Assessing Factors Affecting Financial Performance of Insurance Companies in Zambia

The aim of the research was to assess the factors that affect the financial performance of insurance companies in Zambia and to what extent these factors affect performance. The research employed a mixed method approach in form of descriptive and a sample of 150 respondents drawn from 10 insurance companies (5 Life and 5 Non-life) and from various levels of management and departments using the stratified random sampling technique to guarantee representation. Data was collected through administering survey questionnaires and the results were analysed using the regression technique under the Statistical Package for Social Sciences (SPSS), descriptive statistics and content analysis respectively. The study revealed that underwriting risk, premium-growth, company size, liquidity, GDP and inflation are factors that affect the financial performance of insurance companies in Zambia. The study also indicated through the majority of the respondents that the above-mentioned factors have an effect on financial performance to a great extent. Based on the findings, the study recommends that insurance companies must strike a balance between long-term investment assets and the need to maintain good liquidity, which is essential in meeting short-term liabilities. Insurance companies in Zambia need to assess risky policies in order protect themselves from such policies by reinsurance and pricing them accordingly. Furthermore, the study suggests that insurers in Zambia increase their leverage in order to perform better in terms of their return on assets. However, insurance companies should exercise caution when using excessive debt as this can potentially harm their long-term viability. If they are unable to meet their loan payments, heavily leveraged businesses could face insolvency. Insurance companies should also improve the staff’s managerial skills because they are favourably associated to output.