ADDIS ABABA UNIVERSITY

COLLEGE OF BUSINESS & ECONOMICS

Department of Accounting and Finance

Risk Management & Insurance

(AcFn2081)

Group Assignment
(The Insurance Business Operations in Ethiopia:
A Case Study of Nib Insurance Company)

No Name of Group Member ID Section

1. Mehret Samson UGR/9577/15 4
2. Mulugeta Fekadu UGR/4027/15 4
3. Mesfin Tiki UGR/4048/15 4
4. Mercy Selamu UGR/2017/15 4
5. Mahlet Fisshaye UGR/4453/15 4
6. Nathnael Tesfaye UGR/2523/15 4
7. Ribka Berhane UGR/4824/15 4

Submission date: May, 2024

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Table of Contents

Chapter Layout ------------------------------------------------------------------------------------ 3

Acknowledgement -------------------------------------------------------------------------------- 5

Introduction ---------------------------------------------------------------------------------------- 6

Objectives ------------------------------------------------------------------------------------------ 7

Scope ------------------------------------------------------------------------------------------------ 8

Methodology --------------------------------------------------------------------------------------- 9

Literature Review --------------------------------------------------------------------------------- 10

Historical Background --------------------------------------------------------------------------- 11

Regulatory Structures ---------------------------------------------------------------------------- 12

Types of Insurance Policies --------------------------------------------------------------------- 13

Underwriting processes -------------------------------------------------------------------------- 17

Risk Evaluation -------------------------------------------------------------------------- 17

Underwriting Guidelines ---------------------------------------------------------------- 18

Premium Calculation ---------------------------------------------------------------------

20

Claim settlement process ------------------------------------------------------------------------- 21

Conclusion ------------------------------------------------------------------------------------------

23

References ------------------------------------------------------------------------------------------ 24

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Chapter Layout

1. Introduction
1.1 Acknowledgements
3.2 General Introduction
3.3 Objective
3.4 Scope
3.5 Methodology

2. Literature Review
2.1 Overview of Insurance Business Operations

3. Historical Development
3.1 Establishment
3.2 Key Milestones

4. Regulatory Structures
4.1 Ethiopian Insurance Corporation
4.2 National Bank of Ethiopia

5. Types of Insurance Policies

5.1 Motor
5.2 Liability
5.3 Fire
5.4 Marine Cargo
5.5 Transit Goods
5.6 Workmen Compensation
5.7 Burglary
5.8 Pecuniary
5.9 Political Violence
5.10 Business Interruption

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 5.11 Horticulture
5.12 Fidelity
5.13 Accident
5.14 All Risks

6. Underwriting Process
6.1 Risk Evaluation
6.1.1 Assessing Risks
6.2 Underwriting Guidelines
6.2.1 Core Components of Underwriting Guidelines
6.2.2 Underwriting Considerations
6.2.3 Common Underwriting Processes
6.3 Premium Calculation
6.3.1 Factors for Calculating Insurance Premiums

7. Claim Settlement Process

7.1 Report
7.2 Evaluation
7.3 Documentation
7.4 Submitting
7.5 Settlement Offer
7.6 Negotiation
7.7 Settlement Payment

8. Conclusion
8.1 Summary

9. Reference
9.1 Sources

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 Acknowledgements

To everyone who helped to complete this case study, "The Insurance Business Operations in
Ethiopia: A Case Study of Nib Insurance Company," we would like to extend our sincere
gratitude and appreciation. You have given this essay a great deal of thought and effort, and your
dedication to writing this essay has been enormous. To anybody who has contributed to the
writing of this article, no matter how minor or large, your assistance and cooperation have been
much valued.

This essay would not have been possible without the support, guidance, and encouragement
of several individuals. Many helped with the successful accomplishment of this paper, but first
and foremost, we would like to praise the almighty God, who empowered us throughout the
journey.

We also owe a debt of recognition to the professionals and experts who so kindly contributed
their knowledge and experience throughout the writing of this essay. Their willingness to share
their expertise has improved the analysis in this essay and expanded our understanding of
insurance companies. They shared their knowledge of Nib Insurance, giving us insights that
paved the way for this paper. Their willingness to share their experiences has broadened our
understanding and has surely made the conclusions made here credible.

We would also like to deeply thank our instructor for letting us write this paper, as we have
gained an immeasurable amount of insight on different topics we would not have had otherwise.
Lastly, we would like to acknowledge the contributions of authors, scholars, writers, and
researchers whose works served as the foundation for this paper.

