Nigerian Journal of Banking and Financial Issues (NJBFI)

THE CLAIMS SETTLEMENT BY PROFESSIONAL INDEMNITY INSURERS IN NIGERIA

Abstract

Professional Indemnity Insurance (PII) serves as a critical financial safety net for professionals, safeguarding them against claims and fostering trust between service providers and clients. Given the increasing complexities of professional practices and evolving regulatory frameworks, this study examines the effects of macroeconomic factors on the claims settlement by professional indemnity insurers in Nigeria. Employing econometric models, the study analyzes the macroeconomic factors and claim settlement by professional indemnity insurers on the growth and stability of the PII sub-sector from 2010 to 2023. Using secondary data sourced from audited financial statements, the Nigeria Insurers Association Digest, National Insurance Commission reports, and the Nigeria Liability Insurance Pool’s annual reports, the study leverages time-series analysis and robust statistical methods, including multiple regression, fixed and random effects models regression, to ensure precision in evaluating key variables.  Hence, this study explores how macroeconomic conditions shape the ability of insurers in Nigeria to settle professional indemnity insurance (PII) claims. Nigeria’s economy, with an average GDP of $444.14 billion and a growth rate of 3.18%, shows gradual growth but faces challenges like inflation and currency fluctuations. These pressures erode the real value of premium reserves, making claims settlement particularly difficult for smaller insurers. While GDP per capita averages $2,345.93, income disparities limit access to PII for many individuals and small businesses. The stability of key market variablesclaims, policies sold, premium income, and GDP provides a solid foundation for forecasting and long-term planning. However, larger insurers have a clear advantage in managing risks, leaving smaller providers struggling to stay afloat. Stronger regulatory frameworks, diversified policy offerings, and economic stabilization efforts are crucial to addressing these challenges. Additionally, this study emphasizes the need for further research into the impacts of inflation and the effectiveness of regulatory strategies in fostering a more inclusive and resilient PII market.