EFFECT OF INSURANCE SECTOR CLAIMS SETTLEMENT CAPACITY ON INSURANCE DEMAND IN NIGERIA, 2007-2022

Abstract

This study investigated the effect of insurance sector claims settlement capacity on insurance demand in Nigeria using annualized time series data from 2007 to 2022. The specific objectives of the study were: to determine the effect of life insurance claims settled on the gross premium income of Nigeria's insurance industry; to find out the effect of non-life insurance claims settled on the gross premium income of Nigeria's insurance industry; and to ascertain the effect of total claims settled on gross premium income of Nigeria insurance industry. Expected Utility Theory propounded by Daniel Bernoulli in 1738 was adopted as the theoretical framework. While ex-post facto research design was used for the study. The stationarity test was carried out using the Augmented Dickey-Fuller unit root test. Three hypotheses were tested in line with the objectives of the study at a 5% level of significance utilizing the Error Correction Mechanism (ECM) Test. It was discovered that: life insurance claims settled had a significant negative influence on the gross premium income of Nigeria's insurance industry with a probability value (0.0329) and coefficient of (-0.118607); non-life insurance claims settled had a positive but non-significant influence on gross premium income of Nigeria insurance industry with the probability value (0.2406) and coefficient of (0.020914); total insurance claims settled had significant positive influence on gross premium income of Nigeria insurance industry with the probability value (0.0063) and the coefficient of (0.050550). It was therefore concluded that the Nigerian insurance sector claims settlement capacity had a significant influence on the gross premium income of the Nigerian insurance sector. This implies that Nigerian insurance sector claims settlement capacity had significant influence on the demand for insurance in Nigeria between 2007 to 2022 because the probability value of the f-statistics (0.003005) was below 0.05 level of significance. It was therefore recommended that more effort should be directed towards prompt settlement of genuine life insurance claims so as to improve awareness and demand for Insurance in Nigeria. Effort should be made by insurance companies to improve non-life insurance claims settlement to benefit