The Growth and Contribution of Life Assurance Business in Nigeria
Chapter One
OBJECTIVE OF THE STUDY
In this study, the main objective is to examine the growth and contributions of life assurance business in Nigeria. The specific objectives of this research work include the following;
- To examine the effects of sub-standard policies on the development of Life assurance business in Nigeria.
- To find out the extent at which high level of poverty in the country affects the patronage of life assurance business.
- To examine the effect of low demand for life assurance policies marketing of life assurance business
- To examine the effect of illiteracy on the growth and development of Life assurance business in Nigeria.
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
This chapter which is the literature review would encompass the introduction, impact of insurance, businesses, the risk that may be insured, types of insurance, the Nigerian insurance Market, how modern insurance works, fundamental principle of insurance law and practices, functions of insurance businesses, importance of insurance businesses in National Economy and the summary of the chapter.
Furthermore, we are going to look and assess the contributions of different writers on this subject in this chapter, which is the insurance businesses, and their impact on the economic growth in Nigeria.
INSURANCE BUSINESSES AND THEIR IMPACT ON THE ECONOMIC GROWTH OF NIGERIA.
J.Okafor (1982:8) says that “Insurance can simply be defined as the transfer of risk of economic loss of the event insured against and the amount paid in insurance of such is the heart of the typical insurance contract. We all make plans and have expectation on how our lives will unfold. Experience however, shows that our plans do not follow with certainty their design are over expected and are not always realized. In most cases, circumstances always interfere with our plans. The system is therefore developed to reduce the adverse of financial consequences that may result from random event intrude to prevent the fulfillment of reasonable expectation.
According to Hamsell (1987:113), insurance is a social process device to provide financial compensation for the effects of misfortune, the payments been made from the accumulated contributions of all parties participating in the scheme.
One of the indices for measuring the growth of an economy is the size and maturity of its insurance industry. This is because the insurance industries play a very important role in the mobilization and utilization of investible resources in an economy. It also acts as the absorber of risks uncertainties normally associated with economic activities, the absence of a market for which can reduce the growth of economic activity.
The relevance of the insurance industry is even evident in such less developed economies as Nigeria where the financial system is not very sophisticated and where there is lack of basic infrastructures required to aid the growth of the economy. The industry has been playing a very useful role in the economy most notable in the following areas:
Reduction in the outflow of resources from the country through the retention of insurance and re-insurance premiums within the economy, with a consequent positive effect on the country’s balance of payments.
Growth of capital market: The insurance industry constitutes one of the major institutional investors in the capital market, thereby providing a channel for the sourcing of funds by both the public and private sector of the economy.
Evaluating insurance consciousness:-The advent of an organized insurance industry and the activities of its members have greatly improved the cultivation of insurance consciousness among business houses and individuals. This has reduced the level of risk, which generally encourage enterprises and therefore enhanced the growth of the economy.
Direct equity and loan investment industrial enterprises. The industry is a major catalyst in the growth of large industrial undertakings, which are capital intensive. Mobilization of savings. The activities of the industry particularly life insurance business have encouraged the mobilization of savings which otherwise may not have been channeled to any productive use such mobilized savings constitute an important source of long-term investible funds in the economy.
In another paper presented by a leading Nigerian Insurance Administrator Ogunlana (1973:44-45) while discussing the impact and role of insurance in the present day economy, he suggested that, “the role and objectives of insurance industry should be broadened beyond the very traditional role played by the industry in growth countries. He further states that; “To determine the man power needs of industry it is only logical to ascertain, in the first instance the objectives of the industry”.
In addition to the impact of insurance businesses to the growth of the economy, it plays a prominent role in provision of life policies, which can be used as a collateral security when obtaining a loan while the value of real estate and other mortgaged properties covered by general insurance is greatly enhanced.
FUNCTIONS OF INSURANCE BUSINESSES
Hamsell (1987), in his publication, “Elements of insurance” broadly divided the function of insurance into two, namely the primary and secondary function.
THE PRIMARY FUNCTION
The primary function is the indemnifying of the individual policyholders for losses or damages and also provides other valuable services to the individual. The policyholder or the insured community pays premium into a common pool out of which the unfortunate few who suffer losses are compensated.
THE SECONDARY FUNCTION
The Insurance Company provides a number of secondary functions, which are of great value to society and country in general. It offers financial security to businessmen and women uncovering and promotes trade, commerce and commercials enterprise. These include:
Investment: Insurance play an important role in the economy buoyancy of the nation by investing part of the premium collected to earn interest on government securities, mortgages, individual loans.
Reduction of losses: It help to reduce losses by the recommendation made by their surveyors, rating system applied for good and bad risk, allowance of discounts for security in fire and burglary insurance. All these encourage care and serve as inducement to reduce losses.
Assistance of Business Enterprise: Large business enterprise required the insurance assistance to enable them function well. Most of their fire, theft, equipment damages and capital risk are shared to insurers.
