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MATHEMATICS DEPARTMENT
SCHOOL OF NATURAL SCIENCES
RESEARCH PROPOSAL
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ACKNOWLEDGEMENTS
First and most importantly, I thank God for giving me strength and grace to reach this far in my
academic journey and helping me get through this research. I am grateful to my supervisor Mr Alick
Banda and My Lecturer Dr Taonaziso Chowa who constantly pushed me to work hard and encouraged
me to do my best. Without forgetting Dr John Musonda and all the lecturers from the Math Department
who gave me the listening ear and the profound advice.
Furthermore, I am grateful to my family, my course mates and friends for the encouragement and
support throughout the research. I am immensely grateful that they always believed in me and I
appreciate their contributions of ideas towards my research. I would also like to thank Mr Lwela and the
team from Madison that helped me understand my Research topic more.
DEDICATION
This study is dedicated to my God given father Mr Sydney Musonda, my pillar of strength Peggy
Mundashi and my entire loving family. I wish I could mention them by name but they know themselves.
They have been a great encouragement in my academic journey. I also dedicate this to my church and
my friends who have always stood in the gap for me. Thank you for the love, support and prayers you’ve
offered throughout my journey. My aunt Esta told me about this program, and my brothers Malama and
Njavwa encouraged me to pursue it and I would not have had it any other way despite the hardships
faced.
DECLARATION ON PLAGIARISM
I, Chibwe Musonda, student at the University of Zambia pursuing BSc. in Actuarial Science, do hereby
declare that this report represents my own work and that it has not been presented in any other
institution of learning for any academic credit at degree level by any student from the University of
Zambia.
Signature: _______________________________
Date: ___________________________________
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COPYRIGHTS
All rights reserved. No part of this research report may be reproduced, stored in
any retrieval system or transmitted in any form or by any means, photocopying,
recording or otherwise without the permission of the author or the University of
Zambia.
3
CERTIFICATION
The undersigned certifies that he has read and hereby recommends for acceptance of this
Research report titled “THE IMPACT OF CLAIMS MANAGEMENT ON THE PROFITABILITY OF
ZAMBIAN INSURANCE COMPANIES. A CASE STUDY OF MADISON GENERAL AND PROFESSIONAL
INSURANCE COMPANY” in partial fulfilment of the requirements for the award of the bachelor’s
degree in Actuarial Science.
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TABLES OF CONTENTS
ACKNOWLEDGEMENTS………………………………………………………….2
DEDICATION……………………………………………………………………….2
DECLARATION ON PLAGIARISM……………………………………………….2
COPYRIGHT DECLARATION…………………………………………………….3
CERTIFICATION…………………………………………………………………...4
ABSTRACT…………………………………………………………………………7
CHAPTER ONE – INTRODUCTION……………………………………………...8
1.1 Problem Statement………………………………………………………………8
1.2 Aim……………………………………………………………………………...9
1.3 Objectives…………….…………………………………………………………9
1.4 Research Hypothesis…………………………………………..……………......9
CHAPTER TWO – LITERATURE REVIEW…………………………..…………11
2.0 Introduction…………………………………………………………..…………11
2.1 Concept of Insurance Claims…………………………………………………...11
2.2 Concept of Claims Settlement………………………………………………….11
2.3 Concept of Insurance Development…………………………………………....12
2.4 Insurance Penetration…………………………………………………………..12
2.5 Insurance Density………………………………………………………………12
2.6 Concept of Profitability…………………………………………………...........13
2.7 Multiple Linear Regression…………………………………………………….13
2.8 Descriptive Statistics………………………………………………………......14
CHAPTER THREE – METHODOLOGY………………………………………...16
3.0 Introduction……………………………………………………………………16
3.1 Research Design…………………………………………….………………....16
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3.2 Nature and Sources………………………………..………………………….16
3.3 Model Specification……………………………………………………..……16
3.4 Data Analysis……………………………………………………………..…..17
CHAPTER FOUR – PRESENTATION OF RESULTS…………………………18
4.0 Introduction……………………………………………………………….….16
4.1 Presentation of Results………………………………………………….……16
4.2 Discussion of Results……………………………………………….………..30
CHAPTER FIVE – CONCLUSIONS AND RECOMMENDATIONS…………31
5.0 Introduction…………………………………………………………………..31
5.1 Conclusion……………………………………………………………………31
5.2 Recommendations……………………………………………………………32
5.3 Limitations…………….…………………………………………….……….32
REFERENCES…………………………………………………………….…….33
APPENDIX .………………………………………………………………..……34
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ABSTRACT
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CHAPTER 1
INTRODUCTION
Insurance is simply the transfer of the risk of loss, from one entity to another in exchange for
payment. It is a form of risk management primarily used to hedge against the risk of a
contingent, uncertain loss. It involves the pooling of funds from many insured entities to pay for
the losses that some may incur. Insurance is a safeguard against risk, it is a modern concept for
solving risk-related problems.