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Introduction

In this paper, we analyse the different business operations of Nib Insurance Company. To
give an essential breakdown, we looked into the historical development and evolution of Nib
throughout its journey. These years of success for Nib are attributed to its keeping up with
current technologies as well as prioritising its relationships with customers.

We then dove into the regulatory structures and licensing requirements needed for any
insurance company to function smoothly in Ethiopia. The two primary regulatory entities, the
National Bank of Ethiopia and the Ethiopian Insurance Corporation, are also discussed in this
paper.

Moreover, this paper looks into the different types of insurance policies recognised under
Ethiopian law at Nib Insurance Company, shedding light on the framework that governs them.
Each type of policy has its own set of rules that govern it.

In addition, the underwriting processes, mainly risk evaluation, underwriting guidelines, and
premium calculations, are looked into. Risk evaluation deals with identifying potential risks and
calculating the impact they might have. Whereas, underwriting guidelines are the essential
elements meant to assist insurers in many major decision areas. Premiums are amounts paid to
insurance companies on a regular basis for coverage against risks, so insurance companies need
to expend time and calculate the appropriate amounts customised for each individual.

Lastly, the claim settlement process of Nib Insurance Company, typically involving seven
steps, was mentioned. We listed the necessary steps needed to settle a claim. By exploring this
insurance, this essay aimed to give insights on the establishment, success, and in-betweens of
Nib Insurance Company.

N.B We reflected our own understanding with ideas that we developed by reading and listening
to lectures. We thoroughly researched and worked diligently to sum the different ideas we gained
and summarize them in a coherent form. We also sought published sources, such as books, the
internet, articles, and closely read and interpreted our knowledge.

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Objective

The objectives of the essay “The Insurance Business Operations in Ethiopia: A Case Study of
Nib Insurance Company” are to examine the operations of Nib Insurance Company in Ethiopia
and assess its performance in the market. Specifically, the project aims to analyse the company’s
competitive advantage in the industry. Here are some of the objectives we tried to achieve:

 Analyse the historical development and regulatory framework of the insurance industry in
Ethiopia, providing a comprehensive overview of its evolution and current state.

 Examine the specific business operations of Nib Insurance Company within the context of
the Ethiopian insurance market.

 To assess the challenges and opportunities faced by Nib Insurance Company in operating
within the Ethiopian insurance sector, considering factors such as regulatory compliance,
competition, technological advancements, and economic conditions.

 To evaluate the performance and financial sustainability of Nib Insurance Company, analyse
key financial indicators, profitability ratios, and market share trends to provide insights into
its operational efficiency and long-term viability.

 To explore the impact of socio-economic factors, cultural norms, and government policies on
the insurance business operations in Ethiopia, highlighting the unique challenges and
opportunities that arise in this specific market context.

 To identify best practices and strategic recommendations for Nib Insurance Company and
other insurance firms operating in Ethiopia, aiming to enhance their competitiveness,
customer service quality, risk management practices, and overall business performance.

 To contribute to the existing literature on the insurance industry in Ethiopia by providing a

detailed case study analysis of Nib Insurance Company, offering valuable insights and
practical implications for academics, policymakers, industry practitioners, and other
stakeholders interested in the Ethiopian insurance market.

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Scope

This essay, "The Insurance Business Operations in Ethiopia: A Case Study of Nib Insurance
Company," has the goal of providing a thorough examination of Ethiopia's insurance market
operations at Nib Insurance Company. It will address a number of topics, such as the evolution
of this insurance sector in Ethiopia over time, summarised as historical development. Moreover,
we’ll dive into the competitive environment and the particular tactics used by Nib Insurance
Company to take the lead in the market.

This essay’s introduction will begin by providing a general overview of the insurance
industry in Ethiopia, highlighting its historical development and growth over the years. The
success and market leadership of Nib Insurance Company can be attributed in part to its efforts
on risk management procedures, digitalization, and technology investments, as well as ensuring
their customers’s happiness. These actions paved the way for their dependability and credibility
throughout their journey.

It will then examine Ethiopia's insurance industry's regulatory structure. It will look at how
licensing criteria, norms, and insurance company supervision are handled by regulatory
organisations like the Ethiopian Insurance Corporation and the National Bank of Ethiopia.

The competitive landscape of the insurance industry in Ethiopia will be analysed,

highlighting the major players and their market share. The essay will explore the strategies
adopted by Nib Insurance Company to differentiate itself from competitors and gain a
competitive edge. This can include its line of services, customer-centred projects, and
partnerships with reinsurance companies.

Furthermore, the essay will also look at the different types of policies and plans that Nib
Insurance Company offered to guarantee its success. Nib Insurance Company offers a wide range
of insurance policies to cater to the different needs of customers. Out of these, we have delved
into some of the main ones that will help us gain insights on the general workings of insurance.

