Indonesian Interdisciplinary Journal of Sharia Economics (IIJSE) Vol. 6. No. 3 (2023)
e-ISSN:2621-606X Page: 1449-1466
FACTORS AFFECTING PROFIT GROWTH IN SHARIA LIFE INSURANCE COMPANIES
Mutiara Sawitri Pane1
Universitas Islam Negeri Sumatera Utara, Medan, Indonesia mutiarapane2000@gmail.com
Nur Ahmadi Bi Rahmani2
Universitas Islam Negeri Sumatera Utara, Medan, Indonesia nurahmadi@uinsu.ac.id
Muhammad Syahbudi3
Universitas Islam Negeri Sumatera Utara, Medan, Indonesia bode.aries@uinsu.ac.id
Factors Affecting Profit ….. 1449 Abstract
In 2021, there will be fewer Sharia life insurance providers than there were in 2020. The goal of this research is to analyze Islamic life insurance firms in Indonesia from 2016- 2021 from the perspectives of claims, investment returns, underwriting outcomes, operational expenses, and profit growth. This research employs a quantitative methodology, and the analytical technique used is board information relapse inquiry with the use of Eviews 12. Secondary data were collected from five Sharia life insurance businesses registered with the AASI between 2016 and 2021. The results showed that Sharia life insurers are significantly affected by a number of factors all at once, including claims variability, investment returns, underwriting outcomes, operational expenses, and profit growth. The claim variable has moderately significant negative repercussions, whereas the investment return variable has moderately significant positive repercussions. Then, neither the underwriting outcome variables nor the operating expenses matter much.
Keywords: Claims, Investment Returns, Underwriting Results, Operating Costs, Profit Growth
Factors Affecting Profit ….. 1450 INTRODUCTION
Economic growth continues to increase in Indonesia, especially in the Non-Bank Financial Industry sector which is known as IKNB, and insurance institutions are one of them. Public awareness of the importance of protecting assets owned is the cause of the rapid development of insurance institutions. An insurance institution is a service company that oversees risk management for the insurer.
In Indonesia, Sharia insurance has a bright future, considering that the majority of Indonesian people are Muslims who have business awareness using Sharia standards, where Sharia principles prioritize justice and humanity so that people feel safe in transactions.
Economic growth accompanied by an increase in reserve funds is a good part of the increase in the insurance business, particularly sharia insurance. Islamic insurance on the other hand, is a relatively untapped but potentially lucrative sector outside Indonesia. Until now, there are no less than 65 Sharia insurance companies spread throughout the world.
Assets grew quite rapidly from $550 million in 2000, $193 million of which was in Asia Pacific, increasing to $1.7 billion (Maxum, 2016).
According to data compiled by the Financial Services Authority (OJK) in 2018- 2019, the growth of the domestic insurance business has had a sizable impact on the progress of the country’s economy. Because the collection is so extensive and takes a long time, the government uses the funds to support development. The local community will benefit greatly from the services that will be provided, especially in the form of protection against unexpected disasters.
The need for mutual assistance and protection requires certain advantages from the Islamic insurance sector. They budget for tabarru’ fund obligations that focus on risk sharing in this system. Meaning participants are responsible for managing their financial flows. Sharia insurance that promotes teamwork and shared responsibility (ta’awun) (Nasution, Yenni Samri Julita; Rorizki, 2023).
Sharia insurance participants donate savings and tabarru’ funds as part of their premium payments. The participant’s savings are considered as deposit funds which will be processed by the company through profit sharing (al-mudharbah). When participants submit claims, both for insurance benefits and cash value, participants will receive a return on their investment and savings (Yusrizal; Atika; Alwi, 2023).
Factors Affecting Profit ….. 1451 The large number of competitors and Sharia-based banks that have developed insurance products, as well as the lack of public awareness of the importance of insurance, adds to the challenges for insurance institutions along with their growth. This is the challenge of insurance companies with the ultimate goal of achieving quality and increased payouts. According to the terms of the contract, the participant is responsible for paying a premium to the company to achieve a common goal. Fellow human beings must support each other, look after each other, and help each other.
