THE IMPORTANCE AND ROLES OF INSURANCE INDUSTRY IN NIGERIA ECONOMY
The need for this research paper is partial fulfillment of the researcher’s program in insurance and as a result of the need to know the importance and roles of insurance industry in Nigeria economy. This research has resulted in the researchers going out of the study to discuss with people not engage in the field about their views as regards to the importance and roles of insurance industry in economy also to conduct interview with the insurance managers. This research has played a vital role in the study, the problems and prospect facing the importance and roles of insurance industry in Nigeria economy has been full discussed in this project. This research study is divided into five chapters, chapter one dealt with the introduction and background of the study, statement of problem, objective of the study, research question, significance of the study operation, etc. Chapter two discussed review of related literature as they relate to the topic of study. Chapter three dealt with an overview, chapter four dealt with the summary of findings and discussion while chapter five summoned the conclusion and recommendation on the research.
TABLE OF CONTENTS
Title page i
Approval Page ii
Table of Contents vii
1.1 Background of the study 1
1.2 Statement of problem 6
1.3 Objective of the study 7
1.4 Research question 8
1.5 Significance of the study operation 8
1.6 Scope and limitation of the study 9
1.7 Definition of terms 10
2.0 Review of Related Literature 13
2.1 Detailed Meaning of Insurance 16
2.2 Types of Insurance 19
2.3 Roles and Importance of Insurance Industry to
the Economy 24
2.4 Summary of Related Literature 27
3.0 An Overview 29
3.1 Source of Data 29
3.2 Primary Data 29
3.3 Secondary Data 30
3.4 Population of the Study 30
3.5 Sample Size 30
3.6 Validity of the Instrument and Reliability
of the Instrument 32
4.0 Summary of findings and Discussion 33
4.1 Summary of Findings 33
4.2 Discussion 34
5.0 Conclusion and Recommendation 36
5.1 Conclusion 36
5.2 Recommendations 37
1.1 BACKGROUND OF THE STUDY
Insurance industry is a very vital aspect of Nigeria economy and its importance and roles can not be overemphasized. In this project work the researcher want to identify the history of insurance industry in the Nigeria economy and also the actual roles and the importance of insurance industry to the common man and the society at large. such roles importance include in every sector of the economy, like, the banking sector, Agricultural/Sector, aviation sector, Business sector etc. the research work also treated the types of insurance industry in Nigeria, here the researcher compared it with the types operated overseas and the method used to the standard. Also the project work, focused on the problem encountered by the industry and all the necessary measures that can be used to improve Nigeria insurance up to the worlds standard.
The development of insurance industry, in Nigeria has passed through three distinguishable phase; the initial often door phase, roughly between 1990 and 1960, the transitional phase which concludes with the first national development plan period, 1962 – 1969 and the take off phase (1990 to the present times) witness the toughening of the framework of government regulation and represent a radical change in governments attitude towards the control the industry, there was when the insurance market were dominated with European compaine who monopolies the insurance industry, during this early period, a number of factors did not ensure an active market. Economic activity is at low level, there was no insurance consciousness by the populace, due to non–existence of some legislation, like that of motor vehicle and other things, it made Nigeria market to grow in a low peace and also the third world war hindered the growth of the market.
After the war, Nigeria experienced a lot of improvement, and after that was the introduction of worker’s compensation act 1940 and the road traffic act 1945 which came into force on 1st April 1950. Due to the increase in insurance industry in Nigeria.
This was after Nigeria had their, independent there was a rapid increase in the number of company established and an increase in insurance industry and some of the foreign companies were turned to indigenous companies. The first step was to regulate the operations of the insurance companies to ensure a sound and efficiency insurance market, which would not only discharge its duties to members of the insuring public but would constitute the solid foundation for future growth and development. It was also discovered that some of the insurance companies are not investing in Nigeria, because there was no provision in the law. This leads to the Act of 1964 which states that any insurer should invest Two – Fifth its premium in Nigeria.
As Nigeria insurance industry increase; it was discovered that it is operated by some in experience people, and led to problem and the government arrested the situation by appointing.
Dr. Karl Reichel in October 1996 a united Nations expert the most far reaching action of government, which improves insurance business in Nigeria was the establishment of the National insurance corporation of Nigeria (NICON) in 1 July, 1969. In June 1970 the Post of the superintendent and deputy supper intendance was credited. This phase experience increase in adoption of direct mechanism, a charging situation which was the inevitable result of the growing belief that effective control of the economy must necessarily accomplish the achievement of political independence.
This was where all the problems and weakness in the previous stages was corrected, and the government had control or exclusive public ownership of very strategic industries. The policy of the federal military government to participate in a number of key industries was formulated and implemented. They set up their owned enterprises. The government also helped in the promotion supervision and control of insurance industry in other to protect the investing public.
