An Appraisal Of The Nigerian Insurance Companies Approach To Claim Settlement

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The aim of this research study is to appraise the Nigeria insurance companies approach to claim settlement. A study of Africa Alliance Insurance company in East Central region. The objectives of this research work include the following: To find out if illiteracy or ignorance of the insuring public affect the ability of the insurers to settle, claim to find out if under settlement is common. The related literature review of the work include; Overview and historical development of insurance. For a successful completion of this research work, the researcher made use of both primary and secondary methods of data collection for information gathering. Primary data were collected through; questionnaire administration oral interview and personal observation. Secondary data were collected through periodical and journals, textbooks and lecture and notebooks and internet. The data collected were presented in table and analyzed with simple percentage while the hypothesis, stated ware tested with chi-square. The summary of finds made by the researcher includes the following it was discover that illiteracy or ignorance of the insuring public has affected the ability of the insurer to settle claim. In conclusion, the illiteracy is a major problem of the insuring public and this has affect their ability to supply correct information when needed. The researcher recommends that Nigeria insurers association in conjunction with charted insurance institute of Nigeria set up a credible insurance information service that will enlighten the public on the need and purpose of insurance to reduce low level of awareness and frauds.    




Title Page         -       -       -       -       -       -       -       -       -       i

Approval Page  -       -       -       -       -       -       -       -       ii

Dedication       -       -       -       -       -       -       -       -       iii

Acknowledgement    -       -       -       -       -       -       -       iv

Abstract   -       -       -       -       -       -       -       -       -       vi

Table of Contents     -       -       -       -       -       -       -       viii


1.1      Background of the Study-       -       -       -       -       1     

1.2   Statement of the Problem-       -       -       -       -       5     

1.3      Objectives of the Study    -       -       -       -       -       6     

1.4   Research Question   -       -       -       -       -       -       7

1.5   Research Hypothesis       -       -       -       -       -       -       7     

1.6   Significance of the study  -       -       -       -       -       8

1.7   Scope and Limitations of the Study-       -       -       9     

1.8   Definition of Terms -       -       -       -       -       -       10

References       -       -       -       -       -       -       -       12


2.1   An overview     -       -       -       -       -       -       -       13

2.2   Historical Development of Insurance       -       -       15

2.3   Historical Development of Insurance in Nigeria       -       16

2.4   Benefit of Insurance        -       -       -       -       -       -       37


2.5   Classes of insurance        -       -       -       -       -       -       42

2.6   Claims settlements  -       -       -       -       -       -       44

2.7   General claims procedure        -       -       -       -       -       45

2.8 Conditions under which Insurer may Refuse

to Settle Claims       -       -       -       -       -       -       50

2.9   Exception Clauses Relieving the Insurer from

Liability when a Claim is Failed.      -       -       -       52

2.10 Causes of Dispute in Claim Settlement    -       -       56

References       -       -       -       -       -       -       -       60


3.1      An overview     -       -       -       -       -       -       -       61

3.2      Area of the Study     -       -       -       -       -       -       61

3.3      Population of the study    -       -       -       -       -       62

3.4      Sources of data/method of data collection       -       62

3.5      Techniques used in Determining the Sample Size   64

3.6      Data Analysis Technique         -       -       -       -       -       65

3.7   Validity of the Instrument used       -       -       -       -       66

3.8   Validity and Reliability of the Instrument        -       -       67


4.0      Presentation and Analysis of Data   -       -       -       68

4.1   Data analysis   -       -       -       -       -       -       -       68


4.2   Analysis of Research Questions       -       -       -       70

4.3   Analysis of Data from the Staff of Both

Insurance and Intermediaries  -       -       -       -       77

4.4      Test of Hypothesis   -       -       -       -       -       -       82


5.1   Summary of Findings      -       -       -       -       -       85

5.2   Conclusions     -       -       -       -       -       -       -       87

5.3   Recommendation     -       -       -       -       -       -       88

Bibliography    -       -       -       -       -       -       -       85

Appendix-       -       -       -       -       -       -       -       93

Questionnaire -       -       -       -       -       -       -       94





Insurance is the equitable 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 pooling of funds from many insured entities [known as exposures] to pay for the losses that some may incur. Insurance as a modern concept for solving risk related problems depends on co-operation of a large number of people for it’s success.