Table 1
Number of Sharia Insurance Actors 2018-2021
Company 2018 2019 2020 2021
Full Sharia Life Insurance Company 7 7 7 7
Full Sharia General Insurance Company 5 5 5 6
Full Sharia Reinsurance Company 1 1 1 1
Sharia Business Unit Life Insurance Company 23 23 23 23 Sharia Business Unit General Insurance
Company
24 24 21 20
Sharia Business Unit Reinsurance Company 2 2 3 3
Total 62 62 60 60
Source: AASI (Indonesian Sharia Insurance Association), 2021
In table 1, There are 60 sharia insurance and reinsurance companies in 2021. This number includes 46 dedicated sharia units and 14 fully sharia insurance and reinsurance businesses. Comparing 2021 to 2020, the total number of companies will remain stable at the same level. One full sharia general insurance company grew, while one general insurance company experienced a depreciation of its business units.
Company performance is important because balance sheet and cash flow data in financial statements can tell a lot about a company's ability to run its business. If the company is supported by increasing profits, its growth will continue. However, according to OJK data, the profit of Sharia Life Insurance in 2021 fell 2.57% from IDR 44,281.99 billion to IDR 43,143.88 billion from the previous year. The results of the company's investment development and investment decline have a significant impact on the decline in insurance industry profits. Profits from sharia insurance were dominated by sharia life insurance with a portion of IDR 34,613.40 billion (80.23%). Participant investment funds will become the profit of Sharia Life Insurance in 2021.
Factors Affecting Profit ….. 1452 One of the main things in the company’s activities is profit. Profit is also an interested party information. Therefore, in order for a company to take steps to regain its profits, it is necessary to identify the underlying causes of the loss of profits (Fitrianty et al., 2022).
Previous studies have shown that a company’s income and expenses are the main internal drivers that affect profit growth. Research conducted by (Ramadhani et al., 2022).
Income for insurance companies comes from paying policyholder premiums, investment gains, successful underwriting and other sources. Paying claims, paying taxes, paying employees, and maintaining facilities are all expenses that insurance companies have to cover.
Various factors, including claims, return on investment, underwriting results and operating expenses, have been shown to affect profit expansion in various ways. From the circumstances described and the problems that occurred in previous research, it was found that not all events were in accordance with the hypothesis.
REVIEW OF LITERATURE Sharia Life Insurance
Life insurance agreements cover services for dealing with the eventuality of death or life of a person. Health, accident and old age insurance are part of life insurance. Life insurance participants receive financial protection in the event of death, injury or risks related to old age (Rustamunadi & Asmawati, 2020).
According to (Nainggolan & Soemitra, 2020), life insurance is an agreement between the owner and the insurance company that requires the insurer to pay a premium to the insured. If the insured dies, the insurer is obliged to pay premiums to the insured.
The standard of mutual assistance which is the main goal of sharia insurance protection is the application of the expression of Allah SWT in Surah Al Maidah verse 2;
َّنِإ ۖ َ َّللَّٱ ْاوُقَّتٱ َو ۚ ِنٰ َوۡدُعۡلٱ َو ِمۡث ِ ۡلۡٱ ىَلَع ْاوُن َواَعَت َلَ َو ۖ ٰى َو ۡقَّتلٱ َو ِِّرِبۡلٱ ىَلَع ْاوُن َواَعَت َو َ َّللَّٱ
ِباَقِعۡلٱ ُديِدَش
‘Please help you in (doing) virtue and piety, and do not help each other in sin and enmity. Fear Allah, verily Allah is severe in punishment.’
Factors Affecting Profit ….. 1453 Participants from sharia life insurance will help each other and maintain through the commitment of Tabarru’ funds. Tabarru’ Fund is a collection of assets from the commitment of members who agree to help each other if there is a risk between them. The Sharia Supervisory Board (DPS) oversees the management of these funds in accordance with sharia law. The tabarru' fund will be used to compensate participants in the event of a risk. Risk sharing is another name for this concept (Mapuna, 2019).
