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

TABLE OF CONTENT

Title page

Approval page

Dedication

Acknowledgment

Abstract

Table of content

CHAPETR ONE

1.0   INTRODUCTION 

1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study

CHAPETR TWO

2.0   LITERATURE REVIEW

CHAPETR THREE

3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1 Introductions

4.2 Data analysis

CHAPTER FIVE

5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation

Appendix

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 other words, 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

• Background of the 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. Insurance as a concept has economic, sociological and legal dimensions that make it difficult to define from the prism of one viewpoint. To the lawyer, insurance is a contract whereby a person called the insurer or assurer, agrees in consideration of money called the premium paid to him by another person, called the insured or the assured, to indemnify the latter against loss resulting to him on the happening of certain events.1 To the economist, on the other hand, insurance is a device for the transfer of some economic loss from the insured who otherwise would have borne the risk, to an insurer in return for a premium. 2 To the sociologist, insurance is viewed as a device whereby the participants provide financial compensation or succour to those among them encountering the many misfortunes or contingencies that befall humanity.3 From whatever perspective insurance is viewed, it connotes the existence of risk and a protection against that risk.4 It is principally intended to be a contract of indemnity (except for life insurance),5 meaning that it is for the reinstatement of the insured to the original position he occupied before the loss Flowing from the above is the fact that the insured event must be an uncertain event, both as to its occurrence and its severity.6 Thus the insurance contract is termed aleatory, meaning it depends on chance or contingency.7 Secondly, the insured cannot make a profit from his loss. This fact is well illustrated in the words of Brett, L.J. in Castellain v. Preston8 in the following timeless words: The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity and of indemnity only,…and if ever a proposition is brought forward which is at variance with it, that is to say, which either will prevent the insured from obtaining a full indemnity or which gives the insured more than a full indemnity, that proposition must certainly be wrong.9 It is in that sense that insurance is distinguished from wagering contracts which may include a chance of profiting from the occurrence of an event. It is for these reasons too that the rules as to the existence of insurable interest, observance of good faith, proximate cause, contribution and subrogation are key elements of insurance. Insurance is very important as an aid to trade and general economic stability for many reasons. It ensures the spread of risks. The insurance premium paid is typically small compared to the magnitude of the overall probable loss. However, the little contributions of the many into the common pool ensure that the few who suffer loss could be compensated to the full  extent11 of the loss suffered irrespective of the quantum of the contribution. Consequently, insurance is a source of security against business failures and stimulus to business whereby entrepreneurs would rather apply for investment the resources they otherwise would have set aside to meet contingencies. The insurance industry is also to be credited for evolving advanced and modern measures of loss prevention and control through risk improvement practices such as risk surveying, and the funding of researches into alarm systems, safes and fire prevention and containment equipment. Ultimately this benefits society at large as losses, such as fire gutting a factory, may occasion loss of earning of several persons upon whom many more are dependent. Lastly, insurance provides funds for investment in the economy at large thereby boosting economic growth. Regulation is the promulgation of prescriptive rules as well as the monitoring and enforcement of these rules. 12 Regulation as a form of intervention is advanced or designed to prevent the creation of monopoly power and or its abuse, ensure safety and soundness of the regulated activity, and make less likely the occurrence of actions that generate significant negative spillovers, or externalities. Each of these bodies performs functions aimed at regulating the insurance industry. An assessment of their performance will be made.

• 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.

5. 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.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

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