The Implications Of Ownership Structure Of Insurance Companies On Policy Holders Patronage

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The Implications Of Ownership Structure Of Insurance Companies On Policy Holders Patronage


Abstract


This study is titled the implications of ownership structure of insurance companies on policy holders patronage. I looked into the problem that often associates with ownership structure of insurance companies in Nigeria like lack of fund for expansion in order to carryout its day to day activities, bad records of some past insurance companies in Nigeria, the background of the company and lack of governments total supervision over the companies. I equally looked into the objectives of the study which include identifying the effect of each ownership structure and its implication on the policyholder and also identifying the possible solution in tackling the effects of policyholder’s patronage to private indigenous companies.

Through the literature review, it should be noticed that work has been done on the classification of insurance business in Nigeria, the development of insurance industry, indigenization policy, decrees, basic principles of insurance and their effects on the insurance industry. prospects of adequate management of insurance companies is also highlighted. The research so far done which relates to this work has been carried out without consideration for the understanding of ordinary investors who have no knowledge of the legal aspect of ownership in an insurance industry. I equally looked into the research methodology which includes sources of data collection.

The sources include primary sources and oral interview. It further looked at research instrument used and validity of the instrument. I also looked at summary of findings which include findings and discussion of findings. furthermore, I looked at the conclusions, recommendations and suggestion for further studies. This project tends to review the structure of ownership of insurance companies in the country and analyze its implications on policyholder – (customers) patronage, this will centre on the attitude of owners towards maintaining good insurance customer’s relationship, and how the policy holder claims and pays premiums.


Chapter One


Introduction

1.1 Background of the Study

Insurance plays a vital and important role in the economic development of the society. It pools funds for economic losses of the society from where It can indemnify the policyholders should the claim arise at any time.

The wide spread of insurance industry in Nigeria was traditionally based on the mutual solidarity that made up the insurance business structure.

This work captioned “the implication of ownership structure of insurance companies on policyholder patronage” is trying to pin point the reaction of policyholders over the ownership of insurance companies throughout the federation.

It is basical to know if consumers of insurance product, actually prefer individuals managing insurance companies other than government and what benefit they derive from one particular insurance company over others may be due to its structure, activities, good will, aims and objectives.

The conglomeration of different insurance companies in Nigeria made the citizens who are well vast in insurance business apply to be shareholders in the various companies which they felt have solid asset base. This is because they fear that some insurance companies do not settle claims as at when due or at all.

During the era of Llyods where the insurance business started, people never thought of the structure or the ownership of the business, they are only after their goods, business which should be adequately insured and protected. These problems were obstacles to insurance growth and needed drastic solutions to combat them.


1.2 Statement of the Problems

Ownership of insurance companies in the federation are faced with the following problems and prospects amongst which are:

  • Lack of fund.
  • Bad records of some part insurance companies in Nigeria.
  • The background of the company.

1.3 Objectives of the Study

  1. Identifying how lack of fund posses as a problem to ownership of insurance companies.
  2. Ascertaining if bad records of some past insurance companies stand as a problem to ownership structure of insurance in Nigeria.
  3. Identifying how the background of a company stands as a problem to ownership of insurance companies.
  4. Ascertaining how lack of government supervision posses as a problem to the ownership structure of insurance companies in Nigeria.

1.4 Research Questions

  1. Does lack of fund act as a problem to the ownership structure of insurance companies in Nigeria?
  2. Does bad record of some past insurance companies stand as a problem to the ownership of insurance companies in Nigeria?
  3. Does the background of a company stand as a problem to ownership of insurance companies in Nigeria?
  4. Does lack of government supervision stand as a problem to ownership structure of insurance companies in Nigeria?

1.5 Significance of the Study

  1. It enabled the students to be more careful in obeying the ethics of their profession.
  2. It also directed the investors on the possible areas to invest, and enabled those that have already invested to have the edge to understand themselves better.
  3. It enabled the general public to know the importance of insurance products and how best to obtain policy covers.
  4. It directed the insurance company on how to improve the economy of the insurance business.
  5. It gave the government the possible solutions on how to tighten their belt if there is any loophole in their control.

1.6 Scope and Limitation of the Study

Scope:

In the course of carrying out this research work, I went to some insurance companies like IGI, NICON, and STANDARD ALLIANCE, to make inquiries. I also went to insurances brokers and agents to ask questions pertaining to the study.

Limitations:

This research work is limited in certain areas. I was hindered from going beyond where I reached due to some factors like: limited time, finance, and poor transportation system.


1.7 Definition of Operational Terms

(i) Claim

This is a demand by the insured for payment under his policy

(ii) Conglomerate

Group of companies that perform the same function

(iii) Insured

These are the potential policy-holder of the company

(iv) Insurance Company

This is the company that sells the service to the insured

(v) Ownership

Individual or people that own a particular company

(vi) Policy-holder

The person who owns the policy and who pays the premium usually the insured

(vii) Product

This is the particular risk that is being insured

(viii) Patronage

The ways individuals patronize insurance companies

(ix) Premium

Little consideration the insured pays to the insurance company in view of the risk insured

(x) Proposer

Intending insured.


Chapter Five


Summary of Major Findings, Conclusions and Recommendations

5.1 Introduction

This chapter consists of a summary of the findings of the research, conclusions relating to the research objectives, suggestions or recommendations. The research was aimed at determining the factors affecting the patronage of insurance business by policy holders. A population sample of 105 respondents was taken from the 21 insurance companies registered as at June 2012. Data relating to the objectives of study was collected and analysed and the findings are presented in chapter four.