Insurance company core activities could be divided into three major parts – which are
underwriting, investment and claims processing. Of these core activities, claims processing is
one that affects and touches all parts of the organization. Claims processing affects the
competitive positioning, customer service, fraud management, risk exposure, cost control and
Information Technology infrastructure. Hence, need for a proper system to manage claims.
Claims management and settlement is a critical part of an insurance company, because it is vital
to both the policyholder and the insurance company.
There is a low level of insurance awareness in our society. The public is not properly educated
on the scope, function and limitations of insurance transactions especially in the issue that may
cause disputes that arise in an insurance contract has to do with the settlement of claims. So an
important factor that distinguishes a good insurance company is its claim settlement services.
However, the Zambian Insurance Market recorded an 18.75% turnover increase in 2019. The
latter went from 3.2 Billion ZMW in 2018 to 3.8 Billion ZMW one year later. This increase is
driven by an insurance penetration rate of 2.63% against 2.29% in 2018 (Growth of the Zambian
Insurance market in 2019- Atlas Magazine). These stats show that more people are becoming
more aware and the systems have improved since the start of Insurance companies emerging in
1992.
8
for the motor third party liability insurance which is mandatory in Zambia according to the Road
Traffic Act No 11 of 2002.
However, with many insurance company setups currently in Zambia that are 34 in total with 10
of which operate in life insurance and 19 in non-life insurance, policy holders often use quality
of service as an important differentiating factor to choose the most suitable insurance provider.
Due to this fact, it raises the importance of claims management in various insurance firms being
a critical process that often determines customer experiences which leads to the judgement of
which firm provides the best service. This if not done accordingly may still lead to increased
operating costs, customer dissatisfaction and low patronage which ultimately affects the
profitability of the insurance companies.
Therefore, this particular research will be focused on empirically investigating the impact of
claims management on the profitability of Selected Insurance companies in Zambia. The focus
will be on the penetration of Insurance in the Zambian market as well as the Insurance density
which is calculated as ratio of total insurance premiums to whole population of a given country
(Jennifer Rudden). Hypotheses are formulated to address those factors affecting profitability
which are stated above.
1.2 AIM
To empirically investigate the impact of claims management and settlement on the profitability,
development and operations costs of Insurance companies in Zambia.
1.3 OBJECTIVES
- To estimate the significant relationship of total claims management and settlements on the
profitability of Insurance companies in Zambia.
- To estimate the significant relationship of total claim management and settlements on the
operating costs of Insurance companies in Zambia.
- To outline a possible way of claims management and settlement that is effective for an
insurance company in Zambia.
HYPOTHESIS 1
9
There is no significant relationship between claims management and the profitability of
Madison General insurance and Professional Insurance.
HYPOTHESIS 2
There is no significant relationship between claims management and the Operating costs of
Madison General insurance and Professional Insurance.