One of the recent developments is the creation of reinsurance, which was mainly operated by Europeans and others and also the lunch of the National health insurance Scheme (NHIS) by president Olusegun Obasanjo (GCFR on 29th May 2005). The present stage has thus exhibited the features of the “take of phase”, the market is greatly boosted by legislative provision for compulsory insurance, set owned industries dot the industrial map of the company, again with the indirect effect of boosting the insurance business new legislation is passed with a view to indulgencing the insurance industry and providing a strong financial base for the companies and ensuring a high standard of insurance practice in Nigeria.
1.2 STATEMENT OF PROBLEM
In this section the researcher focused on the prevalence problem that has led to the insurance industries in Nigeria not performing so well. These problems militating against the insurance industries roles in Nigeria economy are as follows:-
1. Ignorance in the part of the members of the public
2. To a certain extent, lack of expert in the field.
3. Poor infrastructures and information technology
4. Limited number of insurance company with a maximum capacity to sustain heavy loses.
5. Lack of information
6. Non –compliance/disclosure of materials fact by the subscribing public to the insurance company.
7. Poor management of existing insurance industry
8. Poor liquidity in the some insurance industries.
1.3 OBJECTIVE OF THE STUDY
The objectives that made the researcher to go into this topic are as follows:
i. To find out the major roles and importance of insurance industry in Nigeria economy.
ii. To find out a way to increase the roles to the standard in the world today.
iii. To find out if there are possible approach, which can be used to eliminate the poor standard of insurance services in Nigeria.
iv. To bring to the knowledge of the public the importance of insurance industry in the economy.
v. To make suggestion and recommendations that could be useful in solving the identified problems.
1.4 RESEARCH QUESTION
1. What are the importance of insurance industry in Nigeria economy
2. Do insurance company provide claim settlement in accordance with the law and terms of relevant insurance policy?
3. What roles do insurance company play in the Nigeria economy?
1.5 SIGNIFICANCE OF THE STUDY OPERATION
This study is meant to highlight the importance and roles of insurance industry in Nigeria economy. Insurance not only helps in reducing the burden on the public but reducing claims fluctuation. Insurance industry plays a vital role in Nigeria economy by momentum to the nation economic of the country.
The obvious contribution to the nation economy well-being in area of Job opportunities, source of finance for government, public and private sector of the economy makes the study of paramount importance.
1.6 SCOPE AND LIMITATION OF THE STUDY
In a study of this nature, one would like to gather/accumulate data from many areas, and due to the importance of insurance industry in Nigeria economy. The researcher choice to consider the run down of the roles and importance of the industry to the whole economy in the country. Therefore, the scope of the study is limited to south East of the country.
Besides, there were many other problems tamed up during the research work in which some of them are as follows:
i. TIME CONSTANT
The time at any disposal as a student to carry out this topic is extremely short, couple with other academic commitments.
ii. FINANCIAL CONSTANT:
As a student, their was not enough capital to Spend in transport and fact finding and borrowing of necessary literature that would have helped in the writing of this research work.
iii. MANAGEMENT CONSTRAINT
The respondents, especially Top official in any insurance organization who has the answer at their disposal, some of them refused to respond or corporate as expected. All this problems notwithstanding did not prevent the continuation of the research work.
1.7 DEFINITION OF TERMS
1.Risk: It is the centre of insurance, and its has several definition which include: risk as the chance of loss, which implies that chance of loss may be used to indicate a state where there is an exposure or a possibility of loss.
2.Insurable interest: It is the “Legal right of insure” this simply implies that a person can not have a bidding contract without being in possession of the insurable interest. And insurable interest is what distinguish insurance and gambling
3.Indemnity: It is the monetary compensation given by insurer to an insured following a loss caused by an insured risk.
4.Subrogation: It is an exercise for ones won benefit of right or remedies possessed by another against third parties.
5.Contribution: It is the right of an insurer to call others similarly but not necessarily equally liable to the same insured to share the cost of an indemnity payment.
6.Proximate cause: This means the active efficient cause that set in motion a train of event which brings about a result without the intervention of any force started and working actively from and independent source
7.Premium: It is monetary consideration passing from the insured to the insurer from their undertaking to pay the sum insured in the event of the risk, insured against happening. It is a necessary element in the formation of an insurance contract.
8.Insurance: It can be defined as the guaranteeing safety of life, one’s property against specified loss or harm.
9.Claims: This means to demand as one’s right for compensation after a loss.
10. Terms: Can said to be a word or phase used to describe a thing or to Express a concept especially in a particular kind of language or branch of study.