The Influence of Loss Ratio on Profitability of Non-Life Insurance Companies in Thailand: The Moderating Roles of Company Type

##plugins.themes.bootstrap3.article.main##

Sippavit Wongsuwatt Wipada Thaothampitak Nattanicha Kongjam Jutamat Ruttanapibool Ruttawit Apacuppakul Thawanhathai Koedkaeo

Abstract

          Research on the influence of loss ratio on the profitability of insurance companies has grown in importance. This study aims to investigate the influence of loss ratio on the profitability of non-life insurance companies and the moderating role of the type of companies. Fifty-two non-life insurance companies in Thailand were selected to collect the financial database for this study. Results from Ordinal Least Square (OLS) regression found significant negative relationships between loss ratio and the profitability of non-life insurance companies related to profitability, return on assets, return on equity, profit margin, and net profit margin. In addition, the type of company influenced its loss ratio and profitability. In terms of organizational implications, our findings would suggest that enhancing underwriting functions and risk management policies to reduce the chances of, and impacts from, future losses or claim payouts will improve a company’s profitability. In addition, balancing lines of insurance business will enhance and improve a company’s profitability as well.


Keywords: Loss Ratio, Profitability, Non-Life Insurance Company

References

Agiobenebo, T. J., & Ezirim, B. C. (2002). Impact of Financial Intermediation on the Profitability of Insurance Companies in Nigeria. First Bank of Nigeria Quarterly Review, 2(1), 4-14.

Ahmed, N., Ahmed, Z., & Usman, A. (2011). Determinants of Performance: A Case of Life Insurance Sector of Pakistan. International Research Journal of Finance and Economics, 61(1), 123-128.

Anansiriprapha, K. (2019, November 22). Insurance Market Trend 2020. Retrieved from https://www.tgia.org/upload/file_group/29/download_1694.pdf

Berhe, T. A., & Kaur, J. (2017). Determinants of Insurance Companies’ Profitability Analysis of Insurance Sector in Ethiopia. International Journal of Research in Finance and Marketing (IJRFM), 7(4), 124-137. Retrieved from http://euroasiapub.org/wp-content/uploads/2017/05/12FMApril-4785-1.pdf

Burca, A.-M., & Batrînca, G. (2014). The Determinants of Financial Performance in the Romanian Insurance Market. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 299-308. DOI: 10.6007/IJARAFMS/v4-i1/637

Crawford, S., Russignan, L., & Kumar, N. (2018, June). Global Insurance Trends Analysis 2018. Retrieved from https://www.ey.com/Publication/vwLUAssets/ey-global-insurance-trends-analysis-2018/$File/ey-global-insurance-trends-analysis-2018.pdf

Dar, S. A., & Thaku, I. A. (2015). A Comparative Analysis of Financial Performance of Public and Private Non Life Insurers in India. International Journal of Management (IJM), 6(1), 507-526. Retrieved from https://www.academia.edu/19845729/A_COMPARATIVE_ANALYSIS_OF_FINANCIAL_PERFORMANCE_OF_PUBLIC_AND_PRIVATE_NON_LIFE_INSURERS_IN_INDIA

de Souza, S. V. C., & Junqueira, R. G. (2005). A Procedure to Assess Linearity by Ordinary Least Squares Method. Analytica Chimica Acta, 552(1-2), 25-35. DOI: 10.1016/j.aca.2005.07.043

Dicu, C., Bondoc, M. D., & Popescu, M. B. (2019). A Quantitative Approach to Profitability Ratios. Scientific Bulletin-Economic Sciences, University of Pitesti, 18(1), 57-65. Retrieved from https://ideas.repec.org/a/pts/journl/y2019i1p57-65.html

EYGM Limited. (2019). 2020 Global Insurance Outlook. Retrieved from https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/insurance/insurance-outlook-pdfs/ey-global-insurance-outlook.pdf

Heikal, M., Khaddafi, M., & Ummah, A. (2014). Influence Analysis of Return on Assets (ROA), Return on Equity (ROE), Net Profit Margin (NPM), Debt to Equity Ratio (DER), and Current Ratio (CR), Against Corporate Profit Growth in Automotive in Indonesia Stock Exchange. International Journal of Academic Research in Business and Social Sciences, 4(12), 101-114. DOI: 10.6007/IJARBSS/v4-i12/1331

Kajananthan, R., & Velnampy, T. (2014). Liquidity, Solvency and Profitability Analysis Using Cash Flow Ratios and Traditional Ratios: The Telecommunication Sector in Sri Lanka. Research Journal of Finance and Accounting, 5(23), 163-170.

