Determinants of Insurance Premium of Life Insurance Companies in Nepal

Abstract

Premium is one of the most important objectives of insurance management because one goal of insurance management is to maximize the owner's wealth. The variation of premiums between life insurance companies over the years, within a country, leads to believe that internal factors play a major role in determining premiums. This paper investigated the determinants of company specific factors (Size of Company, Liquidity Ratio, Volume of Capital, Fixed Assets and Growth Rate) on premiums represents by ROA and ROE. Premiums are dependent variable while Size of company, liquidity, Volume of capital, Fixed assets and Growth Rate are independent variables. The sample in this study includes four of the selected life insurance companies for eight fiscal years (2011-2019). Secondary data obtained from the Annual Reports of selected life insurance companies, relevant articles, books and magazines are analyzed. The results of the paper show that factors such as Size of Company, liquidity, Volume of Capital, Fixed Assets and Growth Rate are the main factors affecting the premiums of insurers, where the fixed assets show the positively relationship with premiums, while Company Size, Liquidity, Volume of Capital and Growth rate shows the negatively relationship with premiums. Keywords: Life insurances, Size of Company, Liquidity, Volume of Capital, Fixed Assets, Growth Rate, ROA, ROE