It then looks into the underwriting guidelines for Nib Insurance in Ethiopia to effectively
evaluate and manage risk. Risk evaluation, being an essential part of any company to determine
potential consequences, has been summarised in a coherent and understandable form. In
addition, the underwriting guidelines assist in decisions about what to insure, under what terms,
and at what premium rates. These premiums are paid on a consistent basis and are calculated
depending on various factors, as stated below. Moreover, once an accident occurs, there are clear

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steps one must follow to settle the claim of insurance, which will be touched on in the coming
pages.

Methodology

The research design for this study will be a case study approach focusing on the insurance
business operations in Ethiopia, with a specific focus on Nib Insurance Company. A case study
design is appropriate for gaining an in-depth understanding of a specific organization within its
real-world context.

Primary data collections were used by conducting semi-structured interviews with key
stakeholders within Nib Insurance Company, and dministering surveys to employees and
customers of Nib Insurance Company to collect quantitative data on their perceptions and
experiences with the company. Moreover, observing a day’s operations of Nib Insurance
Company to understand its processes, interactions, and organizational culture.

Secondary data collections were used for analysis of relevant documents from Nib Insurance
Company, the Ethiopian Insurance Corporation, and the National Bank of Ethiopia to gather
background information and data on the company's performance and regulatory environment.
Moreover, through literature review by eviewing academic journals, industry reports,
government publications, and other sources to gain insights into the insurance industry in
Ethiopia and relevant theoretical frameworks.

The sampling strategies used are purposeful sampling, selecting key informants within Nib
Insurance Company based on their roles, expertise, and knowledge of the company's operations.
Moreover, convenience sampling, surveying employees and customers of Nib Insurance
Company who are easily accessible and willing to participate in the study.

Through data analysis of quantitative and quantitative approaches. Qualitative analysis uses
thematic analysis of interview transcripts and observational notes to identify patterns, themes,
and insights related to Nib Insurance Company's operations. While, quantitative analysis use
descriptive statistics and inferential analysis of survey data to quantify employee and customer
perceptions of Nib Insurance Company.

Accompanied by an ethical consideration to an informed consent, obtaining informed consent

from participants before conducting interviews or surveys to ensure voluntary participation.
Ensuring the confidentiality of participants' responses and maintaining anonymity in reporting
findings to protect their privacy. As well as safeguarding collected data.

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 There are a few limitations, such as: the study's timeline may limit the depth and scope of
data collection and analysis. Limited access to certain information or stakeholders within Nib
Insurance Company may impact the comprehensiveness of the study. In addition, potential biases
in participant responses or researcher interpretations may influence the study's findings.

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Literature Review

The insurance industry in Ethiopia has undergone significant changes over the past few
decades. Historically, the sector was dominated by state-owned enterprises. However, with the
liberalization of the economy and the introduction of market-oriented reforms, private insurance
companies, Nib Insurance Company, have emerged, contributing to the expansion of the
industry.

The regulatory framework governing the insurance industry in Ethiopia plays a crucial role in
shaping business operations. This topic would explore the legal and regulatory framework
iimposed by the National Bank of Ethiopia (NBE) and the Ethiopian Insurance Corporations
(EIC).

The adoption of digital technologies is transforming the operations of Nib Insurance

Company and others worldwide. In the context of Ethiopia, literature on digital transformation in
insurance would cover topics such as tech innovations, digital underwriting, claims processing,
and the impact of digitalization on operational efficiency and customer engagement.

Effective risk management is fundamental to the sustainability of insurance businesses. It

will see and risk assessment and evaluation methodologies, underwriting practices, claims
management, and regulatory compliance needed.

Moreover, the underwriting guidelines, risk evaluation practices, premium calculation

methods, and types of insurance policies provided by Nib Insurance Company in Ethiopia play a
crucial role in shaping the company's underwriting operations, risk management strategies,
pricing decisions, and product offerings. By adhering to sound underwriting principles,
conducting thorough risk assessments, pricing policies accurately, and offering a variety of
insurance products, Nib Insurance can effectively manage risk exposure, attract customers, and
sustain long-term growth in the Ethiopian insurance market, as it has done so.

In conclusion, an overall understanding of the insurance business operations in Ethiopia, with

a focus on the case study of Nib Insurance Company, requires an analysis oon the many factors
faced by the company. By examining these key themes through a literature review lens, this
essay aims to provide valuable insights into the operational dynamics of Nib Insurance Company
in the context of the Ethiopian Insurance Industry.

