A Numerical Investigation of Economic Uncertainty and Its Stochastic Adverse Effects on Policy Holders Attitude towards Premium Payment Compliance in Nigeria

The stochastic adverse effects of economic uncertainty on policyholders have been a persistent issue in Nigerian insurance sector. The efficacy of insurance business is significantly influenced by prevailing economic uncertainties which pose stochastic adverse challenges on policyholder’s attitude towards premium payment compliance for insurance services. Amid these economic uncertainties, there is need for insurance firms to navigate the stochastic adverse effects of economic uncertainties on policyholders’ premium payment compliance which are modeled as Econometric Stochastic Time-Delay Differential Equation (ESTDDE). Numerically, some examples of the modeled equation are solved using Block Backward Differentiation Formulae Method (BBDFM) without the use of interpolation techniques in evaluating the stochastic and delay terms. Following the stochastic display of the computational results of the method, the Absolute Stochastic Errors (MASEs) of step number of BBDFM produced better and faster numerical solutions than the step numbers and 2 by giving the Least Minimum Absolute Stochastic Errors (LMASEs) at a Lower Computational Processing Unit Time (LCPUT) when compared with other existing method. This study recommends that insurance industries in Nigeria should develop economic uncertainty-indexed insurance policies to cushion the stochastic adverse effects of economic uncertainty on policyholders’ attitude towards premium payment compliance for insurance services.