10
CHAPTER 2
LITERATURE REVIEW
2.0 INTRODUCTION
This chapter highlights the whole idea of Insurance from the management of claims to the
profitability of Non-Life Insurance Companies in Zambia.
11
worth the expense (Butler & Francis, 2010). Therefore, the concept of claims settlement is vital
to an Insurance company.
Marquis (2011) posits that insurance Claims Settlement consists of the departmental
stipulation, corporate policies and industry practices that insurance firms use to validate
policyholder payment or reimbursement requests. The main objectives of claims management,
according to Redja (2008), are to verify that a covered loss has occurred for fair and prompt
payment of claims and to the insured.
2.3 CONCEPT OF INSURANCE DEVELOPMENT
According to Cambridge Dictionary (2019), development is the process in which someone or
something grows or changes and becomes more advanced. It is the process of growing or
creating something over a period of time. Development is visible and useful, not necessarily
instantaneously, and includes an aspect of quality change and the creation of conditions for a
continuation of that change. For the purpose of this study, two development indicators
(Insurance Penetration and Insurance Density) were used to measure the level of development
of Zambia Insurance Industry.
12
expressed as a proportion of premium to population. The measure of insurance density reflects
the level of development of the sector (Jeff, 2016). Insurance density is the ratio of insurance
premium to the total population. It gives an indication of how much each person in Zambia
spends on insurance in terms of premium. In other words, it is the per capita premium for the
country, estimated by dividing the total insurance premium by the population.
2.6 CONCEPT OF PROFITABILITY
Profitability is a measure of an organization's profit relative to its expenses. Organizations that
are more efficient will realize more profit as a percentage of its expenses than a less-efficient
organization, which must spend more to generate the same profit (Gartner). Financial ratios
have been agreed and used as measures of profitability (Al-Shami, 2008; Malik, 2011). These
ratios include Return on Assets (ROA), Return on Equity (ROE) and Return on Invested Capital
(ROIC). ROA is a key indicator since it measures profitability relative to the total assets, which
shows how well a company uses its asset to make earnings (Malik, 2011). Return on Asset
(ROA) is equal Net Income before taxes over Total Assets.
In Zambia, The Insurance industry recorded gross written premiums of ZMW 3.757 billion in
2019 compared to ZMW 3.183 billion in 2018 representing a growth of 18%. The gross written
premium for non-life insurance was ZMW 2.292 billion (ZMW 1.907 in 2018) and life insurance
was ZMW 1.465 billion (ZMW 1.275 billion 2018). Non-life insurance premium grew by 20% in
2019 (6%:2018) while life insurance premiums grew by 15% in 2019 (26% growth:2018). The
insurance industry as a whole grew by 18% in 2019 as opposed to 13% growth recorded in 2018
(INSURERS ASSOCIATION OF ZAMBIA). The gross written premium in the Zambia insurance
market was $253.4 million in 2021. The market is expected to grow at a CAGR of more than
17% during the period 2020 and 2025.
Profitability in the insurance sector of Zambia has been affected by The recoverability of
premium debtors, Economic environment, Regulatory environment, Understanding the
roles/benefits of Insurance amongst the Zambian population and Availability of skilled
resources. Therefore, the focus of this research is to show the impact of claims management
and settlements on the profitability of the Zambian insurance industry (Zambia Insurance
Industry Survey 2019 PwC).
13
A simple linear regression model is given by:
𝑌𝑖 = 𝛼 + 𝛽𝑥𝑖 + 𝑒𝑖
𝐸[𝑌|𝑋1 , 𝑋2 , … , 𝑋𝐾 ] = 𝑎 + 𝛽1 𝑥1 + 𝛽2 𝑥2 + ⋯ + 𝛽𝑘 𝑥𝑘
As with the simple linear regression model discussed earlier Y is a random variable whose
values are to be predicted in terms of given data values 𝑥1 , 𝑥2 , … , 𝑥𝑘
𝛽1 , 𝛽2 , … , 𝛽𝑘 are known as the multiple regression coefficients. They are numerical constants
which can be determined from observed data.
