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1.1    Background of the Study

Insurance is usually an intangible product for clients until they receive a payment for an insured loss. The claims experience can therefore significantly influence the client’s understanding of and satisfaction with insurance. A positive claims experience may result in a long-term client and champion of the insurance programme. A negative experience, on the other hand, can lead to mistrust and policy termination. Claims settlement is therefore an integral part of an insurer’s efforts to provide good customer service and to retain clients (Rendek, Holtz and Fonseca, 2014).

The history of insurance industry in Nigeria could be traced to the British colonial trading companies that established agency offices in Nigeria, on behalf of insurance companies in UK. After the Nigerian political independence of 1960, indigenously owned insurance companies sprang up, which as a result of inadequacy of capital, were unable to pay claims at as when due. This inadequacy of capital coupled with lack of technical and managerial skill, poor insurance regulatory framework, brought confidence crisis and strong apathy to insurance purchase in Nigeria (Augustine and Bamidele, 2013).

The rising intricacy of the world economic system in today’s industrial age has increased the importance of insurance in the process of manufacturing and profit-making dealings. Accordingly the absence of insurance will constantly subject the individual/organization to the fear of a huge financial loss in the event of a tragedy and so will affect their decision making course of action in diverse ways (Harry, 2012).

Claim settlement is a critical aspect of the insurance business. Insurance on its right is an investment options for common investor. The insured expects specific return from the policy over and above the sum assured. Therefore, the insured or the beneficiary named in the insurance policy desperately seeks settlement of their claims by the insurance company. The insurance company looks at the claim settlement from the different perspective by ensuring adequate return from the risk assumed. Thus, poor claim settlement may lead to confrontation between the policyholder and the insurance company (Ashturkar, 2014).

Claim settlement is the defining moment in the relationship between an insurance company and its customer. If a company does not effectively handle its claims service, it can tarnish its image hence affect the sales and marketing of their insurance products. Insurance company’s attitude to claims settlement has in the past provoked a lot of public criticism and even attracted the attention of governments.

Consequently, the reputation of any insurance company and consumers demand for insurance depends, to a large extent, on the sort of claims services provided by the company to its customers. Insurance companies in Nigeria now wish to improve their public image, and retain the trust of their brokers (middlemen) and clients in order to meet their sales and marketing department projections. Swift handling of claims is surely the way to do it. This study examines the impact of poor claims settlement on the demand for insurance with a special reference being made to Cornerstone Insurance Plc.

1.2    Statement of the Problem

In Nigeria, the insurance companies, just like other insurance companies in other parts of the world, do pay claims, yet they have a dented image in the eyes of the insuring public (Omar, 2007). The problem of running an effective claims administration that would satisfy the customers and earn their confidence as well as cause them to repurchase insurance products has remained too long in the insurance industry in the sub-region and the world at large.

Claims settlement is like a mirror through which the members of the public see an insurance company. A company, which fails to settle claims to the satisfaction of customers, would definitely attract less business, as it is likely to discourage such clients to continue to insure with the company. Such clients might even advise their friends, colleagues and relations not to patronize such a company.

The consequent effects of the above problem could lead to downward trends in sales and marketing figure, low premium income, low capital formation (savings and loans) and minimal contribution of an insurance company to the gross domestic product (GDP) of Nigeria.

An insurance company is basically set up like other profit-oriented industry for financial gains while rendering essential services to their clients. But in recent times poor handling of claims has been a major drawback to performance of insurance companies. The menace has been so prevalent that many policyholders in Nigeria often contemplate terminating their policies in the face of the insurance companies not indemnifying them on account of losses suffered. Omar (2007) identifies lack of trust and confidence in insurance institution, poor claims management, lack of reliable actuarial data for research and underdeveloped financial market as some of the bottlenecks to the financial performance of the insurance industry in Nigeria. Therefore, this study examines the impact of poor claims settlement on the demand for insurance in Nigeria.


1.                  Reviewed current literature on service marketing vis-à-vis literature on claims settlement. 

2.                  Determined the definition of the word “Poor” from the customer’s point of view.

3.                  Established the relationship between the poor claims settlement and customer repurchase of insurance.

4.                  Examined the company’s perception of existing trend of claims settlement system in the company through questionnaire and interviews to both the company‟s staff and

their clientele.

5.                  Finally, gave recommendations on the best way to settle claims that would ensure customer satisfaction and increase premium growth.


1.                  Does the payment or non-payment of insured’s expected claim amount have any effect on the sales and marketing of insurance products?

2.                  Does prompt claims settlement have any effect on the sales and marketing of insurance products?

3.                  Does the settlement or non-settlement of claims have any effect on the sales and marketing of insurance products?

4.                  Are consumers‟ decisions and choices influenced by the company’s claims handling process?

5.                  Does the Company have any structure in place to ensure customer satisfaction and to cater for customer complaints?


The study is based on the Nigeriaian insurance market using Corner Stone Insurance PLC as a scenario for the study. The research specifically investigated the company’s claims service delivery vis-à-vis their customer services and corresponding effects on sales and marketing figures. It examined the effects of efficient and prudent claim settlement procedures on the sales and marketing of insurance products in the company.


The payment of claims is not only a legal obligation but also a strong public relations instrument and a marketing strategy that has a lot of bearing on the sale of insurance products. This study aimed at identifying whether claims settlement affect the demand for the company‟s insurance products and customers choices.

This study will help Corner Stone Insurance PLC identify and adopt the best ways to settle claims that will ensure customer satisfaction, which will have the positive effect of improving the image of the insurance company in the sub-region. This improved image will, in turn, increase demand for their insurance products and increase premium income generation/sales and marketing figures, capital formation and contribution to the economy of the country in the sub-region.

The study analyzed claim settlement process of the insurance company and its effect on their sales and marketing performance. The establishment of the existence of a relationship or not of these two variables will then be used to make appropriate recommendations to a goal oriented claims management that will ensure the double benefits of cost efficiency and customer satisfaction in Corner Stone Insurance PLC.


A major constraint was imposed by the time available for the study, which was limiting. This therefore forced the researcher to limit the study to just only one insurance company in the Western Region only, notably the Branch Office.

 Again lack of spread of insurance awareness within the study area – Nigeria accounted for the low response rate recorded and also limited the scope of coverage of the survey. This is because even in the urban centres most of the people are ignorant of insurance.

 Another vital limiting factor was the three months duration allocated to the dissertation by the school authorities. This therefore barred the researcher from conducting a detailed research work.


As already noted the first chapter briefly gives a brief background study of the insurance market in Nigeria specifically the current state of the claim administration in developed and developing countries. It goes further to state the problem, aims and objective of the study.

 Chapter two provides the theoretical basis for this research by reviewing the distinguishing characteristics of service marketing from physical products.

§     Chapter three describes the methodology used in the research study.

 Chapter four details the primary data collected for the research as the findings and the analysis of these data.

§     Finally, the fifth chapter presents the summary, conclusion and recommendation from the researcher.

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