CHAPTER ONE

INTRODUCTION

1.1 Background to the study

Globally, claim management plays a pivotal role in the insurance industry as it significantly affects customer satisfaction and retention, which in turn influences the purchase of insurance products. Claims are the ultimate test of an insurer’s promise to its clients, and managing them efficiently is essential to maintaining trust. As argued by Harrington (2018), efficient claim management, including prompt processing and transparent handling, ensures that customers feel supported during stressful times, which strengthens their confidence in the insurance company. In developed insurance markets such as the United States, the United Kingdom, and parts of Europe, insurance providers invest heavily in streamlining their claim management processes using technology to reduce processing times, minimise errors, and enhance customer service. Adopting technologies like artificial intelligence and data analytics, insurers are improving the accuracy of claim assessments, thus enhancing customer satisfaction and increasing the likelihood of policy renewals and new purchases (Deloitte, 2020).

In terms of the global insurance market, the relationship between claim management and the purchase of insurance products has been underscored in various studies. According to Swiss Re (2021), consumers across Asia, Africa, and Latin America are particularly sensitive to claim settlement experiences. In markets where insurance penetration is still growing, such as in these regions, negative claim experiences can significantly deter potential customers from purchasing insurance products. Poor handling of claims, particularly delayed payments or unfair settlements, can lead to widespread dissatisfaction and damage an insurer’s reputation, thereby decreasing the uptake of insurance policies (Swiss Re, 2021). Conversely, insurance companies that exhibit transparency and fairness in handling claims often see a rise in new policy acquisitions as customers share positive experiences, fostering trust in the brand (KPMG, 2022). Globally, customer-centric claim management has emerged as a competitive advantage for insurers seeking to expand market share.

Furthermore, the impact of claim management on the purchase of insurance products is not limited to individual policyholders but also extends to businesses and corporate entities. As noted by Ernst & Young (2020), large companies and corporations, especially in industries like manufacturing, shipping, and health, require seamless claim management as a critical factor in their decision to purchase group or business insurance products. In the worldwide insurance landscape, businesses are increasingly demanding tailored claim management services that not only expedite the settlement process but also offer real-time communication and proactive support. Insurers that meet these demands through efficient claim handling and clear communication channels have been more successful in retaining corporate clients and acquiring new business globally (Ernst & Young, 2020). Hence, the broader global insurance industry recognises claim management as a cornerstone in driving insurance sales, improving retention rates, and ensuring long-term customer loyalty.

In Africa, claim management has emerged as a critical factor influencing the purchase of insurance products, particularly as the insurance sector continues to grow across the continent. Historically, the insurance industry in Africa has faced challenges related to low penetration rates and trust issues due to the poor handling of claims. According to Ngugi (2019), one of the primary reasons for the low uptake of insurance products in many African countries is the perception that insurers are slow or reluctant to pay claims, leading to widespread dissatisfaction among policyholders. This is especially true in markets such as Kenya, Nigeria, and South Africa, where insurers often struggle with inefficiencies in processing claims, which hampers trust. However, insurers that have adopted more efficient and transparent claim management systems have seen improvements in customer acquisition and retention. A study by the Africa Insurance Organisation (AIO) (2021) indicates that companies offering faster claim settlements and clear communication throughout the claim process have been more successful in increasing their policyholder base.

Across Africa, the importance of claim management in driving insurance product purchases is becoming more apparent as insurers compete to serve an increasingly informed and tech-savvy customer base. The use of digital technologies such as mobile applications and online claim portals is gaining momentum in countries like South Africa, Nigeria, and Morocco, making it easier for customers to file claims and track the progress of their settlements (African Development Bank, 2020). This shift is crucial in a continent where mobile penetration is high, and many customers prefer digital solutions. Providing quicker and more transparent claim handling through digital platforms, African insurers are building trust and encouraging more individuals and businesses to purchase insurance products. Insurers like Sanlam and Old Mutual in South Africa have reported significant increases in customer satisfaction and policy renewals due to investments in better claim management systems (PwC Africa, 2021). This trend is gradually transforming the insurance landscape across Africa, where claim management is seen as a key determinant in the growth of the sector.

Moreover, the African insurance market is characterised by unique challenges, such as natural disasters, political instability, and economic fluctuations, which place significant pressure on claim management systems. In countries like Zimbabwe and Mozambique, where natural disasters such as floods and cyclones are frequent, the need for timely and efficient claim settlement is even more critical for the purchase and renewal of insurance policies (Insurance Regulatory Authority of Zimbabwe, 2022). Policyholders, particularly in vulnerable sectors such as agriculture and infrastructure, are heavily dependent on prompt claim management to recover from losses. When insurers fail to meet these expectations, it leads to decreased trust and a lower willingness to purchase insurance products. Conversely, insurers that demonstrate reliability during such crises see an uptick in the uptake of their products. The ability of African insurers to handle claims swiftly and fairly is, therefore, a decisive factor in both market penetration and customer loyalty across the continent.

