EFFECT OF CLAIM PAYMENT ON PROFITABILITY OF NEPALESE LIFE INSURANCE COMPANIES

Abstract

The main purpose of this study is to know the impact of claim payment variables on performance of Insurance companies. The results are based on the secondary data which are collected for five insurance companies during the period 2013/14 to 2022/23. The study helps to examine the impact of loss ratio, insurance premium, Loan to deposit ratio and firm size on profitability of Insurance companies. The study shows that loan to deposit, insurance premiums and firm size have significant impact on profitability measured by ROA. However, loss ratio has not significant impact on profitability of Nepalese insurance companies measure by ROA and ROE. Further, Loan to deposit ratio has significant impact on profitability measured by ROE and remaining variable doesn’t impact on profitability measured by ROE. The study concludes that the claim payment requirement has a significant impact on the performance of Nepalese insurance companies. Similarly, the result shows that LR, IP and Firm size have positive relationship on profitability of Insurance companies measured by ROE. Similarly, the result shows that LR and LDR have negative relationship on profitability of Nepalese insurance companies measured by ROE. The study concludes that Firm size, insurance premium and loan to deposit have significant impact on the profitability of Nepalese insurance companies measured by ROA but LR and LDR does not significant impact on profitability of Insurance companies measured by ROA. The study also concludes that firm size loan to deposit and insurance premium is the most influencing factor that explains the changes in the profitability of Nepalese insurance companies. The findings suggest a relationship between claim payment and profitability for these insurance companies. Specifically, loan to deposit ratio, insurance premiums, and firm size were found to significantly affect profitability as measured by ROA. However, loss ratio did not show a significant influence on profitability measured by both ROA and ROE. Additionally, loan to deposit ratio had a significant impact on profitability measured by ROE, while the other variables did not. In conclusion, this study indicates that claim payment requirements indeed play a significant role in shaping the performance of Nepalese insurance companies.