Effects of Underwriting and Claims Management on Performance of Property and Casualty Insurance Companies in East Africa

The insurance sector plays an important role in service economy of any country by underwriting of risks inherent in most sectors thus providing a sense of peace to most economic entities. Performance of general insurance companies is expected to be related to various factors, including optimal underwriting and prompt and efficient claims management functions. This study investigated the effect of underwriting and claims management practices on the performance of general insurance firms in East Africa. The study employed multiple linear regression analysis using primary and secondary data collected from 82 general insurers in Kenya, Uganda and Tanzania. The findings show that there is a significant positive relationship between underwriting and claims management practices employed by the firms and non-financial performance, but the relationship with financial performance was insignificant. The implication is that a profit oriented insurance firm should embrace a claims function that is closely related with the underwriting and pricing of the firm’s portfolio for meaningful results. It is recommended that general insurance companies focus on other important factors besides underwriting and claims management order to improve overall financial performance

NATURE OF FRAUD AND ITS EFFECTS IN THE MEDICAL INSURANCE SECTOR IN KENYA

ABSTRACT Insurance fraud is a major challenge facing the insurance industry both in thedeveloping and developed world. This vice has no doubt existed wherever insurance policies areunderwritten and takes different forms depending on the economic time and coverages available.However, the validity of this claim has hardly been established empirically in Kenya. It is importantthat the insurance players in Kenya understand the nature and effects of insurance fraud and alsocome up with strategies to counter the same. The study objective was to investigate the nature offraud and its effects in the medical insurance sector in Kenya and also establish possible solutionsin countering the vice. The study adopted a descriptive research design where each of the twentyeight registered medical insurance providers and twenty Insurance companies underwritingmedical insurance in Kenya formed the sample frame of forty eight firms. A questionnaire was themain research instrument. The study findings revealed that majority of the firms sampled hadexperienced different levels of fraud in the recent past with the fraud form ranging from overstatedmedical bills, concealment of medical history of the patient, fraudulent identity / impersonation,document theft fraud as well as perpetration of the insurance premium fraud. The extent of fraudwas found to depend on the existence and extent of automation that the firms had adopted with highfraud levels being associated with low IT Usage and/or automation. The effects of fraud include:increase in the cost of medical insurance and tarnishing the image of the insurance industry.Solutions suggested in manageing the level of fraud include: subjecting medical bills to extensiveaudit to determine their validity as well as high levels of automation of the processes, making itmandatory for clients to produce their smart-cards in any medical facility before receiving services,and maintaining a database of all insured within the organizations’ network. Other strategiesinclude restriction of unauthorized employees in accessing client information, educating the staff touphold ethical practices and offering a better remuneration and friendlier work environment. Thisstudy contributes to a partial understanding of the reasons for medical covers being expensive andthe negative image of the insurance industry

Actuarial Risk Management Practices, Underwriting Risk and Performance of P & C Insurance Firms in East Africa

The purpose of the study was to establish the intervening effect of underwriting risk (loss ratio) on the relationship between actuarial risk management practices (ARMP) and performance of property and casualty (P & C) insurance underwriters in East Africa. Findings from primary and secondary data gathered from 82 general insurers from Kenya, Uganda and Tanzania show that there is a significant positive relationship between ARMP and non-financial performance and that loss ratio significantly mediates this relationship. The relationship with financial performance was however insignificant. The implication is that P & C insurance firms should keenly watch their loss ratios in order to improve their non-financial performance by correctly underwriting, pricing and reinsuring their risks in order to influence their claims ratio and also have a strategic claims management program in place that controls costs and leads to better firm reputation, which in turn will have ripple effect in increasing business volumes and performance. It is recommended that further empirical studies be carried out to establish other factors that especially influence financial performance