ROLES OF INSURANCE IN THE NIGERIAN BUSINESS SECTOR
(A CASE STUDY OF NICON INSURANCE)
ABSTRACT
(A CASE STUDY OF NICON INSURANCE)
ABSTRACT
This work is titled role of insurance in the Nigerian
business sector. The researcher used primary data and the
technique of
analysis adopted is chi-square
with the use of questionnaire. The findings revealed that insurance has played
a vital role towards the business development in Nigeria. Finally the insurance
has been found to be an important tool for boosting business development in
Nigeria. The researcher recommended that insurance industry should be made
known to all people and business enterprises in the country to known the
importance and benefits of insurance
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND
OF THE STUDY
Insurance
is a form of risk management primarily used to hedge against the risk of a
contingent uncertain loss. Insurance is an intricate business and social device
for the handling of risks of life and property. It is social in nature because
it represents the cooperation of various individuals for mutual benefits by
combining together to reduce the consequence of similar risks. As new area of
risks emerges with every passing day a new insurance package is introduced to
take care of risks associated with it.
Insurance
can also be seen as involve the transfer of risk from an individual to a group
of sharing losses on an equitable basis by all members of the groups.
By
the end of the 19th Century by European trading companies mostly
British started effecting their insurance with established insurers in the
London Insurance market. As time went
on, some British insurers appointed Nigeria Agents to represents their interest
in the country. These agents later metamorphosed into full branch offices of
their parent companies in Britain. Osun Kunle (2002) opined that the first
branch office in Nigeria was the Royal Exchange Assurance in 1921, later
followed by other British companies, indigenous Nigeria Insurers and
re-insurers later followed such as National Insurance Corporation of Nigeria
(NICON) established in 1969 and Nigeria reinsurance companies operating in
Nigeria today. Lynch (1992) Opined that insurance companies have continued to
be on the increase since early sixties. This has been due to liberal financial
legal requirements. With the increase in insurance business in Nigeria, the
insurance play a very important role in the mobilization and utilization of investible
resources in the business sector. It also acts as the absorber of risk and
uncertainties associated with business activities. Insurance is a business like
any other business in the country and the aim of every legal business is to
contribute meaningfully to the development of business sector and social
wellbeing of its nation. The increase in insurance industry in Nigeria, it is
anticipated that it should be able to contribute to the growth of the business
sectors. More so, as insurance provides a hedge against loss, it is supposed to
increase enterprise, thereby increasing national productivity.
1.2
STATEMENT
OF THE PROBLEM
There
is no doubt that insurance business have developed from stage to another and
have contributed immensely to the economic development of Nigeria but not
without problems with which it has and is contending with. Among this problems
are:
i. Ignorance:
The problem of ignorance as regard the benefit of insurance products. Many do
not know what insurance is all about even the educated ones.
ii. Unskilled Insurance
Practitioners: The presence of unqualified staff
and firm have created a greater problems as some dubious practitioners goes
around collecting premium without remitting same to the appropriate quarters.
iii. Lack of favourable
government policy: Over time past there
has been little or no effort by the government to enact favourable policies and
enabling environment for insurance business to strive. This area has not been
brought to limelight by Nigerian researchers.
In
view of the above problems it is becomes important to research into the contribution
of insurance industry to the Nigerian business sector, so as to proffer
possible recommendations that could remedy the challenges facing the sector.
1.3
OBJECTIVE
OF THE STUDY
i
To examine whether
insurance industry is relevant to the Nigeria business sector.
ii To assess the extent of insurance service provided to client in Nigeria
ii To assess the extent of insurance service provided to client in Nigeria
iii
To evaluate the contribution
of insurance industry to the development of business sector in Nigeria.
iv
To identify the
challenges facing the insurance business in Nigeria.
v
To make policy
recommendation.
1.4
SIGNIFICANCE OF THE STUDY
The
study is important because the result and findings of the study will be useful
to the following class of users:
1 Policy makers: They
shall consider this research work as basis for making economic policies.
2 Academia: The
research work is also significant to lecturers and students as an addition to
existing literally works, thereby serving as a resource material to all who
wish to further the study of the subject matter.
3 Other researchers: The
research work is significant because other researchers of related subject
matter will make use of it as a resource material.
1.5 RESEARCH QUESTION
a. What
are the roles of insurance industry in the Nigeria business sector?
b. To
what extent has the insurance services been made available in Nigeria
c. To
what extent has insurance industry contributed to the development of business
sector in Nigeria?
d. What
are the likely challenges facing insurance business in Nigeria?
1.6
RESEARCH HYPOTHESIS
H0: The Insurance industry
does not play any vital roles in Nigeria business sector.
H1: The Insurance industry plays
a vital role in Nigeria business sector.
1.7
SCOPE OF THE STUDY
The
scope of the study is confined to the role of insurance industry in Nigeria business
sector, with particular interest to NICON Insurance Abuja.
1.8
LIMITATION OF THE STUDY
The
challenges encountered by the researcher in the course of the study range from:
a. Accessibility to relevant data: it was
not easy to get relevant data that will help researcher to develop more idea on
the topic.
b. Time constraint: this is another
problems, the time limit is not much for a researcher to carry out more study
on the work.
c. Financial challenge: is also the most important
problem that the researcher encountered during researching which involves travelling
to relevant organizations and companies to get relevant data and information,
so limitation in data collection went a long way in affecting this research
work.
