ABSTRACT
The purpose at this research is concerned on the
impact of the government policies in regulating the activities of insurance
companies operating in Nigeria.
The government responsibility to supervise, regulate and control the activities
of insurance companies and intermediaries is to protect the interest of the
insuring public and to save them from exploitation by unreliable insurers. Because
of the intangible nature of insurance product, the government wants to make
sure that those engaged in it must be competent person who will fulfil their
promise a d pledges when the need arise. Also because of the complexity of
insurance business it is necessary that the government regulate the policy
holders. Also because of violation of trust that occurs in insurance
transistors, the government has found it necessary to regulate insurance
industries so as to control such violations. The project attempts to appraise
the effectiveness of government policies in regulating the insurance companies
in Nigeria. The insurance industry in Nigeria has acute shortage of high
level of manpower for most classes of insurance, also many Nigerians suffer
financial loss due to lack of knowledge in insurance. Due to this problem, government
should introduce programs regarding to insurance to the public as to highlight
them on the benefit accrued to insurance due to constant financial loss they
encounter as a result of lack of insurance knowledge.
TABLE OF CONTENTS
Title page
Approval page
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE
1.0 Introduction
1.1
Background of the study
1.2 Statement of the problem
1.3 Purpose of the study
1.4 Significance of the study
1.5 Scope of the study
1.6 Definition of the term
CHAPTER TWO
2.0 Literature review
2.1
The origin of the
insurance industry
2.2
The development of
modern insurance in Nigeria
2.3
The insurance
market and intermediaries
2.4
The socio-economic
significance of insurance
2.5
Structure and
performance of the insurance industry
2.6
Government
regulation of the insurance companies
2.7
The impact of
structural adjustment programs on
insurance companies operation in Nigeria
CHAPTAER THREE
3.0
Research
methodology
Introduction
3.1 Restatements of research question and
hypothesis
3.2 Research design
3.3 Sources of data
3.4 Population of study
3.5 Sample size / Design and procedure
3.6 Data collection instrument / process
3.7 Data presentation and analysis on techniques
3.8 Limitation of the methodology
CHAPTER FOUR
4.0 Data Presentation and Analysis
4.1 Presentation and analysis of data
4.2 Hypothesis testing
4.3 Analysis of result
CHAPTER FIVE
5.0 Summary of finding, Recommendation and
conclusion
5.1 Summary of findings
5.2 Recommendation
5.3 Suggestion for further research
5.4 Conclusion
References
Appendix
Questionnaires
CHAPTER
ONE
1.1
BACKGROUND
OF THE STUDY
“Risk is a phenomenon which has been in existence since
the beginning of the world. Risk exists whenever the future is unknown” (Lemon
1989: 17). This means that the word implies some element of doubt about future
and the outcome may be worse than what it had been at the moment. This man in
his daily operations could be viewed as a risk manager, in that man does his
best possible to reduce, eliminate, avoid, retain or share risk where they are
present.
Tough there were some forms of risk management
before the advent of insurance companies in Nigeria such as the extended family
system, age grade association and
others. insurance in its modern form was introduced into Nigeria by British.
In 1921, the Royal Exchange Assurance Company was
established and it was the first insurance company to open full branch in Nigeria. In 1949, three other companies emerged. In 1958,
Africa insurance company. By 1965, the number
of insurance companies rose to 70. in 1977, the Nigeria Re-insurance company was
established as a federal government owned insurance company. Nigeria was
however under the British colonial rule up to 1960 when she gained her
political independence and as a developing country. From 1960 to date a lot of
insurance companies came into operation. Insurance is a modern method of
sharing loss or spreading risk lightly over a great number of people so that
the few unfortunate ones o r persons who sustain or suffer loss do not heavy
financial loss as a result of their misfortune to the community. the insured
pay premium into a common pool outcome of which the unfortunate few who suffer
loss are compensated.
The secondary
function of insurance companies includes:
1.
Provision of
loans for building on the security of a life policy.
2.
Encourage and
promote commercial enterprise men and industrialist
The accumulated sum of money by insurer
re invested to state approved securities and this helps to provide the state
with a steady flow investment funds with which the state can provide development
and promotions to the local industries which will be of benefit to the
community.
Insurance is a contract whereby a person
called the insurer or assurer agrees in consideration of money paid to him or
her known as premium by another person called the insured or assured to
indemnify him against loss resulting to him on the happening of certain events.
However, it was known that risk exist whenever the future is unknown and
therefore insurance exist primarily to combat the adverse effect of risk.
The purpose of insurance is to
compensate or indemnify the victim for his financial loss. It should be noted
here that the insurance neither eliminate the loss nor stops the disaster
from happening, what insurance does is
to soften the blow in a purely financial sence by offering monetary
compensation to the victim whereby placing him in the same financial position
after loss as he was before though within the terms of the policy.
Re-insurance is the transfer of
insurance business from one insurance company ot another. The original insurer
who obtain the insurance contract form the insured or assured is called the
direct insurer or the ceding company. Re-insurance arose from the need of the
original insurer to spread the risk he has undertaken. Under re-insurance
contract is between the ceding company policies. Therefore in the event of a
loss, the insured cannot enforce the re-insurance contract.
