APPRAISAL OF THE ROLE OF REGULATORY BODIES IN THE NIGERIAN INSURANCE INDUSTRY

ABSTRACT

Business is too important to be left to “Business-men” to run and operate as they see fit. Moreso, if that “business” is that of insurance. The average Nigerian might not know much about insurance but he or she knows that insurance companies “don’t pay claims”
In otherwords, the insurance industry has a bad image. This was the reason behind the federal governments creation of different insurance regulatory bodies. To prevent “quacks from doing insurance business and to protect the insuring public, insurance laws and regulatory bodies have been created to further protect the insuring public.
The question now is, who are these regulatory bodies? How do they operate and how effective are they in performing their duties? This project in addition to “appraising” these regulatory bodies, will trace the genesis of regulating insurance business and finally, make recommendations on how the regulatory bodies can do better.

CHAPTER ONE

INTRODUCTION
1.1 BACKGROUND OF STUDY 
The business of insurance is based on the concept of spreading a risk, so that “it lies easily upon the many than heavily upon the few. Insurance is a pool of funds into which contributions are made and from which those who suffer loss are compensated.
As a contract, the insured and the insurer must be honest in all their dealings with each other. On the part of the insurer, he must be able, financially to settle all legitimate claims made on him as and when due. In the past, almost anyone, with or without experience and adequate capital could own an insurance company. As a result, most legitimate claims were not paid. This sad state of affairs was due largely to the “freedom” or rather, the absence of adequate Government supervision.
In other to stop this exploitation, the Government set up the “J.C. Obande” commission in 1961. Their report led to the 1961 insurance companies act, more decrees and acts followed leading to the present insurance Act of 2003.
In addition, from 1961 to date, the following regulatory bodies supervise the insurance industry they include; the Central Bank of Nigeria (C.B.N), the National Deposit Insurance Commission (N.D.I.C), the Securities & Exchange Commission (SEC) and finally the National Insurance Commission (NAICOM) which plays a more direct role in the supervision of insurers. Each of these bodies performs functions aimed at regulating the insurance industry. An assessment of their performance will be made.

1.2 STATEMENT OF PROBLEM 
For the pragmatist, the value of an idea (e.g. supervision of insurance) lies in its practical results. So, the questions is, how far and how well have the regulators performed?
1. Why is it necessary to regulate or supervise the insurance industry?
2. How are insurers supervised?
3. How effective is the supervision?
4. Can supervision be made better?
1.3 OBJECTIVE OF STUDY
This research work has the following objectives:
1. To trace as far as possible, the origin of insurance
2. To show the time and method of the introduction of insurance into Nigeria.
3. The history and method of insurance supervision in Nigeria.
4. The contribution of regulatory bodies to the insurance industry.
5. To appraise their performance and determine if they have done well so far.
6. Finally, to suggest how they can improve.

1.4 SIGNIFICANCE OF THE STUDY 
This project is intended to serve a number of purposes and all effort has been made to ensure that it has been written to meet these purposes.
1. This project will highlight the supervisory bodies and educate on their functions and mode of operation.
2. To suggest ways of improving their effectiveness.
3. Every research should ad to the volume of knowledge already accumulated. This project is not as exception.

1.5 RESEARCH HYPOTHESES 
The following hypothesis were formed to achieve the objectives of the research.
1. Ho – The regulatory authorities are unable to carry out their roles and functions in the Nigerian insurance industry.
H1 – The regulatory authorities are able to carry out their roles and function in the Nigeria insurance industry.
2. Ho – The regulatory authorities did not contribute substantially to the manpower development in the insurance industry.
H1 – The regulatory authorities have contributed to the manpower development in the insurance industry.
3. Ho – The regulatory authorities did not make the desired impact on the Nigeria Insurance Industry.
H1 – The activities of the regulatory authorities have made the desired impact on the Nigeria Insurance Industry.
4. Ho – The activities of the regulatory authorities will not have future prospects in the Nigerian Insurance Industry.
H1 – The activities of the regulatory authorities will not have future prospects in the Nigerian Insurance Industry.

1.6 SCOPE AND LIMITATION 
This project covers the regulatory bodies of the Nigerian Insurance Industry who they are, their functions, roles and their performance. The limiting factors experienced by the researcher are; difficulty in obtaining relevant material, money was not enough to conduct a thorough research and finally, the researcher did not have enough time to do a thorough job.

1.7 DEFINITION OF TERMS
1. C.B.N: The Central Bank of Nigeria is the apex financial institution which is charged with the responsibility of managing the cost, volume, availability and direction of money and credit in an economy with a view to achieving some desired economic objectives. It also regulates the bank and non-bank financial institutions.
2. Insurance: An arrangement with a company in which you pay money each year and they pay the costs if anything bad happens to you, such as illness or accident.
3. Insurer: This is a corporate entity registered under the companies and allied matters decree 1990 to sell insurance cover.
4. Insurance Market: This is an institutionalized arrangement for bringing together people who have the need transfer their risks and those willing to assure such risks subject to certain terms and condition.
5. Indemnity: This is got from the Latin word “indimidim” and it means to put the insured “back” in the condition he was before he suffered a loss i.e. indemnity means to compensate.
6. Contract: An agreement between two or more parties which is binding at law e.g. insurance.
7. Intermediaries: These are the agents who act as facilitators in arranging insurance contractual relationship between the insured and the insurers. They are awarded by payment of commission.
8. NAICOM: National Insurance Commission which was established by military decree on January 10, 1997 to ensure the effective administration, supervision, regulation and control of insurance business in Nigeria.
9. NIA: The Nigeria Insurers Association is a trade association of registered insurance companies in Nigeria.
10. Policy: This is a document which is the evidence of the contract between the insured and the insurer.
11. Premium: This is the financial consideration the policyholder gives to the insurer in exchange for the compensation he receives when he (the insured) suffers a loss.
12. Risk: This is the possibility of a loss occurring.
13. Reserve: A proportion of profit which is set aside for emergencies by a business.
14. Sanction: This is a form of punishment that can be used if someone breaches a rule of law guiding his or her actions.
15. Underwriting: The process of assessing a risk proposed for insurance and fixing proper premium rates by an expert known as an underwriter.

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