The Impact Of Insurance Companies To Economic Development In Nigeria (A Case Study Of Standard Alliance Insurance Company Plc)
This study is aim at critically examine the impact of Insurance Companies to economic development in Nigeria.
It was discovered that insurance companies provided meaningful contribution to economy development. We can says that insurance company indemnity their client when problem in ascertained.
Also insurance company provides assistance to the entrepreneur when the problem is happen.
Finally, insurance company is contribute greatly to the development of the nation by protect financial institution against loss of the capital.
Table of Content
- Title page
- Table of content
- 1.1 Background of the study
- 1.2 Statement of the problem
- 1.3 Statement of the hypothesis
- 1.4 Purpose of the study
- 1.5 Significance of the study
- 1.6 Limitation of the study
- 1.7 Definition of terms
2.0 Literature Review
- 2.1 History of Insurance Company in Nigeria
- 2.2 Regulatory environment of Insurance business in Nigeria
- 2.3 Types of Insurance
- 2.4 Basic principles of Insurance
- 2.5 Organisation structure of Insurance Company
- 2.6 Insurance agents an brokers
- 2.7 Underwriting
3.0 Research Methodology
- 3.1 Sources of data collected
- 3.2 Research instrument used
- 3.3 Method of data analysis
- 3.4 Method of analysis data
- 3.5 Method of testing hypothesis
- 3.6 Limitation of data collection
4.0 Data Presentation and Analysis
- 4.1 Data presentation
- 4.2 Data analysis and interpretation
- 4.3 Testing of hypothesis
- 4.4 Summary of findings
5.0 Summary, Conclusion and recommendation
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendation
1.1 Background of the Study
Insurance has been existence as far as when the people of old realized the gratuity of financial losses.
In actual sense, modern Insurance started in Nigeria in the 20th century with the opening of an agency in Lagos by the Royal Exchange of London in 1921. this company documented all the Insurance business in Nigeria until 1949 when three other.
British owned Insurance Companies joined the scene up till the time the country attained its political independence in 1960. There were about 25 Insurance Companies operating. All except three that were foreign owned. During this period demand for Insurance was dictated by the requirement of the foreign businessmen that brought their goods into their country or exported raw materials to their countries.
All technical matters including investments of found were handedly the expatriate from 1960, the rate at which insurance industries has grown extraordinary. Some of the Nigerian who has earlier on engages. In insurance business individually or group or in partnership with foreigner have now established indigenous insurance companies.
Prior to the incorporation of the first get of indigenous insurance company, effect of foreign insurance companies have under written insurance business in the country. The political independence facilitate speedily period of economic activities.
This led to the formation of indigenous or state owned, insurance companies.
Function of Insurance
Many writers have extorted the insurance industry by describing its role in the task of natural development and reconstruction, but we will not be labour by listing all of all these functions.
- Insurance provide guarantee to a person that their individual financial loses will be fairly and equitably distributed over the insured community or ground as a whole.
- By offering security to businessman and industrialist, insurance is said to directly and indirectly, protect business enterprises, more so insolvency monies are available to finance and replacement as lost and damaged asset, compensate employee a third parties for injuries sustained, even more willing to innovate and undertake high risk from production so that society is provided with wide range of goods and service.
- Insurance company serves as an effective vehicle for the mobilization of natural resources for the national development effort.
- Insurance company, like other companies is an important employee of labour. This provides job opportunities for the teeming population of this century and helping to solve unemployment problem.
Insurance in Nigeria
Organized insurance business has been known to be practiced in Europe countries many year ago, records who that such modern approach was not adopted in Nigeria until 1921 when the first insurance officers was opened in Lagos as an agent of the ROYAL EXCHANGE ASSURANCE OF LONDON and recommended in 1949. however by the mid sixties, in spite of the large number of indigenous companies which thus sparing up, their insurance market was controlled by a few foreign interest.
Contribution of Insurance to Gross Domestic Product
The insurance company has contributed immensely to the Gross Domestic Products of this country through its financial of investment in Nigeria industries.
The provisions of finance for industry is significant to economic developments of their property investment are in industrial building.
More so, either directly or through subsidiary and association companies they engaged in leasing industries vehicle, machinery and specialist equipment.
They also provide some long-term loan to smaller firms.
Some offices have participated in the formation of specialist institution to provide finance for smaller firm and for the development of new products and process.
Also insurance company is a subscriber to the loan issue of the major institutions in that field, the industrialist and commercial financial corporation limited.