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 The Insurance Business Operations in Ethiopia:
Nib Insurance Company

Historical Background

Nib Insurance Company (NIC) is one of the leading insurance companies in Ethiopia, with a
rich history spanning over decades. The historical development of Nib Insurance Company can
be traced back to its establishment in 2008 as a joint venture between domestic and foreign
investors. The company was established with the goal of satisfying the growing demands of the
Ethiopian market by offering reliable and trustworthy insurance services.

Early on in its existence, Nib Insurance Company had tremendous growth as it made a name
for itself as a key force in the Ethiopian insurance market. Nib Insurance Company was able to
differentiate itself from competitors by forming strategic alliances with international reinsurance
companies and focusing on customer-centred solutions.

Nib Insurance Company has persevered in developing and adapting to shifting regulatory
needs as well as market realities over time. To meet the varied needs of individual and business
clients, the company has expanded its product line to cover a variety of insurance products, such
as life, health, property, marine, and auto insurance.

Nib Insurance Company has made significant investments in digitalization and technology in
addition to its product offerings and customer service experience. Modern methods and
procedures have been put in place by the business to enhance risk management procedures,
improve claim processing, and streamline its operations.

One of the key milestones in the historical development of Nib Insurance Company was its
listing on the Ethiopian Stock Exchange in 2014. This action strengthened the company's
reputation as a dependable and trustworthy insurance provider. Moreover, this gave it access to
financial markets and enhanced its transparency and corporate governance practices, further
solidifying its reputation.

In recent years, Nib Insurance Company has continued to strengthen its market position by
implementing strategic initiatives such as geographic expansion, product innovation, and talent
development. The company has established a strong presence in major cities across Ethiopia,
utilising its vast branch network and distribution channels to reach a wider customer base.

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 Nib Insurance Company is well-positioned for future success as it keeps up with the
changing insurance market in Ethiopia. With a strong foundation built on a legacy of excellence
and a commitment to customer satisfaction, Nib Insurance Company is in a good position to
handle obstacles and take advantage of opportunities in the fast-paced and fiercely competitive
insurance market.

In conclusion, the historical development of Nib Insurance Company is a witness to its

resilience, innovation, and commitment to quality. Through strategic vision, prudent
management, and a customer-centric approach, Nib Insurance Company has emerged as a market
leader in Ethiopia's insurance industry, setting a benchmark for quality, reliability, and
trustworthiness in this sector.

Regulatory Structures

The National Bank of Ethiopia (NBE) and the Ethiopian Insurance Corporation (EIC) are the
two primary regulatory entities that oversee the insurance sector in Ethiopia. These regulatory
agencies are essential to monitoring and controlling the activities of the nation's insurance
providers, such as Nib Insurance Company.

The main regulatory body in charge of policing and overseeing Ethiopia's insurance industry
is the Ethiopian Insurance Corporation (EIC). The Insurance Business Proclamation No. 86/1994
established the EIC, which is a ministry of finance agency. The EIC's primary duties consist of:

 The registration and licensing of insurance.

 Establishing rules and regulations pertaining to insurance activities.
 Keeping an eye on and overseeing insurance businesses' solvency and financial
performance.
 Making sure that all legal and regulatory standards are met.
 Promoting consumer protection in the insurance industry and defending policyholder
interests.

The Ethiopian Insurance Corporation is not the only organisation involved in the regulation
of some parts of the insurance industry; the NBE is also involved in matters pertaining to
financial stability and monetary policy compliance. As Ethiopia's national bank, the NBE is in
charge of regulating the banking and financial industry, which includes insurance providers.

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 Aspects that affect insurance firms like Nib Insurance Company, such as capital
requirements, investment limitations, foreign exchange transactions, and other financial
problems, may be regulated by the National Bank of Ethiopia. In order to guarantee that
insurance businesses adhere to the law and maintain the general stability of Ethiopia's financial
system, the NBE collaborates with the Ethiopian Insurance Corporation.

In general, the National Bank of Ethiopia and the Ethiopian Insurance Corporation oversee
the regulatory frameworks that govern insurance business operations in Ethiopia. These
frameworks play a critical role in preserving the stability of the insurance industry, protecting
policyholder interests, and encouraging fair competition. For Nib Insurance Company to function
efficiently and ethically in the Ethiopian insurance market, it must abide by the rules established
by these regulating organisations.