Profit Growth
The increased profit earned is the result of this process. Strong profit growth indicates fiscal health, which in turn increases company value because the amount of future dividends is directly linked to operating results (Juwita, 2017). Maximizing net profit is seen as a company goal because it is a measure of company productivity. Returns to value holders over the relevant time period are represented in profits (Rahmani, Nur Ahmadi Bi;
Inayah, Nurul; Quraniyah, 2022). Islamic insurance institutions generate profits by dividing them between participants as owners of capital and insurance agents as heads of capital.
Fee-based income generated by ujrah funds, can be used to increase business profits.
Factors Affecting Profit
The amount of the company’s profit is usually reported in the income statement for each period published by the company and shows the amount of the company's profits and losses at a time (Fitrianty et al., 2022). Insurance companies usually benefit from return on investment, operating income, claims expenses and other operating costs. Insurance company income is affected by factors such as return on investment, premium income, operating expenses, tax expense, operating expenses and if applicable, technical reserves (Hidayat et al., 2021). Based on speculation and previous research, the following elements may reasonably affect earnings:
Claim
Claims are the granting of rights from the company to participants to obtain compensation for losses, as stated in the agreement or contract (Lubis, Fauzi Arif; Inayah, 2022). The company will check the validity of the claim submitted and will pay the insured after it is approved. Participants will accept their rights through the agreement to benefit from losses. Claims are characterized as requests related to benefits in accordance with the meaning contained in insurance contracts (Ramadhani et al., 2022).
Factors Affecting Profit ….. 1454 Investment Returns
The insurance company’s operations generate a large return on investment, which is distributed to policyholders. Effective financial planning is the responsibility of a certain allocation of company resources. Because the insurance company’s speculative goals will be maintained by using a portion of the donated funds to finance collateral ownership (Khotima, 2013).
Al-wadiah, which translates to ‘something entrusted to someone who is not the owner’, is the Islamic term for investment. Single deposit of money or legal tender made by one person to another, to be deposited in trust and repaid at the discretion of the donor (Harmain, Hendra; Harahap, 2022). To meet the requirements of managed funds, companies must invest in existing assets. Insufficient premium rates to the insured will be paid by the investment insurance company.
Underwriting Results
.Underwriting refers to the process of categorizing risks that will be borne by insurance companies. The main objective of underwriting is to maximize profits by allocating funds to the types of risks that are most likely to provide those benefits.
Guarantee whatever risk selection is where the company will benefit the most. The underwriting result is calculated as the difference between premium income and expenses for claims, commission fees and other underwriting costs and is shared between the participants and the company (Sakinah, 2019).
Operating Costs
Companies incur operational costs, which are not related to products but operational activities in order to survive. Performance increases when operational costs are lower because they can be managed effectively, so that costs can be distributed more effectively to other sectors.
According to research by (Fatmawati & Devy, 2021), operating costs include acquisition costs, as well as showing managerial and general costs. It is important for companies to balance operational costs with efficiency. Because, if the use of operational costs decreases, the company’s presentation will increase so that it can see additional opportunities in various fields to increase benefits.
Factors Affecting Profit ….. 1455
X1 Y
X2
X3 X4
Figure 1
Conceptual Framework
RESEARCH METHOD
This study uses a type of explanatory quantitative research that explains the relationship between variables through hypothesis testing. From 2016-2020, the sample population consisted of 28 sharia life insurance companies that belong to AASI (Indonesian Sharia Insurance Association). Researchers found the following life insurance companies as samples, including PT. Mitra Abadi Syariah Life Insurance (JMA Syariah), PT. Manulife Indonesia, PT. Family Takaful Insurance, PT. Al-Amin Sharia Life Insurance and Prudential Sharia. The sample was selected carefully using various sampling techniques with purposive sampling method and strict criteria to ensure the sample is representative of the relevant population in the proposed study.
Using secondary data in the form of company published financial reports found on the OJK statistics page on insurance in Indonesia and financial reports available on each company's website for 2016 to 2021. The Eviews 12 program is used as a data processing tool in this type of panel data regression research. This study uses time series data with a total of 6 time intervals from 2016 to 2021. Meanwhile, cross-sectional data comes from five sharia life insurance companies that are members of AASI.