Malik, H. (2011). Determinants of Insurance Companies Profitability: An Analysis of Insurance Sector of Pakistan. Academic Research International, 1(3), 315-321. Retrieved from http://www.savap.org.pk/journals/ARInt./Vol.1(3)/2011(1.3-32)stop.pdf

Mehari, D., & Aemiro, T. (2013). Firm Specific Factors that Determine Insurance Companies’ Performance in Ethiopia. European Scientific Journal, 9(10), 245-255.

Mela, C. F., & Kopalle, P. K. (2002). The Impact of Collinearity on Regression Analysis: The Asymmetric Effect of Negative and Positive Correlations. Applied Economics, 34(6), 667-677. DOI: 10.1080/00036840110058482

Office of Insurance Commission. (n.d.). Non Life Insurance. Retrieved from https://www.oic.or.th/en/node/89364

Petria, N., Capraru, B., & Ihnatov, I. (2015). Determinants of Banks’ Profitability: Evidence from EU 27 Banking Systems. Procedia Economics and Finance, 20, 518-524. DOI: 10.1016/S2212-5671(15)00104-5

Petter, S., Straub, D. W., & Rai, A. (2007). Specifying Formative Constructs in Information Systems Research. MIS Quarterly, 31(4), 657-679. Retrieved from https://scholarworks.gsu.edu/cgi/viewcontent.cgi?article=1041&context=cis_facpub

Pfukwa, A. (2015). The Motor Insurance Industry in South Africa: A Survival Analysis. (Master’s thesis). Graduate School of Business Administration, Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, South Africa. Retrieved from http://wiredspace.wits.ac.za/handle/10539/18136

The Thai General Insurance Association. (n.d.). Accident and Health Insurance Committee. Retrieved from https://www.tgia.org/download-EN

The Organisation for Economic Co-operation and Development. (2020). Global Insurance Market Trends. Retrieved from https://www.oecd.org/pensions/globalinsurancemarkettrends.htm

Thirunavukkarasu, V., & Rajendran, K. (2013). Cash Position and Profitability of Telecommunication Sector in Srilanka. Greener Journal of Social Sciences, 3(6), 324-333. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2383351

Velnampy, T., & Nimalathasan, B. (2010). Firm Size on Profitability: A Comparative Study of Bank of Ceylon and Commercial Bank of Ceylon Ltd in Srilanka. Global Journal of Management and Business Research, 10(2), 96-103. Retrieved from https://www.academia.edu/2501577/Firm_Size_on_Profitability_A_Comparative_
Study_of_Bank_of_Ceylon_and_Commercial_Bank_of_Ceylon_Ltd_in_Srilanka

Wongsuwatt, S., & Suntrayuth, S. (2019). The Influence of Risk Perception and Proactive Behavior on Performance of Firms: The Moderating Roles of Organizational Units and Types of Firms. The Journal of Risk Management and Insurance, 23(2), 1-14. Retrieved from https://jrmi.au.edu/index.php/jrmi/article/view/185

Section
Research Articles

##plugins.themes.bootstrap3.article.details##

How to Cite
WONGSUWATT, Sippavit et al. The Influence of Loss Ratio on Profitability of Non-Life Insurance Companies in Thailand: The Moderating Roles of Company Type. Journal of Community Development Research (Humanities and Social Sciences), [S.l.], v. 14, n. 1, p. 46-60, dec. 2020. ISSN 2985-0231. Available at: <https://www.journal.nu.ac.th/JCDR/article/view/Vol-14-No-1-2021-46-60>. Date accessed: 29 mar. 2024. doi: https://doi.org/10.14456/jcdr-hs.2021.5.