Types of Insurance Policies

Nib Insurance company offers a wide range of insurance policies to cater to different needs.
Here are some of the main insurance policies provided by Nib Isurance:

1. Motor Insurance
a. Motor Comprehensive: Accidental collision or overturning upon mechanical breakdown or
wear and tear but excluding damage to tires unless such insured motor vehicle is damaged at
the same time. Ex: Fire, external explosion, self ignition, lightening, theft, malicious act,
transit risk, and impact damage caused by failing objects. Moreover, legal liability to third
parties for bodily injury or death and damage to property up to specified limit.
b. Third party fire and theft policy: Legal Liability to third parties for bodily injury or death and
damage to properties. Damage to own motor vehicles directly caused by fire, self ignition,
lightening, explosion, theft or attempted theft
c. Third party only policy covers: Legal liability to comply with proclamation No. 559/2008 for
vehicles insurance against Third Party risk of the insured to third parties for bodily injury or
death and damage to properties up to specified limit.
d. Motor B.S.G: This cover is extended under motor comprehensive insurance policy on
payment of additional premium. Covers: Fire, explosion, riots, strikes, civil commotions all
arising out of the actions of bandits and Guerrillas.

2. Liability Insurance

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a. Public Liability Insurance: Provides cover in respect of legal liability to third parties for
bodily injury and loss of or damage to property. The policy gives cover for legal liability for
damages for accidents causing bodily injury to or death, disease or illness sustained by any
person not under a contact of employment to the insured, or accidents causing loss of or
damage material property belonging to another and caused during the period of insurance,
arising out of and in connection with the business.
b. Professional Indemnity Insurance: Insurance professional persons or firms for their legal
liabilities to third parties arising from their professional error and omission negligence of that
of their employees Not only can they cause bodily injury or damage to property through their
cause bodily injury or damage to property through their negligence, they can fail to exercise
and care that is expected of them.
c. Product Liability Insurance: Provides cover in respect of legal liability to third parties for
bodily injury to a person or loss of or damage to property caused by products or goods
supplied by the insured. Note that it is not just the manufacturer who can have a product
liability, retailers and any firm involved in the chain of distribution can also find themselves
bearing responsibility for the good supplied to customers.

3. Fire Insurance

Loss of or damage to the insured property by fire, lightning and explosion of boiler/gas used
for domestic purpose. On payment of additional premium the policy can be extended to include
the following. Earthquake, storm, tempest flood, aircraft damage, impact damage, spontaneous
combustion, bursting or overflowing of water apparatus, bush fire, subsides and/or collapse,
strike, riot, malicious damage and explosion

4. Marine Cargo
Loss and damage to the subject matter insured on "all risk" basis from part of loading to final
warehouse/destination. Some of the perils covered by the policy are fire, explosion, sinking and
general average contribution of cargo.

5. Goods in Transit

Inland transit insurance covers the insured interest against theft, fire, damage directly caused
by overturning or collision or derailment of the carrying conveyance or collapse of bridge and
embankments.

6. Workmen Compensation

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 If any employee in the insured’s immediate service shall sustain death or bodily injury by
accident or occupational disease occurring at the place assigned to him for work and if the
insured shall be liable to pay compensation for such death, bodily injury or occupational disease
under the Ethiopian law.

7. Burglary and House Break

Loss by theft following upon actual forcible and violent breaking into or out of a building, or
consequent upon any attempt threat or if there shall arise any damage to the property insured.

8. Pecuniary Insurance

a. Bond: In addition to the above, Nib Insurance Company provides various types of bonds.
Ex: Bid Bond, Performance Bond, Advance Payment Bond, Supply Bond, Retention Bond, and
Maintenance Bond
b. Fidelity Guarantee Insurance: It covers loss of property or money as a direct result of
fraudulent act by the employees insured. In other words, Fidelity Insurance provides
compensation to an insured for loss suffered due to fraud or dishonesty of the employees
whose honesty is guaranteed by the term of the policy. Thus, the employer can protect
himself from the risk of infidelity of the staffs especially those whose main duty involves the
holding of money or securities.
c. Money Insurance: Money insurance is one form of pecuniary insurance which compensates
the insured of loss of money, as defined here under, sustained as a result of fortuitous
circumstance through the acts of burglary’s and/or thieves while in transit or in a locked safe.
For the purpose of money insurance the term “MONEY” is defined as cash, bank notes,
currency notes, cheques (except crossed cheques), postal order, money order, current
postage, revenue stamp, and credit cards.

9. Political Violence and Terrorism

This policy provides cover for physical loss or physical damage to property belonging to the
Insured or for which the Insured is legally responsible, directly caused by one or more of the
following perils or "Covered Causes of Loss.” Ex: Act of Terrorism, Sabotage, Riots, Strikes
and/or Civil Commotion, Malicious Damage, Insurrection, Revolution or Rebellion, Mutiny
and/or Coup d'Etat.

