Nigerian Journal of Banking and Financial Issues (NJBFI)

THE NEXUS OF CLAIM SETTLEMENT AND PREMIUM INCOME OF PROFESSIONAL INDEMNITY INSURANCE IN NIGERIA: A STUDY OF SELECTED COMPANIES

Abstract

This study examines the impact of claim settlement practices on Professional Indemnity Insurance (PII) and premium revenue in Nigeria's insurance sector, addressing a key concern for industry stakeholders. Utilizing a quantitative research design, the study employs time-series analysis to investigate trends and causal relationships between claim settlement practices and premium revenue.14-year(2010-2023) Secondary data collectedform 10 insurers are analyzed using the E-Views statistical software underpin the research methodology. An econometric model was developed to explore the correlation between professional indemnity claim settlements and influencing factors over time. The findings reveal a positively skewed distribution (skewness = 2.78) with heavy tails (kurtosis = 10.21), indicating significant outliers in claim settlements. This variability highlights the broader financial and economic challenges faced by the Nigerian insurance market. Co-integration tests demonstrate long-term equilibrium relationships among the analyzed variables, suggesting that despite short-term fluctuations, claim settlements and premium revenues are interdependent over time. The study underscores the strategic importance of effective claims management, as efficient settlement processes directly influence premium income. The variability in claim settlements, with an average payout of ₦5,468,459 and a standard deviation of ₦13,133,406, mirrors patterns in other emerging markets and underscores the critical need for improved risk management strategies. These insights provide a foundation for policymakers and insurers to enhance the efficiency and stability of Nigeria's PII sector.