The relevance of local insurance companies' financial statements to corporate policyholders and insurance brokers when taking out an insurance policy

Abstract

Purpose: This research sets out to identify whether corporate policyholders and insurance brokers consider local insurance companies' financial statements when taking out an insurance policy. Additionally, the study also seeks to identify the underlying rationale and the identification of figures of interest when the financial statements are considered, together with the underlying rationale when local insurance companies' financial statements are not considered. Design: This study involves the collection of primary data by means of questionnaires addressed to corporate policyholders and insurance brokers. The findings are based on 75 completed questionnaires received from corporate policyholders together with 17 completed questionnaires received from insurance brokers. Findings An analysis of the questionnaires demonstrates that the majority of corporate policyholders and insurance brokers are interested in local insurance companies' financial statements. However, only the majority of the insurance brokers consider local insurance companies' financial statements when taking out an insurance policy, with the identification of the company's solvency being the main rationale. Furthermore, lack of time is the main rationale provided for not considering local insurance companies' financial statements. Conclusions: Locally, insurance companies' financial statements are relevant to corporate policyholders and insurance brokers. However, in spite of the application of IFRS 4, Phase I, aimed at increasing the usage of insurance companies' financial statements, locally this is still limited even though some corporate policyholders and insurance brokers consider insurers' financial statements when taking out an insurance policy. Implications: This result may imply that local insurance companies could provide simpler yet more useful financial information about the company to assist corporate policyholders and insurance brokers when taking out an insurance policy.