| Abstract: | The study is intended to assess profitability of motor insurance, especially the comprehensive
cover, which registered negative results during the fiscal years 2008/2009-2010/2011. The study
focused on the comprehensive motor insurance cover. This is mainly due to the fact that the
management and technical operation of comprehensive cover falls under the discretion of each
insurance company. Mixed research approach was used to investigate why motor account was
not profitable for National Insurance Company of Ethiopia. The researcher used both primary
and secondary sources of data to undertake the study. The primary source consists of
information that is gathered through structured questionnaire, focus group discussion and
interview method from the sample choosen. In general eleven out of twenty underwriters were
interviewed. However, with regard to focus group discussion the study units are limited to those
who have direct exposure and involvement on underwriting and claims operations in the
company. The data analysis technique was descriptive method. Charts and tables were used in
order to analyze the primary and secondary source of data( i.e financial data of NICE).
Generally it is found that the negative performance of motor class of business during the period
from 2008/2009 to 2010/2011 was attributed, in one way or another, to inadequate pricing,
failure to avoid acceptance of accident prone vehicles for comprehensive cover, claims
management problem, failure to control unnecessary acquisition costs and un proportional
charge of the motor account by management expense. Therefore, strict compliance to the
directive issued with respect to minimum rate, avoidance to accept ISUSU(NPR, FSR) and
MISSAN UD vehicles for comprehensive cover, reorganization of the claims department, putting
in place control mechanism to minimize unnecessary acquisition costs, and adopting an
accounting practice of charging the revenue account with only direct management expenses are
suggested to improve performance of the motor account. |
