The Effect of Motor Insurance Risk Management Practice on Performance the Case of Ethiopian Insurance Corporation
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Date
2022-04
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A.A.U
Abstract
Insurance fraud is one of operational risk challenging almost all insurance companies. In
Ethiopian Insurance Corporation fraud has evolved over time from inflating of legitimate claim
submitting fake accident report and fraud perpetrated on both claim and policy underwriting
process. The objective of the study is to examine and analyze the nature and status of motor
insurance fraud and risk management practice in Ethiopian Insurance Corporation. The study
was descriptive and explanatory research design was used for the study with a target population
of 243 respondents and a sample size of 151. From the study findings, it was found that the type
of motor insurance fraud was claim and underwriting fraud are predominating and mainly
perpetrated by internal and external bodies through collusion. Additionally, most claim lodged
were inflated that was caused as a result of lack of appropriate punishment to fraudsters, poor
internal controls and greed. Moreover, the study was indicated that the company‘s strategic
approach to motor insurance fraud management is passive.
The study concluded that based on multiple regression analysis, 49.6 % variation in
organizational performance is explained by the employed explanatory variable i.e. preventive
fraud management practice, detective fraud management practice, and responsive fraud
management practice. However, the major proportion that is 50.4 % variation in organizational
performance not explained. This indicates that additional elements, such as financial and nonfinancial
considerations, were not included in the study.
The study achieves that preventive fraud management practice, detective fraud management
practice, and responsive fraud management practice are the key factors that affect the
performance of the company in the Ethiopian Insurance Corporation. Furthermore, the study
recommends that the company should create consolidated central database of all motor policies
in order to identify suspected fraudulent claims
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Keywords
EIC, Motor Insurance Fraud, Risk Management Practice, Company Performance