Internal Control Systems and Performance of Life Insurers: Ghanaian Case

Abstract

Life insurance companies are very crucial in the mobilisation of financial resources in a country, and therefore have a tremendous impact on the economic growth and financial stability of the country. The importance of internal control mechanisms in achieving these goals cannot be overemphasized. Despite the growing trend in internal control systems in financial institutions, there is little knowledge on the internal control practices that exist within life insurance companies in Ghana and how these influence their performances. It is against this background that this study set out to fill this gap. The main objective of this study is to examine the effect of internal control mechanisms on the performance of life insurers in Ghana. The multiple regression analysis was used to establish the statistical relationship between the COSO framework of internal control system and the performance of the Ghanaian life insurers. The findings from this study showed that internal control mechanisms have positive and unique contribution to explaining the performance of life insurance companies in Ghana. The study recommends among others that the life insurance firms need to improve upon the core principles of the various components of the COSO internal control integrated framework. For instance, with regards to the control environment, the insurance firms should demonstrate commitment to integrity and ethical values; they should exercise oversight responsibility, establish structure, authority, and responsibility, demonstrates commitment to competence, and enforce accountability throughout the firms.

Keywords Ghana life insurance industry, internal control systems, firm performance

DOI: 10.7176/RJFA/11-18-11

Publication date:September 30^th 2020