International Journal of Banking, Risk and Insurance

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

The Impact of Policy Commencement Date and Claim Settlement Date on Terms of Investment in Motor Insurance Business in Sri Lanka


Affiliations
1 Department of Human Resource Management, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka
     

   Subscribe/Renew Journal


Insurance business involves undertaking of risks and currently shows a positive growth in respect to previous years. Motor insurance is a part of insurance business and contributes to significant part of Net Earned Premium (NEP). Apart from NEP, investment income can be identified as the second main income of the insurance business. The objectives of this research paper were to identify the most suitable time periods for investment decisions to maximize shareholder wealth in motor insurance, to develop a framework to guide to decide time period of investment using commencement date vs claim settlement date and to identify the claim reporting trend throughout the policy period. Data were gathered from 5,630 motor insurance policies commenced during the month of January 2010 and by analyzing respective claims up to January 2011. Both qualitative and quantitative data for both claims and underwritings were collected using the insurance portfolios of insurance agents covering entire country. A telephone survey was conducted with an Internal Audit Manager working at a reputed insurance company in order to collect qualitative data. The study results revealed that averagely 6% of gross written premium need to be repaid in each month as claim expense and based on that loss pattern, a model is developed for investment of funds raised from motor insurance business.

Keywords

Commenced Date, Investment, Motor Insurance, Settlement Date, No Claim Discount, Net Earned Premium
Subscription Login to verify subscription
User
Notifications
Font Size


  • Allianz Insurance Lanka Ltd. (2011). Annual Report. Retrieved from http://www.allianz.lk/pdf/Allianz_ Annual_Report_2011.pdf (accessed on August 2, 2012).

  • Asian Alliance Insurance. (2011). Annual Report. Retrieved from http://www.asianalliance.lk/ (accessed on August 2, 2012)

  • Aviva NDB Insurance PLC. (2011). Annual Report. Retrieved from http://www.avivandb.com/pdf/ aviva_ndb_ar_2011.pdf (accessed on August 2, 2012).

  • Biger, N. & Kahane, Y. (1978). Risk considerations in insurance ratemaking. The Journal of Risk and Insurance, 45(1), 121-132.

  • Ceylinco Insurance PLC. (2011). Annual Report. Retrieved from http://www.ceylincolife.com/ images/annual_report_pdf/ceylinco2011.pdf (accessed on August 2, 2012).

  • Décamps, J. P., Mariotti, T. & Villeneuve, S. (2005). Investment timing under incomplete information. Mathematics of Operations Research, May, 30(2), 472-500. Retrieved from http://www.jstor. org (accessed on June 30, 2012).

  • Haner, C. F. (1968). Prediction of automobile claims by psychological methods. A case study in automobile. The Journal of Risk and Insurance, 35(1), 49-59.

  • HNB Assurance PLC. (2011). Annual Report. Retrieved from http://www.hnbassurance.com/ (accessed on August 2, 2012).

  • IBSL. (2010). Annual Report. Retrieved from http:// www.ibsl.gov.lk/publications/IBSL_Annual_ Report_2010.pdf (accessed on August 2, 2012).

  • Janashakthi Insurance PLC. (2011). Annual Report. Retrieved from http://www.janashakthi.com/ about_us/janashakthi_annual_report2011.pdf (accessed on August 2, 2012).

  • Nelson, K. K. (2000). Rate regulation, competition, and loss reserve discounting by property-casualty insurers. The Accounting Review, 75(1), 115-138.

  • Ohio Insurance Institute. (2012). Glossary Of Insurance Terms (Rev. 04/07). Retrieved from www.ohioinsurance.org (accessed on August 8, 2012).

  • Prastacos, G. P. (1983). Optimal sequential investment decisions under conditions of uncertainty. Management Science, 29(1), 118-134.

  • Puelz, A. V. (2002). A stochastic convergence model for portfolio selection. Operations Research, 50(3), 462-476. Retrieved from http://www.jstor. org (accessed on June 30, 2012).

  • Samagama, S. S. R. (2011). Annual Report. Retrieved from http://www.sicl.lk/ (accessed on August 2, 2012)

  • Smith, K. A., Willis, R. J. & Brooks, M. (2000). An analysis of customer retention and insurance claim patterns using data mining: A case. The Journal of the Operational Research Society, 51(5), 532-541.

  • Union Assurance PLC. (2011). Annual Report. Retrieved from http://www.unionassurance.lk/ english/images/stories/documents/ual_annual_ report_2011.pdf (accessed on August 2, 2012).


Abstract Views: 406

PDF Views: 0




  • The Impact of Policy Commencement Date and Claim Settlement Date on Terms of Investment in Motor Insurance Business in Sri Lanka

Abstract Views: 406  |  PDF Views: 0

Authors

Ishanka Chathurani Karunarathne
Department of Human Resource Management, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka
Samita Dayabandara
Department of Human Resource Management, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka

Abstract


Insurance business involves undertaking of risks and currently shows a positive growth in respect to previous years. Motor insurance is a part of insurance business and contributes to significant part of Net Earned Premium (NEP). Apart from NEP, investment income can be identified as the second main income of the insurance business. The objectives of this research paper were to identify the most suitable time periods for investment decisions to maximize shareholder wealth in motor insurance, to develop a framework to guide to decide time period of investment using commencement date vs claim settlement date and to identify the claim reporting trend throughout the policy period. Data were gathered from 5,630 motor insurance policies commenced during the month of January 2010 and by analyzing respective claims up to January 2011. Both qualitative and quantitative data for both claims and underwritings were collected using the insurance portfolios of insurance agents covering entire country. A telephone survey was conducted with an Internal Audit Manager working at a reputed insurance company in order to collect qualitative data. The study results revealed that averagely 6% of gross written premium need to be repaid in each month as claim expense and based on that loss pattern, a model is developed for investment of funds raised from motor insurance business.

Keywords


Commenced Date, Investment, Motor Insurance, Settlement Date, No Claim Discount, Net Earned Premium

References