Tests can be performed using one of the three models (CEM, FEM, or REM). The Chow, Hausman, and Lagrange Multiplier tests were then used to select the most effective and appropriate regression model for the data. In addition, not all test models are used in panel data regression. The classic assumption test includes the heteroscedasticity test and the multicollinearity test which must be performed if CEM or FEM is selected. However, if
Claim
Investment Returns Underwriting Results
Operating Costs
Profit Growth
Factors Affecting Profit ….. 1456 REM is selected, the classical assumption test is not required. This study conducts a classical assumption test because the selected model is FEM and it is also better to apply the classical assumption test to all selected models even if it passes the Best Linear Unbiased Estimation (BLUE) criteria for the selected model (Basuki & Prawoto, 2017).
RESULTS AND DISCUSSION
Panel Data Regression Model Selection Test Results Chow Test
Table 2 Chow Test Redundant Fixed Effects Tests Equation: Untitled
Test cross-section fixed effects
Effect Test Statistics df Prob.
Cross-section F 8.385654 (4,21) 0.0003 Chi-square cross-sections 28.633798 4 0.0000
Source: Data Processed eviews 12 2023 (attachment)
From the results above, the value of the probability cross-section F is 0.0003 <0.05, which means that the selected model is FEM (Fixed Effect Model). Then the Hausman test must be carried out at a later stage.
Hausman Test
Table 3 Hausman Test Correlated Random Effects - Hausman Test Equation: Untitled
Test cross-section random effects Test Summary
Chi-Sq.
Statistics Chi-Sq. df Prob.
Random cross-sections 33.542617 4 0.0000
Source: Data Processed eviews 12 2023 (attachment)
From the results above, the value of the possibility of irregular cross-area is 0.0000
<0.05. So between FEM and REM the model that is suitable for assessing the condition of
Factors Affecting Profit ….. 1457 recurrence in this study is the FEM (Fixed Effect Model). Because the results of the Hausman test state that the FEM (Fixed Effect Model) is the right model to calculate the regression equation, the Lagrange Multiplier test is not performed. To find out the impact of claims, investment returns, underwriting results, and operational costs on the profit growth of sharia life insurance companies in the 2016-2021 period, the FEM (Fixed Effect Model) is the best and most suitable model to apply.
Classical Assumption Test Results
From the previous panel data regression model selection test, the model chosen was FEM, so it is necessary to test it with the classical assumption test so that it is known that the model formed meets the BLUE requirements.
Normality Test
0 2 4 6 8 10 12
-40000 -20000 0 20000 40000
Series: Standardized Residuals Sample 2016 2021
Observations 30 Mean -1.33e-11 Median -949.9514 Maximum 43728.79 Minimum -48504.91 Std. Dev. 22253.13 Skewness -0.398421 Kurtosis 3.272902 Jarque-Bera 0.886790 Probability 0.641854
Figure 2 Normality Test
Source: Data Processed eviews 12 2023 (attachment)
Based on the research results above, it was found that the probability is 0.641 > 0.05 so that this data is normally distributed.
Multicollinearity Test
Table 4
Multicollinearity Test Variance Inflation Factors
Date: 05/17/23 Time: 20:13 Samples: 1 30
Included observations: 30
Factors Affecting Profit ….. 1458 coefficient
Uncentere
d Centered Variables Variances VIF VIF
C 83006017 1.669067 NA
X1 0.000694 10.45781 7.649556 X2 0.182260 14.40756 9.595463 X3 0.002765 3.444396 2.526375 X4 0.114478 12.30541 9.506368
Source: Data Processed eviews 12 2023 (attachment)
Because the correlation value between the independent variables and the Centered VIF value < 10, there is no evidence of multicollinearity in the data used for the regression model in this study.