1.2 Statement of the Problem
Looking at the topics of the project “The impact of Insurance Companies to economic development in Nigeria” many problem or questions can quickly come to one’s mind. The research work will therefore examine the following pertinent questions. How can impact of insurance be felt and what are the nature and importance of insurance companies to economic development in Nigeria?
How can impacts of insurance companies be measured? Finally, the research work will examine different types of operations and economic significant.
1.3 Statement of Hypothesis
This section attempt to that hypothesis that has already been put forward in chapter one.
Normally, a text procedure for the hypothesis testing will be chi-square i.e. (Co-E)2 and the level of significant of 5% will be used throughout the testing.
- Ho: There is no significance relationship between insurance companies and their meaningful contribution to the development of economy.
- Hi: There is significance relationship between insurance companies and their meaningful contribution to the development of economy.
- Ho: There is no significance relationship between insurance company and their expectation client.
- Hi: There is significance relationship between insurance and their expectation of their client.
1.4 Purpose of the Study
The growth of insurance business is a feature key of the modern would. It is a major risk management tool as well as a catalyst of development. In the layman’s language, insurance business can be described as a social device providing financial compensating for the efforts of a misfortune, the payment being made from the accumulating contribution of all parties participating in the scheme.
Insurance serve as safeguard against many risk to which capital fund is exposed. The burden of losses of entrepreneur in commerce and industry is also reduced by the insurance business.
Insurance also provides assistance to business venture. It provides confidence and security needed to businessmen venture into uncertain area of commerce and industry. Insurance plays a major role in the finance of overseas trade.
This will not possible if marine and export credit guarantee insurance schemes were not available. Insurance income accumulated over time in Nigeria investment, thereby encouraging the commercial and economic development of the country.
1.5 Significant of the Study
The economic significance of the study is the provision of security. In Nigeria, security was providing to an individual by his tribe or the claim, or extended family system. There was also age group, which provided security in various term. As it will be readily appreciated insurance companies protect the business interest of their insured, the policies offered to the public were those generally used by these foreign companies in their home countries.
When independence was achieved in the 1960’s insurance regulatory law were made and put into effect. The control regulations provided for such matter as capitalization, shareholder, margin of solvency, premium and public war dings investment of insurance funds, insurance, intermediaries and qualifications of those engage in insurance.
In everyday life for example, man and his worldly possessions are exposed to many types of risk as human being, we are exposed to the risk of accidents, being attacked by a deadly disease and death, our properties and possession are also exposed to damages that may arise from fire, accident or loss through theft. Insurance has been developed to solve problems poses by the risk, which we are continually exposed. Insurance therefore is a mechanism where by the good fortunes of the many few who do not suffer losses are used to compensate the unfortunates few who suffers losses, by placing them as far as possible in the position which they were immediate before the loss.
Insurance also reduce the burden of losses to the entrepreneurship.
It gives the entrepreneur the confidence and provides him the security needed to venture into uncertain areas.
1.6 Limitation of the Study
This research work has categorically centered this area of insurance such as:
- The usefulness and purpose of insurance company in our economy.
- To see relationship between industry and other financial institutions.
- To create general awareness in the mind of the people.
- To know in which ways insurance company contributes to the economy.
1.7 Definitions of Terms
It is a subsequent term or condition attached to a policy which has the effect of modifying the terms of policy by either restricting, or extending the cover granted by the general policy form. Endorsements have the same effect as the policies to which they are attached.
It is used to limit the issues liable and they are also used for nothing changes in the subject matter of insurance and changes of interest.
Certification of insurance:
These are document issued by the insurance to the issued eyes of the law, a policy have no effect unless and until there is delivery by the insurer to the person by when the policy is affected.
The certificate must be in prescribed form. It is of no effect until is a delivered form the insurance to the insured’.
If the policyholder found there are errors in the policy e.g. property many have been omitted. Some insured document’s man is incorrect.
To protect him, such policy should immediately be returned to, in order to rectify their errors. This is known as ratification.
A cover note is a temporary policy document and it is usually issued pending the preparation a limited number of the days ranging from 15 to 30 days. A motor cover note also fulfill the function of a temporary certificate. The insurer has the right to cancel the over note within the period that is in force, but they must give the insured at least 24 hours notice. Before a cover note could be binding on insurer it must be insured by only authorized officially or agent of the company.
This is the form upon which the insured communication his/her wisher to the insurer. The offers is submitted on a purposed form drawn up by the insure which contains series of standard question asking the proposal for information from which the insurer is able to make a proper assessment of the risk. Many insurer accept or reject the risk. If the insurer accept the risk, the contract becomes binding on the proposal for occupied on important position in the practices of insurance.
