Nigeria insurance company

1.5 SIGNIFICANCE OF THE STUDY

It is perceived that at the completion of the study, the findings will be of great importance to the policy holder as the findings will help them ascertain the approach of the insurer towards indemnity payment in the event of loss. The study will also be beneficial to the management of insurance company as the study seeks to examine the dangers of inappropriate claim settlement and under settlement. The study will also be useful to researcher who intend to embark on a similar topic as the study will contribute to the pool of literature that already exist in the subject matter. Finally the study will be useful to students, researchers, teachers and academia’s as it will contribute to knowledge.

1.6 SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers an appraisal of the insurance companies approach to claim settlement, but in the cause of the study there were some factors which limited the scope of the study

  1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study.
  2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities        and examinations with the study.
  3. c) FINANCE: The finance available for the research work does not allow for wider coverage as resources are very limited as the        researcher has other academic bills to cover.

1.7 DEFINITION OF TERMS

Insurance

Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss

Insurance claim

An insurance claim is when you have a loss or sustain damage that is caused by a peril insured by your insurance policy.

Indemnity

Indemnity is a contractual obligation of one party to compensate the loss occurred to the other party due to the act of the indemnitor or any other party

Insurance policy

In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay.

Policy holder

A person who holds an insurance policy, especially the person whose life is insure

ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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Author: SPROJECT NG