ABSTRACT
The purpose of 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 fulfill their promise and
pledges when the need arises.
Also because of the complexity of
insurance business, it is necessary that the government regulate it to protect
the policy holders. Also because of violation of public 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
Approval………………………………………………………………..i
Dedication…………………………………...……..…………………..ii
Acknowledgement……………….……………………………………iii
Abstract………………………………………………..………………iv
Table of contents……………………………….………………………v
CHAPTER ONE
Introduction ………………….….………………………………1
1.1 Background of
the study………..……………………………….1
1.2 Objective of the
study……………………….....……….……….9
1.3 Purpose of the
study…………….…………….……….……….10
1.4 Significance of
the study………………...…………………….11
1.5 Scope of the
study…………………………………………..….12
1.6 Definition of
terms ………………………..………………..….12
CHAPTER TWO
2.0 Literature
review………………………………….……………14
2.1 The origin of
the insurance industry…………………………14
2.2 Development of
modern insurance business in Nigeria………16
2.3 The
insurance market and intermediaries …………………..19
2.4 The
socio-economic significance of insurance ……………....20
2.5 Structure and
performance of the insurance industry …….…...23
2.6 Government regulation of the insurance
companies ……25
2.7 The impact of structural adjustment
programs on insurance companies operation in Nigeria ………………37
CHAPTER
THREE
3.0 Research methodology …………………………………..39
Introduction …………………………….………………….39
3.1 Restatements of research question and
hypothesis ……39
3.2 Research design …………………………………..…………41
3.3 Sources of Data ……………………………………………41
3.4 Population of study ……………………………...…………42
3.5 Sample size / Design and procedure …………...…………44
3.6 Data collection instrument / process ………………….…45
3.7 Data presentation and analysis on
techniques …………46
3.8 Limitation of the methodology ……………....……………47
CHAPTER FOUR
4.0
Data presentation and analysis …………………...………49
4.1 Presentation and analysis of data …………………………49
4.2 Hypothesis testing ………………………….………………56
4.3 Analysis of result ………………………...…………………58
CHAPTER
FIVE
5.0 SUMMARY
OF FINDINGS, RECOMMENDATION AND CONCLUSION
5.1 Summary of findings …………………………….…………60
5.2 Recommendations ………………………..…………...……62
5.3 Suggestions for further research ………………......………63
5.4 Conclusions
…………………………………….……………64
References ……………………………….…………………..65
Appendix ………………………...…………………..………66
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
the 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.
Though
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 or 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
3. The accumulated sum of money by insurer
reinvested 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 to another. The original insurer who obtain the
insurance contract from the insured or assured is called the direct insurer or
the ceding company. Re- insurance arose form 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 sector 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 from 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 the 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 matters.
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
the 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.
* To look into the factors hindering the
performance of insurance companies through the various government regulatory
policies.
* To determine the impact of those
government policies on the insurance companies and the insuring public.
* 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.
* 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 they 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.
Login To Comment