The Effect of Claim Expense Ratio and Net Premium Growth on Liquidity Ratio in General Insurance Companies Listed on the Indonesia Stock Exchange (2017–2024)

Hanaya Michelle Herwinata; Salma Farah Faiza; Michael Kidastra Latayu; Aisyah Rizki Adinda; Valeria Lisa Savitri; Muhammad Fazli Rabbaani; Dewi Hanggraeni

doi:10.55606/bijmt.v6i2.6974

Authors

Hanaya Michelle Herwinata Universitas Indonesia
Salma Farah Faiza Universitas Indonesia
Michael Kidastra Latayu Universitas Indonesia
Aisyah Rizki Adinda Universitas Indonesia
Valeria Lisa Savitri Universitas Indonesia
Muhammad Fazli Rabbaani Universitas Indonesia
Dewi Hanggraeni Universitas Indonesia

DOI:

https://doi.org/10.55606/bijmt.v6i2.6974

Keywords:

Claim Expense Ratio, Firm Size, General Insurance, Liquidity Ratio, Net Premium Growth

Abstract

This research intends to examine the impact of Claim Expense Ratio (CER) and Net Premium Growth (PGR) towards Liquidity Ratio (LIQ) of general insurance firms quoted at Indonesia Stock Exchange (IDX), incorporating Firm Size as a control variable. Using panel data from 5 general insurance companies with the largest market capitalization during 2017–2024 (40 observations), this study applies the Pooled Ordinary Least Squares (OLS) method. The F-test confirms the model is jointly significant (F = 3.461; p = 0.026), accompanied by an R² of 22.4%. Partially, only Firm Size proves to have a significant negative effect on the Liquidity Ratio (β = -0.054; p = 0.008), while CER (β = -0.068; p = 0.205) and PGR (β = -0.116; p = 0.332) are not statistically significant. The non-significance of CER and PGR is explained through the OJK regulatory framework that mandates the formation of technical reserves, rendering the effect of claims and premium growth on liquidity indirect. These findings contribute to the understanding that firm size characteristics are more dominant in determining liquidity levels than operational dynamics of claims and premiums in the Indonesian general insurance industry.

References

Bunyaminu, A., et al. (2022). Claim management of non-life insurance companies: Does it impact on profitability? Journal of Accounting and Financial Management, 8(3), 44–58.

Cummins, J. D., & Weiss, M. A. (2014). Systemic risk and the U.S. insurance sector. Journal of Risk and Insurance, 81(3), 489–528.

Dewi, T. T. C., & Mahfudz. (2017). Effect of change in surplus ratio, incurred loss ratio, liquidity ratio, premium growth ratio, size and risk-based capital to predict the possibilities of financial distress: The case of Indonesian non-life insurance listed in Indonesia insurance director. Advanced Science Letters, 23(8), 7285–7288.

Harrington, S. E., & Niehaus, G. R. (2004). Risk management and insurance (2nd ed.). McGraw-Hill.

Nilasari, A. (2021). Pengaruh kinerja keuangan, risk-based capital, ukuran perusahaan dan makroekonomi terhadap financial distress. Jurnal Ekonomi Bisnis dan Kewirausahaan, 10(1), 55.

Otoritas Jasa Keuangan. (2021a). Surat Edaran Otoritas Jasa Keuangan Nomor 1/SEOJK.05/2021 tentang penilaian tingkat kesehatan perusahaan asuransi, perusahaan asuransi syariah, perusahaan reasuransi, dan perusahaan reasuransi syariah.

Otoritas Jasa Keuangan. (2021b). Surat Edaran Otoritas Jasa Keuangan Nomor 8/SEOJK.05/2021 tentang penerapan manajemen risiko bagi perusahaan asuransi, perusahaan asuransi syariah, perusahaan reasuransi, dan perusahaan reasuransi syariah.

Outreville, J. F. (2013). Theory and practice of insurance. Springer.

Ridwan, M., Ulupui, I. G. K. A., & Ahmad, G. N. (2022). The impact of total equity, risk-based capital ratio, adequacy investment ratio, direct premium receivable ratio, liquidity ratio, and loss ratio toward the early warning system of general insurance. The International Journal of Social Sciences World, 4(1), 11–27.

Sasidharan, A., & Ranjith, V. K. (2023). Determinants of factors affecting the financial performance of Indian general insurance firms: Panel data evidence. Contemporary Economics, 17(2), 154–168.

Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 87(3), 355–374.

Sugandi, D. S., & Gantyowati, E. (2024). Enhancing financial resilience: A study of financial ratios to predict financial distress in Indonesian life insurance firms during COVID-19 era. Jurnal Aplikasi Manajemen dan Bisnis, 10(1), 22–34.

Ulfan, K., Sutriswanto, S., & Apriyanto, G. (2018). Analisis pengaruh rasio early warning system terhadap financial solvency pada perusahaan asuransi jiwa syariah di Indonesia. Wiga: Jurnal Penelitian Ilmu Ekonomi, 8(1), 12–23.

Wong, J. (2022). The impact of technical reserves on insurance liquidity: Evidence from emerging markets. International Journal of Risk and Insurance, 14(2), 112–125.

Wong, W. (2022). Factors influencing credit risk and insurance risk in general insurance of Indonesia: Technical reserve ratio and reinsurance ratio. Dinasti International Journal of Management Science, 4(2), 195–208.

Zamachsyari, A. Z., & Amanah, L. (2016). Pengaruh kinerja keuangan dan ukuran perusahaan terhadap financial distress. Jurnal Ilmu dan Riset Akuntansi, 5(5), 1–17.