As for the simple linear model the multiple regression coefficients are usually estimated by the
method of least squares.
The response variable 𝑌1 is related to the values 𝑥𝑖1 , 𝑥𝑖2 , … , 𝑥𝑖𝑘 by:
And so the least squares estimates of 𝛼, 𝛽1 , 𝛽2 , … , 𝛽𝑘 are the values 𝛼̂, 𝛽̂1 , 𝛽̂2 , … , 𝛽̂𝑘 for which:
𝑛 𝑛
Is minimized.
14
well as correlations will be greatly expressed to prove the hypothesis. For this research we will
look at T distributions as our statistical methods.
The T distribution, also known as the Student's t-distribution, is a type of probability
distribution that is similar to the normal distribution with its bell shape but has heavier tails. T
distributions have a greater chance for extreme values than normal distributions, hence the
fatter tails. The formula is;
̅−𝝁
𝒙
𝒕= 𝒔
⁄ 𝒏
√
15
CHAPTER 3
METHODOLOGY
3.0 INTRODUCTION
The following presents the methodology used to conclude the study. It highlights the research
design, nature and sources of data, model specification and the data analysis.
where:
16
Expense Ratio (ER) = Total Underwriting expenses/Earned Premium,
Net Premium (NP) = Total Premium – Premium paid to Re-insurer.
17
CHAPTER 4
PRESENTATION OF RESULTS
4.0 INTRODUCTION
This chapter presents the finding and the analysis of the collected data of the study. The
findings are in the following order: presentation of results in form of tables and test of
hypothesis as well as the discussion of results.
YEARS NET CLAIMS PROFIT MGT EXPENSES TOTAL ASSETS NET EARNED
BEFORE TAX PREMIUMS
2012 50,734,369 8,148,793 54,662,591 123,424,585 110,560,128
2013 58,182,734 16,051,313 50,888,445 140,342,395 118,918,470
2014 58,278,816 9,195,682 62,399,760 139,528,441 128,876,563
2015 59,999,541 5,002,622 71,744,882 183,304,339 124,596,809
2016 82,044,795 -21,191,363 87,795,683 159,292,369 148,176,510
2017 53,984,480 19,834,878 101,364,695 185,327,285 148,044,335
2018 49,250,242 28,194,350 114,162,419 203,232,662 150,232,850
2019 156,800,755 -77,367,278 132,366,598 244,945,597 164,871,999
2020 128,167,758 -62,303,020 128,069,554 283,154,596 168,898,602
2021 84,637,182 25,820,271 109,717,856 193,724,086 197,750,274
The graph below shows the quantities of Madison and how they varied over the years. There is
no steady increase or decrease because the quantities are not dependent on years but business
that the company engages in for that time period. The Total Assets and Net Income before Tax
are used to determine the profitability of the company.
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MADISON QUANTITIES
350,000,000
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
-50,000,000
-100,000,000
GRAPH 1: NET CLAIMS, PROFIT BEFORE TAX, MGT EXPENSES, TOTAL ASSETS, NET
EARNED PREMIUMS OF MADISON GENERAL INSURANCE.
The Graph below shows the changes in the variables of Madison General Insurance. The Loss
Ratio is a ratio of the Net Claims and the Net Earned Premiums, The Return on Assets is a
measure of the Profit before Tax as a percentage of the Total Assets for the year, The Expenses
Ratio is a measure of the total expenses as a percentage of the Net Earned Premiums. These
variables are later compared in the study to determine if at all relationships between them exist
and how strong these relationships are.
19
MADISON VARIABLES
1.2
0.8
0.6
0.4
0.2
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
-0.2
-0.4
GRAPH 2: LOSS RATIO, RETURN ON ASSETS AND EXPENSES RATIO OF MADISON GENERAL
INSURANCE.
