An Assessment on the Relationship Between Selected Underwriting Risk Management Practices and Insurer Profitability: A Case of Professional Insurance Corporation Zambia

Abstract

This study assessed the relationship between selected underwriting risk management practices and insurer profitability using a case study of Professional Insurance Corporation Zambia (PICZ) Head Office in Lusaka, Zambia. Specifically, the study examined the relationship between risk assessment processes, underwriting risk selection practices, pricing and premium-setting methods, reinsurance arrangements, and insurer profitability. The study adopted a positivist research philosophy and employed a quantitative case study research design. A census approach was used to collect data from 23 employees in the Underwriting Department at Professional Insurance Corporation Zambia. Primary data were collected using a structured questionnaire and analysed using SPSS version 21.0. The data were analysed using descriptive statistics, reliability analysis, and Spearman's rank correlation analysis to determine the relationships between the study variables. The findings revealed that respondents generally perceived the organisation's underwriting risk management practices to be effective. The study further found positive relationships between all the selected underwriting risk management practices and insurer profitability. However, only the relationship between pricing and premium-setting methods and insurer profitability was statistically significant at the 5% level, while the relationships involving risk assessment processes, underwriting risk selection practices, and reinsurance arrangements were positive but not statistically significant. The study concluded that sound underwriting risk management practices are positively associated with insurer profitability and remain important components of effective underwriting decision-making. The study recommends that Professional Insurance Corporation Zambia continue strengthening its risk assessment processes, underwriting risk selection practices, pricing and premium-setting methods, and reinsurance arrangements to enhance underwriting performance and support long-term financial sustainability. Future studies should consider including multiple insurance companies and a larger sample to improve the generalisability of the findings.