Nigerian Insurance System And Cost Control

Abstract

The stocks of most insurance companies in Nigeria are not enjoying investors' confidence and patronage because of low return on investment among other related reasons. This is not unconnected with low profits usually declared by insurance companies. One of the reasons for this low profitability is the high operating costs that usually characterize the operations of insurance companies in Nigeria. The article therefore examines the nature of operating costs control and its importance for business survival. It also highlights the strategies insurance companies could employ in reducing their operating costs and guaranteeing consistent profitability. Data were collected from the Annual Reports of 15 randomly selected insurance companies in Nigeria for the period 1996-2005. Multiple regression coefficient and analysis of variance were used in establishing by how much total operating cost will increase/reduce if there is a percentage increase/decrease in expenses and claims and whether there is a significant difference in operating costs as a result of management expenses, commissions and claims expenses respectively. The paper concludes that insurance companies wishing to survive and maintain earnings in the face of today's adverse and competitive operating environment must as a deliberate policy include operational costs control in their strategy portfolio.

Keywords: keywordOperating Cost, Cost Control, Premium Income, Claims, Underwriting Profit


JORIND Vol. 6 (1) 2008: pp. 10-10