THE CONTRIBUTION OF INSURANCE BUSINESS TO THE ECONOMIC DEVELOPMENT OF NIGERIA

THE CONTRIBUTION OF INSURANCE BUSINESS TO THE ECONOMIC DEVELOPMENT OF NIGERIA 

ABSTRACT

This study shows the contribution of insurance business to the economic development of Nigeria Economy (2005-2011). The contribution of insurance  industry  in the development of Nigeria economic. It was seen that insurance has significant impact on Nigeria on individual and business enterprise in Nigeria, which the research make comparation between claims and premium which was seen that the premium received  by insurance company is more than claim paid by the industry to assess the exit  of in dimities paid by insurance industry to the insured the problem and aspect of insurance industry the research show that the insurance industry has and significant impact on the economic development of Nigeria however when looked at holistically it was found that the contribution made to the national GDP is here low.

CHAPTER ONE

1.0     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. According to Adebisi, (2006) Insurance is an intricate economic 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 every new area of risks and since with every passing day a new insurance package is amounted to take of more and more areas of risks ,the  insurance booms.

Agbaje (2005) defined insurance as the business of pooling resources together to pay compensations to the insured or assured (i.e. the policy holder) on the happening of a specified event in return for a periodic consideration known as premium. An insurance contract is usually evidenced by a document called the insurance policy which is usually signed at the foot by the insurer or assurer or his agent. Gollier (2003) argued that insurance involved the transfer of risk from an individual to a group sharing losses on an equitable basis by all members of the group. The group known as what is now called Nigeria agents toward the end of the 19^th century by European trading companies  mostly British. These companies 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, it is anticipated that it should be able to contribute to the growth of the economy. More so, as insurance provides a hedge against loss, it is supposed to increase enterprise, thereby increasing national productivity.

1. STATEMENT OF THE PROBLEM

There is no doubt that insurance industry 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:

1. 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.
2. 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.
3. 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 business to the Nigerian economy, so as to proffer possible recommendations taht could remedy the challenges facing the sector.

2. OBJECTIVE OF THE STUDY

1. To examine whether insurance business is relevant to the Nigeria economy.  
2. To assess the extent of insurance service provided to client in Nigeria
3. To evaluate the contribution of insurance business to economic development in Nigeria.
4. To identify the challenges facing the insurance business in Nigeria.
5. 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:

2. Policy makers: They shall consider this research work as basis for making economic policies.
3. 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.
4. Other researchers: The research work is significant because other researchers of related subject matter will make use of it as a resource material.

5.     RESEARCH QUESTION

1. What are the roles of insurance industry in the Nigeria economy?
2. To what extent has the insurance services been made available in Nigeria
3. To what extent has insurance business contributed to the economic development of Nigeria?
4. What are the likely challenges facing insurance business in Nigeria?   

1.5     RESEARCH HYPOTHESIS

H0: The Insurance industry does not play any vital roles in Nigeria economy.

H1: The Insurance industry plays a vital role in Nigeria economy.

1.6     SCOPE OF THE STUDY

The scope of the study is confined to the role of insurance industry in Nigeria economy with particular interest to NICON Insurance Abuja.

1.7     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

1. 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.
2. Reinsurance: The contract made between an insurance company and a third party to protect the insurance company from losses. (www.report.dictionary.the freedictionary.com) insurance is the equitable transfer of the risk of a loss from one entity to another in exchange for payment (www.wikepedia.org/wiki/insurance).
3. Insurer: An individual or company who through a contractual agreement undertakes to compensate specified losses liability, or damages incurred by another individual (www.legaldictionary.thefreedictionary.com/insurer). Proportion of its insured risks which it cannot bear with another insurance or reinsurance company.
4. Premiums: This is the amount paid by the insured to the insurer for the insurance cover provided in the policy.
5. 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.
6. Cover: A contract of insurance, to effect insurance, that is to ‘cover’ and insured for example, motor insurance with effect from a given time.
7. 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.
8. 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.
9. 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.
10. 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.



BIBLIOGRAPHY

Alborn Timothy Regulated Lives: Life Insurance and British Society, 1800 – 1914 (U of Toronto Press, 2009)

Akintoye, A.S &Macleod, M. J. (1997) Risk analysis and management in construction, international journal of project management, vol, 15, no, pp.31-38

Inkwn J.O. (1977) Insurance Management in Africa “Lagos Gaxtion  Press Limited Ibadan.

Segun B.B (2004) Growing New Insurance in Nigeria. Lagos CSS Bookshop Limited.

Sogress M.S (2001), The role of Insurance company in National Growth and Development

Prudential Insurance Company America ed The Documentary History of Insurance, 1000BC – 1875 A.D (1915).

Wikipedia 2007, insurance, retrieved March, 23, 2007

Williams, C.A. & Helms, RM (1989) Risk management and insurance

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