IMPACT OF INFLATION RATE ON THE GROSS PREMIUM INCOME AND PROFIT BEFORE TAX OF NON-LIFE INSURANCE COMPANIES IN NIGERIA

Abstract

This research was carried out to determine the impact of inflation on the non-life insurance companies. Twenty non-life insurance companies’ data that have been in the business for more than twenty years and have their financial accounts statistics up to date were collated. The nonlife insurance companies are considered for this project to reduce the influence of investment return that usually come from life insurance business which give a better performance to their profitability as the inflation often trigger an increase in interest rate.  An E-views application was used to determine the level of correlation between inflation and the nonlife insurance performance on gross premium income and profit before tax. From the result of the analysis, a correlation coefficient of 0.83 and 0.72 of inflation rate were recorded against gross premium income and profit before tax respectively.  The further result from the least square regression model to test the hypothesis shows a p-value for both gross premium income and profit before tax are below the significant level. It could be adjudged that the inflation has impact on the gross premium income and inflation rate, but its impact is not significant. The study recommends that the nonlife insurance companies should ensure they keep up with their growth trajectory to reduce the impact of the inflation rate further. Consequently, the non-life insurance companies must sustain their growth trajectory through standardization of policy rate. In addition, the government should support the effort of the industry on enforcement of the compulsory insurance policies especially during inflationary period to ensure that the industry record required growth to lessen the inflation’s impact.