5.2 Summary of the Findings

The study aimed at finding out the factors that affect the growth of life insurance business. The study targeted 105 respondents and there was 100% response rate. The study established that over 62.9% of the sales staff in life insurance companies were not in management levels, with only 23.8% being in management levels. The study also established that 50% of the respondents had worked with the organisation for between 1-5 years, 25% for less than one year, 16% for between 5-10 years with only 6% and 3% having worked for 10-15 years, and over 15 years respectively. This indicates that majority of the respondents were knowledgeable about the operations of their companies regarding life insurance.

In regards to sales and marketing department the study findings indicated that over 95% of the respondents confirmed that their organisation had a comprehensive sales and marketing department. However among the sales staff there were those who don‟t actually agree that their organisations have a comprehensive sales and marketing department. This clearly indicates that the low penetration is as a result of under staffing of sales departments in some of the organisation.

The study findings clearly indicated that 80% of the respondents believed that professional training of sales staff was lacking in the life insurance industry. Only few respondents at 4% indicated that the training of sales staff was very satisfactory. This clearly establishes a knowledge gap that needs to be filled through proper professional training of insurance sales staff to better the growth of this important sector. Over 85% of the respondents in the study agreed that professional training of sales staff is an important factor in the marketing and growth of life insurance business.

In regard to sales staff appraisal, the study established that 71.3% of the respondents indicated that this was not being undertaken as regards their dealings with life insurance customers. Although majority (88%) agreed that their companies practiced good ethics in dealings with life insurance customers, a notable 12% disagreed, which is a negative aspect that leads the low penetration. The study also established that 70% disagreed by indicating that sales staff that practiced unethical practices in their dealings with life insurance customers were not exposed, only 28.6% agreed that those that are involved in unethical practices are exposed. This clearly indicates that the management of life insurance companies needs to do more in ensuring that high standards of ethics by the company and by sales staff dealing with life insurance customers are practiced. This will contribute to enhanced customer value, satisfaction ultimately translating to enhanced growth of the life insurance sector.

In regards to customer satisfaction the study established that companies are confident that their customers were satisfied with the services that they offer. The study also established that many companies carried out customer surveys to find out the expectation from the customers and establish their satisfaction with their services.
The study established that sales promotion of life insurance business would lead to enhanced business for the life insurers. The methods that were established as being in use by life insurers included advertising, PR and publicity, through agency, personal selling and sales promotion.

As to the affordability and pricing of life insurance products, the study established over 83% of the sales staff agrees that this is an important factor in enhancing growth of life insurance business while 17% are of a different believe. The study established that 74.3% believed that most of life insurance products are traditional in nature with 25.7% having a different believe. Over 66% agreed that life insurance products need to be repackaged with various benefits to enhance their uptake hence enhancing growth of life insurance business. Only 11% disagreed with this view with another 23% being decisive less.

In regards to government regulation policies over 77% in the study agreed that this is an area that needs to be enhanced to increase the customer base and business for the life insurers in Kenya.

Also the study pointed out that 80% of the sales staff indicated relatively inexperienced employees or management was the single most important reason for low penetration of life insurance in the country, with only 20% having a different opinion. In addition the study established 55% of the sales staff believed that insurance sector growth can be enhanced through targeting of low income population (micro- insurance), 23% disagreed, 6% were neutral, and 17% strongly disagreed.

Lastly the study established that life insurance sales staff believes that innovation, proper product packaging, professionalism, good image and reputation, good customer service, technology, change of distribution channels are all factors that can help in shaping the life insurance sector and business. Other factors identified by the study are proper government regulatory framework, expansion of coverage, consolidation and mergers and affordable or competitive pricing.


5.3 Conclusion

The purpose of this study was to determine the factors affecting the growth of life insurance business. The first objective was to determine the effect of professional sales staff training on the growth of life insurance business. The findings revealed that professional training of life insurance sales staff was lacking in the industry. This implies that a lot needs to be done by the management of life insurance firms in ensuring proper training of sales staff. Lack of professionalism has also been indicated by the study as a contributor to unethical dealings with life insurance customers.

The second objective was to examine how sales promotion of life insurance products affects growth of life insurance business. The study revealed that sales promotion is one of the major factors that can lead to growth of life insurance business if done through a combination of different methods.

The third objective was to examine the effect of affordability of life insurance products on the growth of life insurance business. The study findings revealed that life insurance sales staff, at 83%, indicated that life insurance products should be fairly and competitively priced to ensure that the customers achieve the highest value. Proper packaging and pricing of life insurance products are likely to lead to growth of life insurance business.

The fourth objective was to find out the effects of government regulation policies on the growth of life insurance business. The study revealed that proper government regulation policies are lacking and from the findings a lot needs to be done in this area.


5.4 Recommendations

On the basis of the findings of the study the following recommendations can be made:

The life insurance companies should ensure proper sales promotion and pricing of life insurance products for value maximization to its clients. The insurance companies should work hard and competitively to ensure penetration of their services and to organize education to members of the public to demystify their life insurance services. Micro insurance is one of the methods the insurance companies can enhance growth of life insurance business.

The Insurance Regulatory Authority (IRA) should come up with mechanisms on how the life insurance sector can best be monitored to attain maximum growth. Proper regulation of the sector would ensure a level playing field and rid the industry of unethical practices.


The Implications Of Ownership Structure Of Insurance Companies On Policy Holders Patronage


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