Heteroscedasticity Test
Table 5
Heteroscedasticity Test Heteroskedasticity Test: Glejser
Null hypothesis: Homoskedasticity
F-statistics 9.956939 Prob. F(4,25) 0.8531 Obs*R-squared 18.43088 Prob. Chi-Square(4) 0.8395 Scaled explained
SS 25.69242 Prob. Chi-Square(4) 0.8756
Source: Data Processed eviews 12 2023 (attachment)
Dependent Variable: ARESID Method: Panel Least Squares Date: 05/17/23 Time: 20:02 Sample: 2016 2021
Period included: 6
Cross-sections included: 5
Total panel (balanced) observations: 30
Variables coefficient std. Error t-Statistics Prob.
C -32981.40 28473.61 -1.158315 0.2597 X1 0.071464 0.049391 1.446905 0.1627 X2 0.052536 0.150568 0.348920 0.7306 X3 0.030068 0.017502 1.717979 0.1005 X4 0.305043 0.149942 2.034405 0.0547
Factors Affecting Profit ….. 1459 The test method used is the Glejser test where the Obs*R-squared probability value is 0.8395 > 0.05. From the Glejser test results, the probability value of each independent variable is greater than 0.05. This means that the data in this study has no heteroscedasticity problem with the regression model.
Panel Data Regression Analysis Equation Results
Based on the panel data regression model approach using the Eviews 12 application between CEM, FEM, and REM as well as the model selection test and classic assumption test, this study found that FEM is a more appropriate regression model to be used as a linear regression equation for panel data.
Table 6
FEM Results (Fixed Effect Model) Dependent Variable: Y?
Method: Pooled Least Squares Date: 06/22/23 Time: 19:29 Samples: 1 6
Included observations: 6 Cross-sections included: 5
Total pool (balanced) observations: 30
Variables coefficient std. Error t-Statistics Prob.
C 283298.0 64310.55 4.405156 0.0002
X1? -0.434249 0.111554 -3.892726 0.0008
X2? 0.712089 0.340074 2.093924 0.0486
X3? 0.027556 0.039530 0.697097 0.4934
X4? 0.624996 0.338659 1.845502 0.0791
Fixed Effects (Cross)
ALAMN—C -253554.2
JMS—C -282353.0
MNULIF—C -205539.0
PRDNT—C 976711.8
TKFL—C -235265.6
Effects Specification Cross-section fixed (dummy variables)
Root MSE 21879.10 R-squared 0.992518
Mean dependent var 139690.0 Adjusted R-squared 0.989667 SD dependent var 257263.2 SE of regression 26150.53 Akaike info criterion 23.42445 Sum squared residue 1.44E+10
Factors Affecting Profit ….. 1460
Source:Processed eviews 2012 in 2023 (attachment)
The equation for the following regression can be formulated as follows:
𝑷𝒓𝒐𝒇𝒊𝒕 𝑮𝒓𝒐𝒘𝒕𝒉 = 283298 − 0.4342 𝑿𝟏 + 0.712 𝑿𝟐 + 0.0275 𝑿𝟑 + 0.6249 𝑿𝟒 Based on the results of the fixed effect (cross) test in table.6, a variable equation for each company is obtained as follows:
𝟏. 𝑷𝒓𝒐𝒇𝒊𝒕 𝑮𝒓𝒐𝒘𝒕𝒉 𝑷𝑻. 𝑨𝒔𝒖𝒓𝒂𝒏𝒔𝒊 𝑱𝒊𝒘𝒂 𝑺𝒚𝒂𝒓𝒊𝒂𝒉 𝑨𝒍 − 𝑨𝒎𝒊𝒏 = −253554.2 − 0.4342 𝑿𝟏 + 0.712 𝑿𝟐 + 0.0275 𝑿𝟑 + 0.6249 𝑿𝟒
2.𝑷𝒓𝒐𝒇𝒊𝒕 𝑮𝒓𝒐𝒘𝒕𝒉 𝑷𝑻. 𝑨𝒔𝒖𝒓𝒂𝒏𝒔𝒊 𝑱𝒊𝒘𝒂 (𝑱𝑴𝑨 𝑺𝒚𝒂𝒓𝒊𝒂𝒉) = −282353 − 0.4342 𝑿𝟏 + 0.712 𝑿𝟐 + 0.0275 𝑿𝟑 + 0.6249 𝑿𝟒