PROFESIONAL INSURANCE
20
The graph below shows the quantities of Professional and how they varied over the 7 years
which are used as a sample. There is no steady increase or decrease because the quantities are
not dependent on years but business that the company engages in for that time period. The
Total Assets and Net Income before Tax are used to determine the profitability of the company.
PROFESSIONAL QUANTITIES
500,000,000
450,000,000
400,000,000
350,000,000
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
0
2015 2016 2017 2018 2019 2020 2021
GRAPH 3: NET CLAIMS, PROFIT BEFORE TAX, MGT EXPENSES, TOTAL ASSETS, NET EARNED
PREMIUMS OF PROFESSIONAL INSURANCE.
The Graph below shows the changes in the variables of Professional Insurance. The Loss Ratio is
a ratio of the Net Claims and the Net Earned Premiums, The Return on Assets is a measure of
the Profit before Tax as a percentage of the Total Assets for the year, The Expenses Ratio is a
21
measure of the total expenses as a percentage of the Net Earned Premiums. These variables are
later compared in the study to determine if at all relationships between them exist and how
strong these relationships are.
PROFESSIONAL VARIABLES
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2015 2016 2017 2018 2019 2020 2021
22
After a careful and systematic analysis of the data collected from the two companies,
hypothesis was carried out to determine the correlation between two chosen variables.
HYPOTHESIS 1: There is no significant relationship between claims management and the
profitability of Madison General insurance.
LOSS RATIO AND RETURN OF ASSETS
MEAN STD.DEVIATION N
CORRELATIONS
The table above shows the correlation between loss ratio which is used to measure claims
management and the return on assets which measures the profitability of the company. From
the correlation result of hypothesis one, loss ratio has a strong negative correlation with a
correlation coefficient (r) of -0.944937 with probability. Since the p-value is 0.025 which is less
than 0.05, thus its significant at 5% and we reject the Null Hypothesis. This means there is a
significant relationship between the loss ratio and the return on assets. Over the last 10 years,
the management of claims for Madison has affected the profitability of the company according
to the descriptive statistics as well as the correlations shown above. This might be because they
might not have had enough reserves to cushion the impact of the large net claims that they
experienced. It is seen that in 2019, they had the biggest net claims figure and in that very year
they made the biggest loss over the ten years. This suggests a possible relationship between the
23
two. But in 2021 when they recorded the third highest claim, they made the second highest
profit which suggests either change in claims management or no relationship exists at all.
Because we did correlations, we had to do some linear regression to see if there was any
linearity between the two given variables. Correlations were found as well as t-values and
intercepts, all this is seen in the summary statistics. The graph below shows linearity;
MEAN STD.DEVIATION N
CORRELATIONS
24
LOSS RATIO EXPENSE RATIO
The table above shows the correlation between loss ratio which is used to measure claims
management and the expenses ratio which measures the operating costs of the company. From
the correlation result of hypothesis one, loss ratio has a moderate positive correlation with a
correlation coefficient (r) of 0.4697306 with probability. Since the p-value is 0.1707483 which is
greater than 0.05, thus it is not significant at 5% and we fail to reject the Null Hypothesis. This
means there is no significant relationship between the loss ratio and the expenses ratio. Over
the last 10 years, the management of claims for Madison has not affected the operating costs
of the company according to the descriptive statistics as well as the correlations shown above.
These results suggest that even if the claims may be seen as an expense, they are not linked to
the costs involved in operating the company.
Regression graph to show linearity between Loss Ratio and Expenses Ratio is shown below;
25
DESCRIPTIVE STATISTICS AND REGRESSION FOR PROFESSIONAL INSURANCE
HYPOTHESIS 1: There is no significant relationship between claims management and the
profitability of Professional insurance.