10. Business Interruption Insurance

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 Business interruption insurance is sometimes known as consequential loss or loss of profit.
Policies like fire, engineering, “All Risks” deal with the value of the property damaged or
destroyed, but not with the losses caused by reduced sales and continued expenditure during the
repair period and thereafter. Therefore, business Interruption Insurance exists to meet demand for
protection in the event of some incident happening which disrupts the operation of the business
causing a loss of income and continued expenditure of some unavoidable costs while the
business was not operational. When a property is destroyed or damaged the owner of the
property insured will be indemnified by the payment of a sum of money which would enable
them to repair or replace what is lost, damaged or destroyed. It is not, however, the full extent of
their loss.

11. Horticulture Insurance

The following are properties covered under horticulture policy: Greenhouse(GH) Structure,
Plastic Cladding on GH structure, Crops(flowers) in greenhouse, Machinery breakdown,
Deterioration of Horticultural produce in cold storage, and Irrigation Equipment.

12. Fidelity Guarantee Insurance

It covers loss of property or money as a direct result of fraudulent act by the employee(s)
insured. In other words, Fidelity Insurance provides compensation to an insured for loss suffered
due to fraud or dishonesty of the employees whose honesty is guaranteed by the term of the
policy. Thus, the employer can protect himself from the risk of infidelity of the staffs especially
those whose main duty involves the holding of money or securities.

13. Accident Insurance

A benefit policy intended to compensate the insured against accidental bodily injury or death
and directly occurred by violent, accidental, external and visible means and which injury shall be
the direct cause of death and disablement. Benefits are payable for: Death, Permanent
Disablement, Temporary Total Disablement, Medical, surgical and hospital expenses in
connection with an accident. The insurance cover is a 24 hrs accident cover.

14. All Risk Insurance

It covers the insured against loss or damage by fire, theft, or any accident or misfortune not
excluded by the policy. Properties to be covered by this policy are personal effects, house hold
goods and the like.

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Underwriting Processes

Risk evaluation

Risk evaluation is an essential part of risk management; it deals with identifying, assessing,
and measuring risks in order to determine the consequences and potential impacts they may have
on the company.

Nib Insurance Company is a privately owned company in Ethiopia. Like any other company,
it’s also exposed to different kinds of risks, including insurance risk, financial risk, credit risk,
and interest rate risk. One of the ways the company evaluates its risk is through the preparation
of its financial statements. Based on this statement, managers can identify patterns of change in
the company's finances, which is helpful to make judgements and assumptions.

Another way is by understanding the insured. The company provides both non-life insurance
and life assurance services, which include property insurance, engineering insurance, liability
insurance, pecuniary insurance, and group or personal accident insurance. So in order to assess
the risk, the company will look into the insured’s history and business operation method.

Yet another way is by classifying the risks. This method helps the company classify the
potential risks and manage them accordingly. The company’s risks are measured using methods
that reflect both the expected loss likely to arise in normal circumstances and unexpected losses,
which are an estimate of the ultimate actual loss based on a statistical model.

The company also uses historical experience and data to determine probability and reflect the
economic environment. After the risk is evaluated and assessed, the next step is to prepare an
effective method of managing the potential risks. First The board of directors is responsible for
arranging a comprehensive risk management programme and policy for the company. Then
senior management has the responsibility for the proper execution and interpretation of the risk
management strategy and the policies. Then, finally, the Risk Management Unit is responsible
for implementing and maintaining risk-related procedures and independently assesses and
monitors the level of risk assumed by the insurance company. It is also responsible for
monitoring compliance with risk principles, policies, and limits all across the company.

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Underwriting Guidelines

Underwriting guidelines for NIB Insurance in Ethiopia are designed to effectively evaluate
and manage risk, ensuring fair and sustainable coverage. These guidelines assist NIB Insurance
in deciding whether to insure a particular risk, under what terms, and at what premium rates.
Here are the essential elements and considerations specific to NIB Insurance in Ethiopia:

Core Components

i) Risk Evaluation
a. Health and Medical History: For health and life insurance, evaluating an applicant's medical
background, lifestyle, and family medical history is crucial. NIB Insurance may request
medical examinations or reports.
b. Property Condition: For property insurance, assessing the condition, location, and age of the
property is essential. This includes checking for compliance with local building regulations
and evaluating risks like fire or theft.
c. Driving History: For auto insurance, reviewing the applicant’s driving record, including any
accidents or traffic violations, is necessary to determine risk levels.

ii) Financial Stability

a. Credit Score and Financial Records: Evaluating the applicant's financial stability through
credit scores and other financial records helps predict the likelihood of future claims.
b. Income and Employment Status: Assessing the applicant’s income and employment status
can influence underwriting decisions, especially for life and health insurance.

iii) Claim History

Reviewing the frequency of past claims made by the applicant to gain insights into future risks.

iv) Demographic Factors

Age, gender, occupation, and other demographic factors are considered, though these must
comply with Ethiopian regulations to ensure fairness and non-discrimination.

v) Coverage Limits and Deductibles

NIB Insurance’s guidelines outline maximum coverage limits and deductible options based on
the applicant's risk profile and the type of insurance sought.

vi) Type of Insurance

Specific underwriting criteria are tailored to different insurance products offered by NIB
Insurance, such as health, life, auto, and property insurance.