𝟑. 𝑷𝒓𝒐𝒇𝒊𝒕 𝑮𝒓𝒐𝒘𝒕𝒉 𝑴𝒂𝒏𝒖𝒍𝒊𝒇𝒆 𝑰𝒏𝒅𝒐𝒏𝒆𝒔𝒊𝒂 = −205539 − 0.4342 𝑿𝟏 + 0.712 𝑿𝟐 + 0.0275 𝑿𝟑 + 0.6249 𝑿𝟒
4.𝑷𝒓𝒐𝒇𝒊𝒕 𝑮𝒓𝒐𝒘𝒕𝒉 𝑷𝑻. 𝑷𝒓𝒖𝒅𝒆𝒏𝒕𝒊𝒂𝒍 𝑺𝒚𝒂𝒓𝒊𝒂𝒉 = 976711.8 − 0.4342 𝑿𝟏 + 0.712 𝑿𝟐 + 0.0275 𝑿𝟑 + 0.6249 𝑿𝟒
𝟓. 𝑷𝒓𝒐𝒇𝒊𝒕 𝑮𝒓𝒐𝒘𝒕𝒉 𝑷𝑻. 𝑨𝒔𝒖𝒓𝒂𝒏𝒔𝒊 𝑻𝒂𝒌𝒂𝒇𝒖𝒍 𝑲𝒆𝒍𝒖𝒂𝒓𝒈𝒂 = −235265.6 − 0.4342 𝑿𝟏 + 0.712 𝑿𝟐 + 0.0275 𝑿𝟑 + 0.6249 𝑿𝟒
From the equation above, it shows that the Prudential Sharia company is the company with the best profit growth value among other companies because the coefficient in the fixed effect (cross) is 976711.8 where profit growth is positive.
Model Feasibility Test Results Coefficient of Determination (R2)
Table 6 shows that the Adjusted R-squared statistical value obtained is 0.9896, which indicates that claims, investment returns, underwriting results, and operational costs affect profit growth simultaneously by 98.96% of the total. This study does not use other components as research variables, so that the remaining 1.04% of the total is an element for these other variables.
Schwarz criterion 23.84481 Likelihood logs -342.3668 Hannan-Quinn criter. 23.55893 F-statistics 348.2095 Durbin-Watson stat 1.948527 Prob(F-statistic) 0.000000
Factors Affecting Profit ….. 1461 t Test
Table 6 shows the results of partial testing of the influence of independent factors on the dependent variable of the sharia life insurance business in Indonesia for the 2016- 2021 period, and from this data the following conclusions can be drawn:
Claim Variable
Claims variable has tcount <ttable, namely -3.892726 < -2.05954 (ttable obtained from df = n – k = 30 – 5 = 25, and α = 0.05/2 = 0.025) and a probability value of 0.0008 <
0.05 which means that partially claims have a negative and significant effect on profit growth. Therefore, the hypothesis H01 is rejected and Ha1 is accepted.
Investment Return Variable
The investment return variable has tcount > ttable, namely 2.093924 > 2.05954 (ttable obtained from df = n – k = 30 – 5 = 25, and α = 0.05/2 = 0.025) and a probability value of 0.0486 < 0.05 which means that partially investment returns have a positive and significant impact on profit growth. Therefore, the hypothesis H02 is rejected and Ha2 is accepted.
Underwriting Result Variable
The underwriting outcome variable has tcount <ttable, namely 0.697097 <2.05954 (ttable obtained from df = n – k = 30 – 5 = 25, and α = 0.05/2 = 0.025) and a probability value of 0.4934 > 0.05 which means that partially underwriting results do not have a significant effect on profit growth. Therefore, the hypothesis H03 is accepted and Ha3 is rejected.
Operational Cost Variable
The operational cost variable has the result tcount <ttable, namely 1.845502
<2.05954 (ttable obtained from df = n – k = 30 – 5 = 25, and α = 0.05/2 = 0.025) and a probability value of 0.0791 > 0.05 which means that partially operational costs do not have a significant effect on profit growth. Therefore, the hypothesis H04 is accepted and Ha4 is rejected.
