DOES INSTITUTIONAL OWNERSHIP IN INSURANCE COMPANY MOTIVATES INSURANCE DECISIONS?
Olajide S. Fadun 1
1 Department of Actuarial Science and Insurance, University of Lagos, Akoka, Lagos, Nigeria
The purpose of the paper is to explore influence of institutional ownership in insurance company on firms’ insurance decisions. The study is motivated by lack of empirical evidence on impact of institutional ownership in insurance company on corporate demand for insurance. The study aims to expand the domain of factors influencing corporate demand for insurance by establishing that institutional ownership in insurance company can impact firms’ insurance purchase decisions. Using responses of survey of 264 respondents and elite interviews in Nigeria; the study explored the question: Does institutional ownership in insurance company motivate insurance decisions? The paper provides empirical insights about how institutional ownership in insurance company can influence firms’ insurance decisions. Overall, the findings suggest that institutional ownership in insurance company influence firms’ insurance decisions. It noted that purchase of insurance by firms from parent or sister insurance companies do not contravene principle of risk transfer, provided professionalism and good practices are upheld. The paper highlights implications for practice in that it is essential that insurers should prudently underwrite risks accepted from parent or sister firms’ in order to prevent adverse selection and ensure payment of equitable premium. The policymaking implications centred on the need for firms to purchase and use appropriate insurance policies to manage their risks. This paper contributes to knowledge by establishing that institutional ownership in insurance company can impact corporate insurance purchase decisions. This is plausible as the literature does not indicate that institutional ownership or interest in insurance company influence corporate insurance demand.
Keywords: Insurance, Institutional ownership, Corporate demand for insurance, Insurance purchase practices, Insurance decisions, Risk management