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 Underwriting Considerations

i) Regulatory Compliance
Underwriting practices must adhere to Ethiopian regulations to ensure fair and non-
discriminatory treatment of all applicants.

ii) Actuarial Data

Using actuarial tables and statistical data to predict risks and set appropriate premium rates.

iii) Market Conditions

Considering economic factors and market competition within Ethiopia, which can influence
underwriting guidelines and premium pricing.

iv) Technological Advancements

Incorporating big data, machine learning, and predictive analytics to improve the accuracy and
efficiency of risk assessments.

v) Reinsurance
Sharing risk with reinsurance companies, which affects underwriting criteria and decisions.

Common Underwriting Processes

- Application Review
Initial assessment of the application and supporting documents to ensure completeness and
accuracy.

- Risk Classification
Categorizing applicants into different risk classes (e.g., preferred, standard, substandard) based
on their risk profile.

- Premium Calculation
Determining the appropriate premium based on the risk classification and coverage terms. This
includes consideration of factors such as the applicant's health, property condition, and driving
history.

- Policy Issuance
Finalizing the terms and issuing the insurance policy to the applicant once all underwriting
criteria are met.

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 Premium Calculation

Nib Insurance Company (S.C.) is an Ethiopian insurance company that provides coverage
against specific risks or losses. Insurance premiums are the amounts paid by individuals or
businesses to an insurance company for coverage against specific risks. Premiums can be paid on
a regular basis (monthly, quarterly, or annually) to maintain an active insurance policy. Nib
Insurance, along with Nib International Bank, has introduced a novel premium financing
scheme. Under this facility, the bank pays annual premiums on behalf of taxi owners and public
transport vehicles unable to afford a lump sum for motor and life insurance policies. For Nib
Insurance in Ethiopia, you would typically need to consider the following:

- Type of Insurance: Nib Insurance offers a range of policies, such as Motor, Engineering,
Liability, Pecuniary, Group/Personal Accident, Fire & Lightning, Burglary and Housebreaking,
Plate Glass, Marine Cargo, Goods in Transit, Horticulture, Political Violence and Terrorism,
Consequential Loss, Workmen's Compensation, Fidelity Guarantee, and "All Risk" Insurance.

- Coverage Details: Each policy has different coverage limits and conditions that will affect the
premium.

- Coverage Type: Different types of insurance (e.g.motor, health, property) have varying premium
rates.

- Risk Assessment: The company will assess the risk associated with the insured entity or
individual (e.g., vehicle, property, or life), which can influence the premium cost.

- Discounts and Deductibles: These may apply based on the policyholder's history, the presence of
safety features, or other criteria. Higher deductibles may lead to lower premiums.Safe driving,
loyalty, or bundled policies may reduce premiums.

- Additional Coverage: Optional add-ons (e.g. riders) affect the premium.

- Location: Geographic factors impact risk (e.g. urban vs. rural).

- Sum Insured: The maximum amount the insurer will pay in case of a claim.

- Policyholder's Profile: Age, gender, occupation, and other personal details.

- Claim History: Previous claims influence premium rates.

- Reinsurance Arrangements: Nib Insurance Company (S.C) has reinsurance arrangements with
internationally renowned and financially strong Reinsurance Companies, which might affect
premium calculations.

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 Claim Settlement Process

The first step is to report the claim to the insurance company. This can usually be done
online, over the phone, or by visiting a branch office. Reporting the claim is the process of
officially notifying an insurance company about a loss or damage covered by an insurance
policy. It typically involves providing information about the incident, such as the date, time, and
location, as well as details about the extent of the damage and any injuries sustained. The insurer
will then investigate the claim and may request additional information or documentation before
making a decision on coverage and payment. This can usually be done online, over the phone, or
by visiting a branch office.