F test
Table 6. It can be seen that the results of Fcount > Ftable are 348.2095 > 2.76 (Ftable is obtained from df1 = k - 1 which is 5 – 1 = 4, and df2 = n - k which is 30 – 5 = 25)
Factors Affecting Profit ….. 1462 and the value probability (F-Statistic) 0.0000 <0.05, meaning that there is a significant influence between all variables X and variable Y.
Effect of Claims on Profit Growth of Sharia Life Insurance Companies
Based on the data, variable X1, namely claims, has a significant negative effect on the profit growth of sharia life insurance companies. This research is in accordance with (Liana Zakiyatul & Sholikha, 2023) which states that claims have an effect on increasing profits. Claims are a source of company expenses that can affect the level of profit.
Therefore, the size of the claims issued by a company will affect the level of profit.
Claims are costs that may slow a company's ability to increase profits. The company's profit growth will be affected by the size of the claim. If the company reduces the number of claims, profits increase. But if the company issues more claims, profits will definitely decrease.
Effect of Investment Returns on Profit Growth of Sharia Life Insurance Companies The results showed that variable X2, namely investment returns, has a significant positive effect which contributes to increasing the profits of sharia life insurance companies. The results of this study are in line with the results of other studies(Diana &
Apriani, 2020)which shows that the return on investment affects the profit growth of the insurance business.
This shows that profits are proportional to the change in the value of the investment, increasing when the value rises and decreasing when the value falls. According to the first idea, the total amount of costs may be quite large. In this way, companies can increase their managed reserve needs by investing in existing resources.
Effect of Underwriting Results on Profit Growth of Sharia Life Insurance Companies The results showed that the X3 variable, namely underwriting results, had no significant effect on the profit growth of sharia life insurance. Research (Prasetyo et al., 2023) shows that underwriting results have an impact on insurance company profit growth, which is contrary to the findings of this study. Because the purpose of underwriting is to increase profits through risk-sharing results, that can measure how to increase profits. If the underwriting management is not appropriate, it will be difficult for the company to compete.
Factors Affecting Profit ….. 1463 However, previous research conducted by (Wulandari et al., 2019) supports the findings of this study by stating that underwriting does not change profit development.
Underwriting is a risk selection process to find potential participants conducted by the company. Therefore, underwriting is a method used to attract potential participants who have an acceptable risk. All prospective policyholders will go through various stages of the underwriting process, if the underwriting results are known, the payment will be made according to the contract. However, in Islamic insurance, asset management and the tabarru business are separated to ensure that the guarantee does not impact the company’s profits.
Effect of Operational Costs on Profit Growth of Sharia Life Insurance Companies Based on the data, variable X4, namely operational costs, has no influence on the profit growth rate of sharia life insurance companies. The results of this study are not in accordance with other studies. (Fitrianty et al., 2022) which confirms that operational costs affect the profit growth of insurance companies. Every company must incur operational costs so that the business runs smoothly and can continue to operate properly. However, not all operational costs can return maximum results for the company, because if the costs incurred for processes that are not effective then this can affect the company's profit growth, even the possibility of a decrease in profits.
However, previous research conducted by (Lilavira & Zulaikha, 2020) supports the findings of this study by stating that operational costs do not necessarily affect profit growth because the main source of subsidies for profit growth is not internal company money but external sources such as debt and securities.
CONCLUSION
Submission of claims has a negative impact on the profit growth provided by the company during the 2016-2021 period. Consequently, an increase in the number of claims will likely result in a reduction in benefits. Investment returns have a positive impact on profit growth provided by insurance companies during the 2016-2021 period. Increasing investment returns will have a direct impact on the level of profit earned.
The growth of sharia life insurance business profits from 2016 to 2021 is not affected by underwriting results. Therefore, rising and falling underwriting results will not have an impact on profit growth. The profit growth of a sharia life insurance company from
Factors Affecting Profit ….. 1464 2016 to 2021 is not affected by operational costs. As a result, changes in operating costs, such as increases or decreases, will not affect profit growth. When compared to other companies, Prudential Sharia Company has the best value for profit growth.
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