CHAPTER THREE:
RESEARCH METHODOLOGY
INTRODUCTION
Research is simply the process of arriving at dependable solutions to problems through the planned and systematic collection, analysis and interpretation of data Osuala (1987:26) for any given problems to be solved, information concerning those problems has to be available and must be collected in the light of that problem.
In like manner, this chapter seeks to explain the design of research project and method used in collecting data or information in order to find solution to the problem of the subject matter of this research project.
RESEARCH DESIGN
Kinner and Taylor (1970) emphasized that research design provides a broad frame work of determine the type of information to be collected, the source of data and collection procedure. Also Wentz (1979) contributed that there is no research design as such the major guide for appropriate research method and procedure is the objectives.
Hence the historical performance of the case study (NICON Insurance Corporation) was used. Data were collected using different method of data collection such as textbooks, journals, insurance yearbook, interview and questionnaires etc. Then a solid background was laid for the subject matter through a detailed literature review. A study of NICON insurance was made. Date collected on the company were presented, analyzed and interpreted.
METHOD OF DATA COLLECTION
For the purpose of this research, various methods were adopted to collect the required data for the research work. Some of these methods include:
INTERVIEW
This was carried out to get official views and information relating to the financial policy, planning and control.
QUESTIONNAIRE:
Copies questionnaire were administered on impact of insurance businesses on economic growth of Nigeria for the purpose of collecting pertinent data required by the study.
DOCUMENTARY
The researcher used documentary materials such as the annual report, magazine, statistical yearbooks and general reports.
PROCEDURE FOR DATA COLLECTION
The major sources of data for this study were the primary and secondary sources of data.
PRIMARY SOURCES OF DATA
These include responses received from respondents on whom the Questionnaires were administered. The respondents are the senior, intermediate, and junior staff of the NICON Insurance Corporation.
SECONDARY SOURCES OF DATA
In order to be more comprehensive in information gathering, the researcher also consulted the follow-up secondary source, the journal of NICON insurance PLC, and the journal of the charted institute of Accountants in Nigeria (ICAN) and printed materials like Newspapers bulletin and published reports.
POPULATION OF THE STUDY
All businesses that fall under insurance industry would be the population of this research. The businesses under this industry are mostly found in most states of the federation.
NICON INSURANCE CORPORATION was selected for investigation because of the following reason: –
Firstly, NICON Insurance Corporation is largest insurance company in Nigeria, because it accounted for 45% of the total premium income of the Nigerian Insurance market, with a gross premium income of N9.96 billion generated with a profit after tax of N871 million. It has nine zonal offices and 48 branch offices located in virtually every state in the country.
Second, necessary information about its different departments might be easier to obtain than the others.
Thirdly, easy accessibility to the researcher.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS INTERPRETATION
INTRODUCTION:
The aim of this chapter is to present and analyse the data collected from the staff of NICON Insurance Corporation and other insurance businesses. Therefore the data are presented in a tabular form and are analyzed accordingly. Data were collected through questionnaire, observation, personal interview and existing documents in the corporation. A total of fifty (50) Copies of questionnaire were administered; and they were completed by the staff of NICON Insurance Corporation and the employees of other Life assurance businesses with offices in enugu. However, not all the respondents responded to the all questions as expected.
Based on the questionnaire and other research method used, the presentation, analysis and interpretation of respondents’ answers are as follows:
QUESTION 1: Your Sex?
CHAPTER FIVE:
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
INTRODUCTION:
In this chapter, a Summary is made of all the matters discussed in the previous chapters. Conclusions and recommendations are also made.
SUMMARY:
This project work is aimed at highlighting the various functions and importance of Insurance Businesses to the Nigerian economy. This project work has five chapters, the first chapter consist of the Nature and origin of Insurance in Nigeria which deals with the statement of the problem, assumption of the study objective, significance, hypothesis, scope, limitation and plans of the study.
The second chapter is the literature review, it contained the data collected from documented materials or published information such as annual reports, magazines, journals etc. The chapter also contained discussions on impact of Insurance Businesses on the growth of Nigerian economy and the role of the Nigerian Insurance market.
In the third chapter, which is the research methodology, attempt was made to explain the design of the research project and the method used in collecting data that were relevant to the study.
The fourth chapter deals with analysis and interpretation of the data collected. And finally, in the concluding chapter, we present a summary of the study, conclusions, recommendations, and suggestions for further studies.
CONCLUSION
This study has attempted to highlight the impact of insurance and its major contributions to the economy. It has revealed the significance of the insurance industry, in national economic growth. The industry is still quite young, however, the regulatory body, NAICOM are laying down regulations in an attempt to revitalize the industry. The insurance industry acts as an absorber of the risks and uncertainties normally associated with economic activities, it is our conclusion that enactment and implementation of laws that would enhance the growth of the industry that would increase its contribution to the gross domestic product. We cannot have a buoyant economy if it is not insurance backed. Hence, we must support our insurance industry to enable it play an effective role as the nation’s risk bearing industry, capable of propelling the national economy to greater heights and further growth. Also, the entire insurance mechanism and the national economy can only function effectively in a peaceful and orderly environment under the rule of law.
