INSURANCE COMPANIES AND THEIR IMPACT ON ECONOMIC DEVELOPMENT OF NIGERIA

ABSTRACT

Business produce goods and services to satisfy the demand of customers. Muchas these businesses declare profit year-in-year-out, they also face element of riskand uncertainties that may causes losses. This includes fire, theft, damage byartificial or natural agents and so forth. The business men in the olden daysengage into economic activities with pessimism and fear of incurring losses. Thisinhibits large scale production which is capital intensive. However, with the adventof the insurance business, things improved for the between, as business menbecome encouraged to commit more of their resources in production activities,knowing fully well that the insurer will reimburse item in the event of damage orloss. Simply put, insurance is a contract of utmost good faith in which the insurerwill pay compensation to a policy holder for loss or damage of insured items.Meanwhile, the practice of insurance has become a lucrative business in itself,such that it contributes enormously to the national development in items ofemployment opportunity provision as well as Gross Domestic Product (GDP)Thus, the interest of the research is aroused to carry out a study in this important,yet neglected sector of the economy with a view of sensitizing the students,business men and the entire public of the benefits derivable from the insurancebusiness. The public policy makers shall be intimated as to the areas that requirefurther regulations and or deregulations.6The researcher therefore employed and secondary sources of data collection inorder to do justice to the topic. Chi-square technique of data analysis was used tofully digest the sourced information. This technique is quantitative and its choicewas informed by its ability to give a pictorial view of the research findingsnumerically. Similarly, NICON insurance company was the focus as a case study.The most important among the research findings include the lack of awareness oninsurance issues by the teaming Nigerian populations, minimal coverage of theindustry’s activities in such important sector as health and agriculture, lack ofadequate government as well as private sector participation in insurancebusiness, death of professionally qualified staff operating with the industry toboost the confidence of patronizers; vague and intricate operational mechanismand of course public suspicion about the sincerity of purpose with which theinsurance business is dispended, the researcher, hence, proffered such remedialrecommendations as infusion of deep sense of professionalism by practitioners inthe industry with a view to fostering public confidence, inclusion of insurancetraining in schools curriculum right from secondary to post secondary institutionsas mandatory especially for science students, sponsored programmes on pointand electronic media outfits on insurance matters, increased governmentparticipation and deregulation of stringent rules barring the engagement of privatesector into insurance business and up-front settlement of genuine claims as theyfall due.7TABLE OF CONTENTSTitle iDeclaration iiCertification iiiAcknowledgement ivAbstract viTable of contents viiCHAPTER ONE: INTRODUCTION1.1 Background of the study 11.2 Statement of the problem 21.3 Assumption of the study 31.4 Objective of the study 41.5 Significance of the study 51.6 Hypothesis of the study 61.7 Scope of the study 61.8 Limitation of the study 61.9 Plan of the study 7-8Reference 9CHAPTER TWO: LITERATURE REVIEW2.1 Introduction 102.2 Insurance Companies and their Impact on theEconomic Development of Nigeria. 102.3 Function of Insurance Companies. 1282.4 The Risk that can be insured 142.5 Types of Insurance 172.6 The Nigerian Insurance Market 222.7 How Modern Insurance Works 272.8 Fundamental Principles of Insurance Lawand Practice 282.9 Importance of Insurance Companies in theNational Economy. 322.10 Summary 34Reference 36CHAPTER THREE: RESEARCH METHODOLOGY3.1 Introduction 373.2 Research Design 373.3 Method of Data Collection 383.4 Documentary 383.5 Procedure for Data Collection 393.6 Population of the Study 393.7 Method used in Analysing Data Collected 403.8 Summary 41Reference 42CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS4.1 Introduction 434.2 Hypothesis Testing 534.3 Five-Year Analysis of the Performance9of the Insurance Industry. 60Reference 63CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION5.1 Introduction 645.2 Summary 645.3 Conclusion 655.4 Recommendation 675.5 Suggestion for Further Studies 70Reference 73BibliographyQuestionnaire

10  CHAPTER ONE

BACKGROUND TO THE STUDY

The developments in our society have made living complex and risky to lifeand properties. This has become so great that the traditional methods ofassisting those affected by misfortunes in our societies are no longeradequate. Therefore, societies call for a more reliable and adequate meansby which risk or any misfortunes can be covered in the future, and here liesthe importance of insurance which safeguard against risks or lossesincurred by clients.Majority of the people in our society today are either ignorant or have amisconception of what insurance entails, what role it plays or its usefulnessin the promotion of trade and commerce. As a service industry insuranceplays a very important role in the economic and social development of anation. In appreciation of this, the government has continued to take stepsto regulate the activities of the insurance business in order to crate a soundand efficient insurance market.Insurance business is one of the subjects that have been securing thepublic in this country. Many people outside the periphery of the businesshave looked at the institution with disdain and they are simply suspicious of11the insurer and their styles of business. They claimed that insurer are onlyinterested in collecting premium and hardly settle claims, whenever theyarise.

1.2 STATEMENT OF THE PROBLEM

The insurance industry is one of the misrepresented or misunderstoodbusinesses in the world. This is mainly due to lack of knowledge on the partof the public concerning their activities. The degree of knowledge variesfrom century to century and is relative to the state of socio-economydevelopment in each individual country concerned, which may in turn begoverned by the level of the literacy component of each community. In adeveloping economy, problems associated with the misconception of theimpact of insurance are not as pronounced as in under developedcountries, including Nigeria.All attempts in developing a sound insurance industry have beenconfronted by market distortions, high rate of inflation, variousgovernmental regulations, unethical practices and fraudulent tendencies ofthe insuring public there are overwhelming. There are a few behaviors,which indicate that the Nigerian public, literate or otherwise, know little ornothing about the operation of the insurance business.12Consequently, many questions have been asked. Should insurancecompanies/brokers continue to exploit the general public as a result of theirignorance about the industry? Is there any need to control the business atall? What are the control measures? These are the questions, which shallbe address my self within the essay together with same brief suggestions,and methods by which the loopholes discovered could be corrected.Therefore, this research work aims at highlighting the various function orimportance of insurance industry to individuals and whole society ofNigeria.

1.3 OBJECTIVE OF THE STUDY

On a cursory look at the insurance mechanism, it would be seen thatinsurance is a service rendering business. There are special socialcharacteristics of insurance that set it apart from tangible goods industries.Being mostly a contract of indemnity and more so that insurance is acommodity, which people pay for in advance and whose benefits arereaped in the future.Furthermore, the objective of the study is to throw more light on theactivities of the insurance with the view to arousing the awareness of thepolicyholders and prospective ones. This will be achieved by highlighting13the insurance mechanism, discovering the weak areas that need to bestrengthened and recommendations will be proffered for further study.Also the study is to highlight the fundamental principles of insurance, whichthe society has not been able to recognize. This work is made in such wayas to highlight the need for insurance in our society. Taking all these intoconsideration, the following are the objectives of this study:The main objective of this study is to outline the functions, roles andcontribution of insurance companies to the development of thenational economy.To identify if insurance companies are useful to our day-to-dayactivities.To ascertain if insurance companies actually perform their financialroles diligently.To suggest ways of improving the functions of the insurancecompanies.

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