Since risk is an unavoidable event in every business venture, there will be need to understand events in like, there will be also need to understand what risk entails for. Example walking in the street imposes a danger of being knock down by a vehicle. Since risk is ever present it cannot be eliminated but can be prevented. Even men own habits, occupation, relationship with others, the society and his political activities are sources of danger.

The taste of good insurance transaction lies in the manner in which a claim is handled. This is why it is referred to as the acid test for insurance [Ogwo, Enwereuzor, Nwite, Ibeabuchi and Eche, 2000] one of the principal functions of an insurance company is the settlement of claims. It is infact the fear that a claim might occur that induces individual and economic institutions to take out insurance policies.

Therefore, the payment of claims can be said to be the major function of an insurance company. The acid test of viability of any insurance company is prompt settlement of claim and it is also a veritable cheapest means of advertisement.

Notwithstanding, the positive roles which the insurance industry plays in the social and economic development of our country, the industry still does not enjoy a good public image. The public sees the industry wrongly as dupes [Eche, Enwereuzor, Ibeabuchi, Nwite and Ogwo 1999[. They believe that the insurers are good at extorting money from them in form of premium but they are reluctant in settling claims when the time comes.

The most important reasons for this impression is that there is a low level of insurance awareness in our society. The public are not properly educated on the scope, function and limitations of insurance transactions especially in the issue that may cause disputes that arises in an insurance contract has to do with settlement of claims. So an important factor that distinguished a good insurance company is it’s claim settlement services. It does not mean an insurer should be over libral in order to edge itself out of market.

When the policy has been issued, the risk for the peril insured against is covered. The contingence against which protection is given or not materialized when the loss insured against actually occurs, the insured has got to make a claim on the insurer for indemnification of loss and admitted genuine claims should be settled promptly for an insurance company to maintain a good public image [M.N. Mishra 2002]. But if loss does not occur, no payment would be made to the insured.

It is therefore, obligatory on the part of the insurer to compensate the insured [their client] whenever there’s loss on the item insured against as long as the insured abides to the condition stated in the contract or policy.

Frequently, of course, claims are settled following negotiations between insured and insurer, or parties acting on their behalf such as assessors and loss adjusters. The reported cases have been concerned with whether an insurer can reopen a settlement, but it conceivable that an insured could do so on the ground of misrepresentation undue influence by the insurer [John Birds 1997] this though would be difficult to show. The first and most important point to make is that the notification of a claim is the responsibility of the insurer.

Worthy of mention, is that public should appreciate that insurance is not a charity. The shareholders of an insurance company should look forward in making profit just like any other shareholders in other commercial enterprise.

However, the interest of the policy’s is to satisfy their profit motive. They are obviously in business just because they are policyholders. The insurers should appreciate that claim settlement is their shop windows.



        Unwilling to educate public properly on the scope, functions, and limitations of insurance as well as the basic rules that govern insurance transactions especially on the issue of claim settlement and how to abide by the rules and regulations guiding insurance company.



The broad objective of this study is to appraise the approach of insurance companies to claim settlement in the Nigerian insurance companies.

The specific objectives include the following.

1.          To find out if approach of insurance companies to claim settlement is effective.

2.          To find out if insurance companies are capitalizing on the ignorance or illiteracy of the insuring public towards claim settlement.

3.          To find out if the issue of under settlement is common.

4.          To find out if insuring public involve intermediaries  in their insurance affairs or contract.



        The following research questions were formulated by the researcher.

        How effective is the insurers approach to claim settlement?

        How does illiteracy or ignorance of the public affect the ability of the insurer in the settlement of claim?

What makes the issue of under settlement common?

To what extent should insuring public involve intermediaries in their insurance affairs or contract?



The following hypothesis are formulated for the purpose of this research work.

Hypothesis one

Ho:   The approach to claim settlement are not effective

H1:   the approach to claim settlement are effective.

Hypothesis two

Ho:  The illiteracy or ignorance of the public has negative effect on the ability of the insurer to settle claim.

H1:   The illiteracy or ignorance of the public has positive effect on the ability of the insurer to settle claim.

Ho:   The issue of under settlement is not 

H1:   The issue of under settlement is common.


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An Appraisal Of The Nigerian Insurance Companies Approach To Claim Settlement