The proposal form is the first documentary record of the nature of transaction between the parties. The use if standard proposal form enable insurer to consider the application accurately and speedily so that the proposal obtain a quick decision.
This is very common. In marine insurance, the slips contain an abbreviated description of the risk. The Coyote usually used abbreviations, which are familiar only to this (Lodes specialist).
It is issued out by the insurance to the incurred of policyholder wherever it becomes necessary for information from which the insurance is able to make a proper assessment of the claim. The settlement of claim is one of the claims. The settlement of claim is one of the principle functions of insurance company.
It is a regular sum of many that is payable to an insurance company for an insurance policy.
This is the printed document, which contains the term of the insurance contract. It is the evidence of the contract arising groom the agreement reached by the parties not the control itself. The insured should scrutinize the wording to ensure that it cover the risk he originally proposed. The importance of the policy lies in the fact that in the event of any disputes arising as regards the terms of the contract this can only be settle by referring ambiguities they will be found by the by the provision, of the policy.
In insurance company normally use as standard printed form of policy in most classes of insurance.
5.0 Summary, Conclusion and Recommendation
5.1 Summary of Findings
The subject of this study has taken a look into the roles of insurance company in developing countries with emphasis in Nigeria insurance industry and their benefit roles effects and importance toward the development of the country.
Insurance is a contract under which the insurer agree to indemnified the insured back to his former position against a loss or a specified contingency such as fire, accident, death theft, flood, drought, wind storm, destination, e.t.c. by making payment that is proportionally to the risk involved called the premium. All these types of insurance companies existing in Nigeria today can be grouped into two categories.
Composite insurance companies: These are the companies aphorized to transact either non-life insurance or life insurance only.
Specialist insurance company: These are the company authorized to transact either
Businessman are to face risk, thus invest huge amount of or-life i.e. general insurance or-life insurance only.
Going through all that has been initially discussed could be seen that insurance has a big role to play in the development of a nation. In a developing country like Nigeria, it has many impact and roles to play.
This can be seen from the following
- Insurance companies have been able to offer great employment opportunity and act as a stimulus to business enterprises and facilitate the provision of funds for investment in the productive side of a business in the economy in Nigeria.
- Businessmen are to face risk, thus invest huge amount of capital in both production and commercial aspect of the economy.
- Insurance companies raises funds for the government by making spread of investment of the insurance market it helps government in the short and medium term borrowing and to industry and commerce by various kinds of loans and the provisions of working capital by taking up shares.
- Insurance also act as a form of invisible earning to the government.
- Insurance policies are efficient means of protecting the vast capital investment in various project embarked on also the income and profit generated form use to do such capital expenditure.
These are the infrastructural development by the government, which are expressed to various perils and the extent of the caused by perils.
It is believed that the insurance company performs a significant role in our society, which people are now using more and more as hedges for the prevention of losses. The institution undertakes the loss that may likely befall.
This project has discussed and narrated some of the roles played by the insurance industry to the development in Nigeria. It is not only to the business organization, but also to the whole economy as a whole. One can safely draw the conclusion that the need for insurance will definitely grow and now attained a better awareness and the importance that has becomes household name in Nigeria and the whole world.
The role of insurance is universal and it will not be an exaggeration to say that an industrial concern without an insurance is like to be a car without full or tyres for easy movement. In additional to the industry that has been monitoring before there are other roles performed by industry over the years include promoting international trade helping in spreading education proceeding facilities of loan on the basis of insurance policy reducing prices encouraging executives efficiency and insurance is an acceleration and stabilizer of economic growth and development.
This project work will not be completed if did not make suggestion on area of further development. The world is full of risks and in the world are increasing. Insurance need to dismantle many barriers. These include government interference, either by statutory law or corner – Gutting by the near non-performance of the industry marketing strategies which have to make it stagnant.
More so insurance industry should employ the classes of qualify personnel who in turn to educate the masses about the important of the insurance.
Another important recommendation, which can influence the roles of insurance industry in the spreading of insurance industry to the rural areas.
Hence the rural dwellers will be able to learn much about the impact of insurance industry on their business growth.
It is also advisable for all motor vehicle owners to go for comprehensive policy that the insurance industry will have to repair both the insured and the third party car in case of accident. Considering these and other roles and attributes of insurance, insurance companies should not relent their effect, but make good better and do their best.
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