1.9 DEFINITION OF TERM
a. Agent:
One who solicits, negotiate and effects contract of insurance on behalf of
insurer(s) within a defined limit of authority and subject to statutory and
common laws. An agent may be a full time sales employee of an insurer or appointed
on a part-time basis.
b. Broker:
A broker is an independent operator whose main duty is to bring parties to an
insurance transaction together for a commission. The broker conducts his
business for all and sundry and does not represent any particular insurer to
the exclusion of others. The broker is professionally liable to the insured in
view of his professed expertise in insurance.
c. Cover:
A contract of insurance, to effect insurance, that is to ‘cover’ and insured
for example, motor insurance with effect from a given time.
d. Excess:
The portion of a loss which an insured is expected to bear while the insurer
will be responsible for any amount of the insured loss over the portion. This
is mainly applicable to motor insurance.
e. Insurance:
This is a contract in which the insurer, for a consideration or for a sum of
money which is called premium, agrees to pay to the insured a sum of money or
its equivalent whenever the event that was insured occurs.
f. Indemnity:
The maximum amount payable by an insurer to beneficiary of loss. The principle
of indemnity implies that the claim does not profit from the loss.
g. Insurer:
An individual or company who through a contractual agreement undertakes to
compensate specified losses liability, or damages incurred by another
individual. Proportion of its insured risks which it cannot bear with another
insurance or reinsurance company.
h. Premiums:
This is the amount paid by the insured to the insurer for the insurance cover
provided in the policy.
i. Pool (insurance):
An agreement between a group of insurance and reinsurance companies to cede a
percentage of some defined classes of business to a common source from where
premiums, losses and expenses are shared in agreed proportion amongst them.
Pools are usually formed to cater for volatile classes of business as to
increase local retention capacity markets.
j. Reinsurance:
The contract made between an insurance company and a third party to protect the
insurance company from losses. insurance is the equitable transfer of the risk
of a loss from one entity to another in exchange for payment.
CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION
This chapter deals with the review of
related literature in which the contributions of other authors, writers and
researchers are been considered to see what they have done on the role of
insurance industry to Nigeria business sector. This review shall cover background
of the case study (NICON insurance Abuja), concept of the study, current
concept of the study, types of insurance companies in
Nigeria, importance of insurance to
business activities, the effect of insurance company’s performance on
the nation’s business sector. The nature of Nigeria economy and theoretical
framework.
2.1 THE BACKGROUND OF THE
CASE STUDY NICON INSURANCE ABUJA
The National Insurance Corporation of
Nigeria (NICON) was established in 1969. The NICON was accepted by the Federal
Government of Nigeria of Dr. Rachel’s recommendation, the government
promulgated decree 22 of 1969 called the NICON, Decree which gave birth to the
National Insurance co-operation of Nigeria (NICON).
The NICON insurance plc has grown into
the biggest, most outstanding and most reliable insurance company in the
country and possibly on the African continent, with a reputation based on a
service and performance. The insurance giant handles all classes of insurance;
worthy of note are specialized areas as aviation, oil and marine and the
special products such as the police welfare scheme and the NICON – NERFUND
scheme which provides a strong backing for the Nigerian industrialists. NICON
has the following management hierarchy, chairman, managing director and three
(3) Executive Director, Administration and Finance Department, Special Risk
Department, Technical Executive and Assistant Managing Directors. The company
in his history has engaged in underwriting various classes of insurance
including life, aviation fire and oil and has between 48 – 52 branches across
Nigeria. The formation of NICON is attributed to twin situations around the end
of the 1960s. First was the allegation of fraud in the insurance of government
business and second was the dominance of foreign insurance companies in the Nigerian
insurance industry. To control corruption in the insurance of government
property and to stimulate growth in the Nigerian insurance business as the foreign
companies where critized for catering to foreign business interests alone,
NICON was founded. However some faulted the dominance of the government
property insurance business by NICON has stifling indigenous insurance
enterprises as that was the main business of the main business of the few
African owned insurance interests in the 1960s.
In 2003, NICON’s monopoly of the
insurance business was repealed and the company was later privatized and sold
to a consortium headed by Jimoh Ibrahim. However, in late 2007, the government
dissolved Jimoh Ibrahim led board of NICON. It was the intention of Ibrahim to
transform the company into a global diversified player in the property, oil and
gas, investment management, aviation and telecom industry.
It has nine zonal offices and 48 branch
offices, located in virtually every state in the country and leads in the
underwriting of such personal line insurance as life, motor, personal accident
as well as in the insurance of aviation, marine, oil and energy and other
special target risks.
The corporation also has a contact
office in London for its international operations with its head office located
at NICON plaza, plot 242, Muhammadu Buhari way, central business district, PMB
5029, Abuja FCT. Growing rapidly over years, the corporation’s mission is
“providing sup
relative insurance and financial services to customers, where ever,
whenever and in whatever form desired”.
Organizational Structure Of NICON Insurance Plc
By the very nature of
insurance, any cumbersome structure will affect prompt delivery of service of
it’s clients. At the tope of the organization chart in NICON is the Board, then
the Managing Director and Executive and non executive directors. The Managing
Director and Executive Directors make up what is generally called executive
management.
This has recently been
expanded to include Deputy General Managers, the Head of London Contract office
and the corporate secretary legal adviser. There are found directorates namely,
Technical Special Risks, Finance and Administration and Administrative Staff
Development and Human Resources. The Executive Management is followed by senior
management which comprises Assistant, General managers and senior managers,
managers and assistant managers constitute what is known as General Management.
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