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What accounts for the high underwriting losses in the Ghanaian insurance industry?

Author

Listed:
  • Joseph Oscar Akotey
  • Godfred Aawaar
  • Nicholas Addai Boamah

Abstract

Purpose - This research explores to answer the question: What accounts for the substantial underwriting losses in the Ghanaian insurance industry? Design/methodology/approach - Thirty-four (34) insurers' audited financial reports covering the period of 2007 to 2017 were analysed through dynamic panel regression to uncover the underlying causes of high underwriting losses in the Ghanaian insurance industry. Findings - The findings indicate that efforts at increasing market share by overtrading add no value to insurers underwriting profitability. The underwriting risk suggests that the industry charges disproportionately too small premiums for the risks it underwrites. This may indicate under-pricing by some insurers to grow their customer base. Practical implications - The findings have implications for managerial efficiency and risk management structures that align compensation with underwriting efficiency. Originality/value - The association between managerial preference and the underwriting performance of insurers in emerging markets has rarely been researched. This study responds to this knowledge challenge.

Suggested Citation

  • Joseph Oscar Akotey & Godfred Aawaar & Nicholas Addai Boamah, 2022. "What accounts for the high underwriting losses in the Ghanaian insurance industry?," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 14(1), pages 34-52, September.
    • Handle: RePEc:eme:ajemsp:ajems-12-2021-0546
    DOI: 10.1108/AJEMS-12-2021-0546
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    More about this item

    Keywords

    Underwriting losses; Underwriting risks; Managerial preference; Insurance; Ghana; G22; G32; G35; D35; C33;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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