The future of this industry looks promising if the professionals will remain united, having the same vision and pursuing the same goals.
The industry has been under serious criticisms on account of its reluctance in the settlement of claims and alleged unclear terms of insurance, which were often interpreted against the interest of the clients. These misconceptions have given the industry bad name, to the extent that members of the public consider it a waste of resources to insurance any property. According to Late Mrs. Stella Obasanjo, as quoted in a meeting tagged FIICEN (forum of Insurance Institutions chief executives and National Insurance Commission) said “There remains this belief that the insurance company will manufacture some excuse not to settle your claim in the event of accident”. According to her, an efficient and reliable insurance Industry should constitute a major element in the overall economic growth plan, adding that it remains one of the ways in which investors could be persuaded on the security of their investment.
RECOMMENDATIONS
The fact that the performance of the insurance industry depends to a large extent on the social, economic, and political environment in which it operates, the insurance industry of any nation is to a large extent, a reflection of the level of performance of the nation’s economy.
In this light therefore, to have a viable insurance-backed economy that is to improve on the efficiency of insurance industry, we recommend followings:
- A revolutionary promotion of knowledge and education: the number of professionals in this field is too limited. In an effort to improve the status of the industry, there must be a revolutionary promotion of knowledge amongst the brokers. Insurers, reinsurances, activities and loss adjusters. The industry must now begin to recruit young graduates for training as future leaders in all sectors of the
- Marketing culture: For the industry to develop there is the need to be more creative and innovative especially in marketing initiatives. Due to lack of marketing orientation, the level of awareness of insurance business has remained low in
- Agricultural and Health Insurance: The present Government of the country has to give more emphasis on agriculture and health insurance, because they are the areas that demand urgent coverage by insurance industry. This is because at this stage of our growth it is obvious that our survival as a nation depends on our ability to feed ourselves. Therefore, the funds accumulated by the Nigerian Agricultural Insurance Company should also be used to assist the small-scale farmers, so that they will use the fund to purchase fertilizer and other tools and farming Further more, the problem of health care and medication has become so costly, that there is a yearning need for health insurance scheme in Nigeria. Nigeria is highly populated, the benefit of large number will make the health insurance viable.
- Government policies and programmes should be geared towards the promotion of insurance awareness by making it mandatory by certain class of insurance in the interest of the public. For example, the employer’s liability to their employees for death or injuries at work, fire insurance for all installation in office buildings, factories etc, would have the advantage of promoting awareness and availability of funds thereby increasing the investment
- Insurance company could also further invest in the construction of housing estates in urban and rural areas that could be rented out to members of the public at a reasonable amount. Also the educational sector needs the insurance businesses to provide special funds for under privileged children, orphans and also for technical training in order to learn a
Finally, certain control should be incorporated into the operation of the insurance businesses in order to check against misuse of funds, which is supposed to be used in indemnifying people concerned, such control are to make sure that the operations are carried out and the staff are efficient. The areas of control include:
- Structural control
- Procedural control
- Custodian control
- Efficiency control
All these are along institutional line and often referred to as check and balances. Hopefully, if these few suggestion is adopted effectively, the insurance industry will have a remarkable impact on the economic planning of the nation.
REFERENCES
- Anderson, D. J. (1983): Commerce for West Africa. Macmillan Publishers Ltd. Ibadan-Nigeria.
- Babalola, A. (1987): The Role of Accountability and Profitability in Insurance. McGraw Hill Book London, United Kingdom.
- Dale, E. (1978): The Principle of Insurance. Prentice Hall of India Private Ltd. India.
- Denenber, H. S. (1974): Risk and Insurance. Prentice-Hall. Inc. New Jersey. U.S.A.
- Ejiofor, P. M. (1975): The Role of Insurance Industry In the Economic Growth. Heinemann Educational Books Ltd. Ibadan-Nigeria.
- Franks, J. R. (1985): The Insurance Law and Decree. Dryden Press, London, United Kingdom.
- Insurance Digest (2001): “Nigerian Insurance Year-book”(An In-House Magazine of Insurance Businesses). Published by Nigerian Insurance Association.
- Irukwu, J. O. (1968): Insurance Management In Africa. Mac million Publishers Ltd. Ibadan-Nigeria.
- Kenau, D. (1988): Accidents and Motor Insurance. Pitman Publishers.New York-United States Of America.
- Ogunlana, F. O. (1973): Growth of High Level Manpower for The Insurance Industry In Africa. Heinemann Educational Books Ltd. Ibadan-Nigeria.