However, the effect of re-insurance
contract on the ceding company includes:
i Re-
insurance reduces the probability of the ceding
company’s ruin by
assuming his catastrophe risk.
ii Re- insurance stabilizes the ceding
company’s balance sheet by taking on apart of his risk of random fluctuation
risk of change and risk error.
iii Re- insurance increases the amount of
capital effectively available to the ceding company by freeing equity that was
tied up to cover risk.
iv Re-insurance enlarges the ceding company’s
underwriting capacity by accepting a proportional share of risks and by
providing part of the necessary reserves.
The insurance section is made up of a large number of
companies with varying sizes, among which the NAICOM was established. The
government uses this commission to regulate the insurance industry. The
government uses this commission to regulate the insurance industry. It was
established in 1997 by NAICOM decree N0 1 of 1997. Prior to the establishment
of National insurance commission, the insurance business regulation and
supervision were done by the insurance department of the ministry of finance.
The national insurance supervisory board (NISB) was
established in 1991 to take over the supervision of insurance form the director
of insurance. National insurance commission (NAICOM) is the head by the
commission finance and administration and deputy director for insurance
technical.
NAICOM Decree 1 of 1997 stated the functions of
NAICOM as follows:
1 To ensure eh effective administration, supervision
regulation and control of insurance business in Nigeria.
2
Establishment of
standards of the conduct of insurance business in Nigeria.
3
Approval of rate
insurance premium to be paid of all classes of insurance business.
4
Regulation of
transactions between insurers and re- insurance in Nigeria
and those outside Nigeria
5
Ensuring
adequate protection of strategic government assets and other properties.
6
To act as
adviser to the federal government on all insurance related matter.
7
Approve
standards, conditions and warranties applicable to all classes of insurance
business.
8
To protect
insurance policy holders and beneficiaries and third parties to insurance
contract.
9
To publish for
sale and distribution to he public, annual reports and statistics on the re- insurance
industry.
10 To liaise with and advise federal ministries, extra
ministerial departments, statutory bodies and other government agencies on all
matters relating to insurance contained in annual technical agreements to which
Nigeria is signatory.
11 To contribute to the educational program of the
chartered institute
of Nigeria and the West
African insurance institute.
12 To carry out such other activities connected or
incidental to its other functions under the decrees.
1.2 STATEMENT OF THE PROBLEM
The insurance industry in Nigeria has acute shortage of high
level manpower for most classes of insurance and re- insurance business. the Nigeria
insurance industry does not enjoy the required public goodwill and reason for
this has to do with the damage done to practice of the profession by the get
rich entrepreneur who goes about the business of insurance with the little
regard to the principle of the profession. As a result of this, the government
has come up with so many policies aimed at the study though will save the
insurance industry. The extent to which all those government policies affect insurance
companies and provides solution to ensure
the survival of these insurance companies is another thing. The research
therefore, is indicated to examine the impact of various control measures as
promulgated by government to regulate the activities of the insurance industry.
1.3 PURPOSE OF THE STUDY
The purpose of this research is essential in a
direct investigation on the impact of government policies on the insurance industry in Nigeria.
Ø To look into the factors hindering the performance
of insurance companies through the
various government regulatory policies.
Ø To determine the impact of those government policies
on the insurance companies and the insuring public
Ø Since the insurance industry is the second largest
deposit mobilization institution in the country, it therefore encourages saving
which plays an important role in the social and economic well being of the
country.
Ø To evaluate the performance of the industry
therefore, is necessary for the growth of the economy.
1.4 SIGNIFICANCE OF THE STUDY
i To enlighten the Nigerian populace about
the benefit that they could drive by taken up insurance cover.
ii To guide the policy makers when hey are
enacting laws concerning insurance.
iii Ascertain the need or otherwise for
government intervention through regulatory body in the insurance industry.
1.5 SCOPE OF THE STUDY
i To determine the impact of government
policies in regulating the activities of the Nigerian insurance industry.
ii The study therefore will concentrate on
the Nigeria
insurance industry.
1.6 DEFINITION OF THE TERM
i INSURER
/ ASSURER: This is the insurance or assurance company that issue out policy
to the policy holder.
ii INSURED
/ ASSURED: This are policy holders in the insurance business.
iii PERIL:
This is known as a prime cause or what gives rise to the loss.
iv PREMIUM:
This is periodic consideration payment by the policy holder to the
insurance company which will necessitate compensation by the insurer to the
insured.
v POLICY:
This is a written contract of insurance which is issued to the policy
holder.
vi RE-INSURANCE:
This is an insurance company re-insuring again a risk that had already been
insured to another insurance company.
vii CEDING
COMPANY: This is the direct insurer or the original insurer who is
re-insuring the risk to another insurer.
viii UNDERWRITING:
This is a process by which an insurance company determine weather or not on
the basis it will accept an application for insurance.
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