LOSS RATIO AND RETURN OF ASSETS
MEAN STD.DEVIATION N
26
LOSS RATIO Pearson Correlation 1 0.01458244
N 7 7
p-value 0.9752
The table above shows the correlation between loss ratio which is used to measure claims
management and the return on assets which measures the profitability of the company. From
the correlation result of hypothesis one, loss ratio has a weak positive correlation with a
correlation coefficient (r) of 0.01458244 with probability. Since the p-value is 0.9752 which is
way greater than 0.05, thus it is not significant at 5% and we fail to reject the Null Hypothesis.
This means there is no significant relationship between the loss ratio and the return on assets.
Over the last 7 years, the management of claims for Professional has not affected the
profitability of the company according to the descriptive statistics as well as the correlations
shown above. This could be because their reserves might be very large that it does not directly
affect the profit at the end of the year. They actually made the biggest profit in the same year
they had the largest claim. This suggests that they have put up measures that are able to
cushion the large net claims and not directly affect the profitability of the company. This might
also be that the sample size of 7 might have been too small to determine the correct
correlation.
Regression graph to show linearity between Loss Ratio and Return on Assets is shown below;
27
HYPOTHESIS 2: There is no significant relationship between claims management and Operating
costs of Professional insurance.
LOSS RATIO AND EXPENSE RATIO
MEAN STD.DEVIATION N
CORRELATIONS
28
LOSS RATIO Pearson Correlation 1 0.6987386
N 7 7
p-value 0.0807
The table above shows the correlation between loss ratio which is used to measure claims
management and the expenses ratio which measures the operating costs of the company. From
the correlation result of hypothesis one, loss ratio has a strong positive correlation with a
correlation coefficient (r) of 0.6987386 with probability. Since the p-value is 0.0807 which is
greater than 0.05, thus it is not significant at 5% and we fail to reject the Null Hypothesis. This
means there is no significant relationship between the loss ratio and the expenses ratio. Over
the last 7 years, the management of claims for Professional has not affected the operating costs
of the company according to the descriptive statistics as well as the correlations shown above.
Regression graph to show linearity between Loss Ratio and Expenses Ratio is shown below;
29
4.2 DISCUSSION OF RESULTS
Descriptive statistics and correlations were done for the different companies over the different
years. This was not a comparative study of the two companies but two companies were used in
order to strengthen the conclusions to be drawn from the study.
It was discovered that the relationship between the Loss Ratio and Return on Assets differed
for the two companies used. This might be because the sample size used in the research might
have been too small. Because the results should have been similar and not entirely different.
However, the relationship between the Loss Ratio and the Expenses Ratio was the same for the
two companies. From the results obtained, there seems to be no relationship between the
claims management and the operating costs of the companies.
30
CHAPTER 5
5.0 INTRODUCTION.
This chapter highlights the major findings, conclusions, limitations and provides
recommendations based on the output obtained during the research and the data analysis.
5.1 CONCLUSION
i. According to the data obtained from Madison General Insurance, there is a significant
relationship between the Loss Ratio and the Return on Assets.
ii. According to the data obtained from Professional Insurance, there is no significant
relationship between the Loss Ratio and the Return on Assets.
iii. There is no significant relationship between the Loss Ratio and the Expenses Ratio.
5.2 RECOMMENDATIONS
Based on the findings, it has been concluded that there is a significant relationship between the
Loss Ratio and Return On Assets and also that there is no significant relationship between Loss
Ratio and Expenses Ratio. Thus, the researcher recommends that:
i. Due to the different results obtained from the two different companies, a study should
be done for over a longer period of time in order to accurately prove the statistics.
ii. The insurance companies should consider enlarging the reserves to avoid major
catastrophes that could easily wipe out the entire claims management system put in
place. It is recommended that insurance companies should have a proper
31
documentation for claims and a well-structured strategy in place before the occurrence
of claims.
iii. It is important that the claims management department should be properly structured
with highly technical and experienced staff as to manage the claims of the insurance
companies properly as a well-managed claim leads to profitability through repeated
purchase.
iv. Finally, in as much as the insurance company wants to make major profits. They should
not forget the main reason for their existence which is bringing the insured back to
his/her pre-loss position by paying out genuine claims. This will eventually instill trust in
them from the public which in turn will boost sales and bring about profitability.