In Cameroon, claim management is a key factor influencing the purchase of insurance products, as the sector faces challenges related to customer trust and market penetration. The Cameroonian insurance industry, although steadily growing, has been marked by low public confidence, primarily due to delays and inefficiencies in the claims process. According to Foncha (2020), one of the main reasons Cameroonians are hesitant to purchase insurance products is the perception that insurers either delay payments or deny legitimate claims. This distrust has affected the industry’s growth, particularly in rural areas, where insurance is often seen as an unreliable investment. However, insurers that have improved their claim management processes by reducing delays and providing transparent communication have seen a rise in both policy renewals and new customer acquisitions. The Association of Insurance Companies in Cameroon (ASAC) noted in its 2021 report that insurers with faster and fairer claim settlement processes are gaining more traction in the market, especially in urban centers like Douala and Yaoundé.

The advent of digital technologies has begun to reshape claim management in Cameroon, making it a more crucial factor in influencing customer decisions. This digital transformation is helping to bridge the trust gap that has historically plagued the sector, as policyholders now have more transparency and faster access to information (Ngwa, 2021). In addition, the use of mobile money services for claim payouts is gaining popularity, particularly in rural areas where access to banking services is limited. The ability to settle claims quickly via mobile platforms has improved customer satisfaction and encouraged more people to purchase insurance products, as they see tangible benefits in the form of quicker settlements. According to the Ministry of Finance (2022), these innovations are playing a pivotal role in increasing insurance penetration, which remains below 3% in Cameroon but is gradually rising due to improved claim management practices.

The Cameroonian insurance market faces unique challenges, particularly in managing claims related to natural disasters, road accidents, and health-related issues, which place immense pressure on insurers to handle claims efficiently. Cameroon, being prone to floods, landslides, and other natural disasters, highlights the critical role of effective claims management in influencing public trust and purchasing behavior. According to a report by the Cameroon Insurance Commission (CIMA, 2022), regions such as the Far North and the West frequent hotspots for natural disasters have witnessed increased insurance purchases, especially for property and agriculture-related products, due to timely and fair claim settlements. Conversely, slow or unfair claim management has been identified as a significant factor discouraging policy renewals (Hassan & Alhassan, 2021; Oduor & Muniu, 2020). Insurers that adopt customer-centric approaches and prioritise transparent claim processes are more likely to experience sustained growth in product uptake (Ali et al., 2020; Abiola & Ismail, 2022).

1.2 Statement of the Problem

The insurance industry relies heavily on effective claims management to maintain customer trust and foster the purchase of insurance products. At Garantie Mutuelle des Cadres Bamenda, inefficiencies in claims investigation, evaluation, and settlement have emerged as significant barriers to policyholder satisfaction and market penetration. These issues are undermining the insurer’s ability to meet customer expectations and retain their confidence in the company. A prompt and thorough investigation is a critical component of claims management. However, Garantie Mutuelle des Cadres Bamenda has experienced delays in gathering necessary information and verifying claims, leading to frustration and dissatisfaction among policyholders. Ali et al. (2020) highlights that customer who perceive the claims process as inefficient or lacking transparency are less likely to renew policies or recommend the insurer to others. Delayed investigations often fuel suspicions about the insurer’s intentions, reducing the trust that customers place in the organization and potentially deterring prospective customers.

Another pressing issue is the absence of clear and fair claim evaluation processes. When customers feel their claims are not assessed accurately or are unfairly rejected, they perceive the insurer as unreliable. According to Ndungu et al. (2020), transparent evaluation processes foster trust, which is essential for encouraging additional purchases and building long-term customer loyalty. The failure to provide clear communication about claim evaluations at Garantie Mutuelle des Cadres Bamenda has exacerbated dissatisfaction among policyholders, impacting the company’s reputation and customer retention rates. Again, the most critical aspect of claims management is the settlement process. When claims are not settled promptly or are only partially paid, it creates a sense of mistrust and neglect among policyholders. Research by Oduor and Muniu (2020) reveals that prompt and accurate claim settlements are directly linked to higher customer satisfaction and loyalty. In the case of Garantie Mutuelle des Cadres Bamenda, delays in settlement or disputes over claim amounts have significantly tarnished the company’s image, resulting in a decline in repeat purchases and referrals.

The combination of these challenges has contributed to declining customer satisfaction at Garantie Mutuelle des Cadres Bamenda. Moreover, these issues are not only reducing the likelihood of policy renewals but are also preventing the insurer from attracting new customers, limiting market growth. Addressing these problems is essential to restore trust, improve the customer experience, and drive the uptake of insurance policies.

1.3 Research Question

1.3.1 Main Research Question

What are the effects of claim management on the purchase of insurance products at Garantie Mutuelle des Cadres Bamenda?

1.3.2 Specific Research Questions

1. How does claims investigation impact the purchase of insurance products at Garantie Mutuelle des Cadres Bamenda?
2. In what ways does claim evaluation influence the purchase of insurance products at Garantie Mutuelle des Cadres Bamenda?

• How does the claim settlement affect the purchase of insurance products at Garantie Mutuelle des Cadres Bamenda?

1.4 Research Objective

1.4.1 Main Research Objective

To assess the effects of claim management on the purchase of insurance products at Garantie Mutuelle des Cadres Bamenda.

1.4.2 Specific Research Objectives

1. To examine how claims investigation impacts the purchase of insurance products at Garantie Mutuelle des Cadres Bamenda.
2. To analyze how claim evaluation influences the purchase of insurance products at Garantie Mutuelle des Cadres Bamenda.

To evaluate how claim settlement affect the purchase of insurance products at Garantie Mutuelle des Cadres Bamenda.