Claim evaluation refers to the process by which an insurance company assesses the validity
and value of a claim made by a policyholder. This typically involves investigating the
circumstances of the claim, reviewing any documentation or evidence provided, and determining
whether the claim is covered under the policy. The insurer will also evaluate the extent of the
damage or loss and calculate the appropriate amount of compensation to be paid out. Claim
evaluation aims to ensure that policyholders receive fair and accurate settlements for their
claims, while also protecting the financial interests of the insurance company. The insurance
company will assess the claim to determine its validity and the extent of the coverage provided
by the policy.

Documentation plays a crucial role in the claim settlement process as it serves as evidence to
support the claim and helps insurance companies assess the validity and value of the claim. The
documentation required may vary depending on the type of claim and the insurance policy, but
commonly requested documents include:

- Claim form: A form that needs to be filled out by the policyholder to provide details about the
claim, such as the date and cause of the loss, the extent of the damage, and contact information.
- Proof of loss: Evidence supporting the claim, such as photographs, videos, receipts, invoices, and
estimates for repairs or replacements.
- Police report: In case of theft, vandalism, or other criminal activities, a police report may be
required as part of the documentation.
- Medical reports: For health or medical insurance claims, medical reports, bills, and receipts from
healthcare providers may be needed.
- Policy documents: Copies of the insurance policy and any endorsements or riders that may
impact the coverage of the claim.
- Witness statements: Statements from witnesses who can corroborate the events leading to the
claim.
- Other relevant documents: Any other documentation deemed necessary to support the claim,
such as contracts, leases, or property titles.

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 Submitting accurate and complete documentation is essential for a smooth and efficient claim
settlement process and may help expedite the processing of the claim. It’s essential for
policyholders to carefully review their insurance policy to understand the documentation
requirements and obligations in the event of a claim. The policyholder will need to provide
relevant documentation to support the claim, such as medical records, police reports, and other
evidence

A settlement offer in the claim settlement process refers to an amount of money proposed by
an insurer or defendant to the claimant as a way to resolve a dispute or claim. This offer is
typically made in exchange for the claimant agreeing to release the insurer or defendant from any
further liability related to the claim. If the claimant accepts the settlement offer, the claim is
resolved and no further legal action can be taken. If the claimant rejects the offer, they may
choose to negotiate for a higher settlement amount or proceed to court for further resolution.
Once the claim has been evaluated and approved, the insurance company will make a settlement
offer to the policyholder. This may involve the payment of a lump sum or the reimbursement of
expenses.

If the policyholder feels that the settlement offer is inadequate, they may negotiate with the
insurance company to reach a more satisfactory resolution.

Settlement payment in the claim settlement process refers to the final monetary compensation
that is provided by the insurance company to the policyholder for a covered claim. This payment
is agreed upon between the insurance company and the policyholder after evaluating the claim,
determining the extent of the damage or loss, and negotiating the amount of coverage provided
under the policy.

The settlement payment is intended to reimburse the policyholder for the financial losses or
damages incurred as a result of the covered incident. This payment can be used to repair or
replace damaged property, cover medical expenses, or compensate for other financial losses
resulting from the claim.

Once the settlement offer is accepted by the policyholder, the insurance company will issue
payment in the agreed-upon amount through various means such as a check, direct deposit, or
electronic transfer. In exchange for the settlement payment, the policyholder may be required to
sign a release form, releasing the insurance company from any further liability related to the
claim. This signifies that the settlement payment is considered final compensation for the claim.

The claim is considered settled once the payment has been made and all necessary
documentation has been submitted. It is important for policyholders to carefully review their
insurance policy to understand the coverage provided and the claims settlement process in case
they need to file a claim.
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Conclusion

In conclusion, the case study on the insurance business operations in Ethiopia, with a specific
focus on Nib Insurance Company, has provided valuable insights into the company's operations
within the Ethiopian insurance industry. Through a combination of primary data collection
methods such as interviews, surveys, and observations, as well as secondary data analysis
through document reviews and literature review, this study has shed light on various aspects of
Nib Insurance Company's functioning.

This study’s summary shows or highlights the importance of understanding the regulatory
environment, maintaining customers, risk evaluation practices, and use of current technologies
and trend, in shaping the operations of an insurance company in Ethiopia.

In the future, further research could explore additional aspects of insurance business
operations in Ethiopia, such as market competition, product innovation, distribution channels,
and regulatory compliance to deepen our understanding of the industry's dynamics and potential
areas for improvement.

Overall, this case study contributes to the body of knowledge on insurance business
operations in Ethiopia and serves as a starting point for future research endeavors aimed at
enhancing the effectiveness and sustainability of insurance companies operating in the country.

In conclusion, the study highlighting the importance of continuous learning, adaptation, and
innovation for insurance companies like Nib Insurance Company to grow in a dynamic,
evolving, and competitive market environment like Ethiopia.

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