5.3 LIMITATIONS
The data was limited to a period of 10 years for Madison and 7 years for Professional Insurance.
The results would have shown more accuracy if it was for a longer period of time. The study
would have been carried out in months but the needed variables are calculated yearly and not
monthly so it limited the study.
However, there was consistency in proving one of the relationships which was between the
Loss Ratio and The Expenses Ratio. In as much as the first hypothesis tests contradicted
themselves for different companies, how claims are managed can affect profitability. But note
that in a case where an insurance has a very high claim, they could make a very good profit and
vice versa.
This means, they are other factors such as investments that may play a bigger part in the
insurance world as well as other economic factors.
32
REFERENCES
33
APPENDIX
MV <- read.csv(file.choose(),header=TRUE)
MQ <- read.csv(file.choose(),header=TRUE)
#RUN PSYCH
describe(MV)
attach(MV)
#LOSSRATIOANDRETURNOFASSETS
#pearson correlation between LR and ROA
34
#test at 5% level that rho is positive
#cor.test(LOSS.RATIO,RETURN.ON.ASSETS,conf=0.95)
res <- cor.test(LOSS.RATIO,RETURN.ON.ASSETS,
method = "pearson")
res
#H0 rho = 0
#H1 rho is not = 0
#p-value is lesser than 5% , hence we reject th H0 in favor of H1
#which shows a statistically significant relationship LR & ROA
#-------------------------------------------------------------
#Linear regression model
#-------------------------------------------------------------
model<-lm(LOSS.RATIO~RETURN.ON.ASSETS, data=MV)
model
names(MV)
plot(LOSS.RATIO, RETURN.ON.ASSETS,pch=20,main="ROA AGAINST LR", las=1, col="purple")
#abline adds arbitrary line with intercept a and slope b to EXISTING plot
abline(model,col="red",lwd=2,lty="dotted")
35
summary(model)
#LOSSRATIOANDEXPENSERATIO
36
#-------------------------------------------------------------
model<-lm(LOSS.RATIO~EXPENSES.RATIO, data=MV)
model
names(MV)
plot(LOSS.RATIO, EXPENSES.RATIO,pch=20,main="ER AGAINST LR", las=1, col="purple")
#abline adds arbitrary line with intercept a and slope b to EXISTING plot
abline(model,col="red",lwd=2,lty="dotted")
summary(model)
PV <- read.csv(file.choose(),header=TRUE)
PQ <- read.csv(file.choose(),header=TRUE)
#RUN PSYCH
describe(PV)
attach(PV)
#LOSSRATIOANDRETURNOFASSETS
37
#pearson correlation between LR and ROA
38
#-------------------------------------------------------------
#Linear regression model
#-------------------------------------------------------------
model<-lm(LOSS.RATIO~RETURN.ON.ASSETS, data=PV)
model
names(PV)
plot(LOSS.RATIO, RETURN.ON.ASSETS,pch=20,main="ROA AGAINST LR", las=1, col="red")
#abline adds arbitrary line with intercept a and slope b to EXISTING plot
abline(model,col="purple",lwd=2,lty="dotted")
summary(model)
#LOSSRATIOANDEXPENSERATIO
#pearson correlation between LR and ER
39
cor(LOSS.RATIO,LOSS.RATIO, method = "pearson")
#-------------------------------------------------------------
#Linear regression model
#-------------------------------------------------------------
model<-lm(LOSS.RATIO~EXPENSES.RATIO, data=PV)
model
#abline adds arbitrary line with intercept a and slope b to EXISTING plot
abline(model,col="red",lwd=2,lty="dotted")
40
summary(model)
41