Strategic Growth and Profit Policy of Insurance Companies [chapter]

Dieter Farny
1991 Risk, Information and Insurance  
The pricing and profitability of a good insurance product depends greatly on some key factors such as the investment rate, shareholders rate, expense rate, commission rate, surrender and death benefits. Profit testing of "key man" product was run on three insurance companies in Ghana using the modern method of profit testing under the asset share models and the results obtained indicated that an increase in premium was not enough to increase effciency and profit. Instead, the investment rate
more » ... to be increased and expense decreased whiles giving shareholders substantial dividend rate. The study revealed that the investment rate has a great effect on profit of the product and also illustrated that it was expedient to spread out the expense over a longer period of time with the first two years having the greater share of the expense followed by a low constant expense rate for the continuing years. The amount paid as dividend should motivate and attract investors while the commission rate should motivate agents to bring more clients on board and at the same time there should be a strong reserve to cater for claim payments while the surrender and death benefits should be well allocated. These factors are nesssary to keep an insurance company to run efficiently, irrespective of the claims that it must has to pay.
doi:10.1007/978-94-009-2183-2_9 fatcat:muh3evyttndhrkk2pc26bitydy