Insurance Companies And Their Impact On Economic Development Of Nigeria
Business produce goods and services to satisfy the demand of customers. Much as these businesses declare profit year-in-year-out, they also face element of risk and uncertainties that may causes losses. This includes fire, theft, damage by artificial or natural agents and so forth. The business men in the olden days engage into economic activities with pessimism and fear of incurring losses. This inhibits large scale production which is capital intensive.
However, with the advent of the insurance business, things improved for the between, as business men become encouraged to commit more of their resources in production activities,knowing fully well that the insurer will reimburse item in the event of damage or loss. Simply put, insurance is a contract of utmost good faith in which the insurer will pay compensation to a policy holder for loss or damage of insured items.Meanwhile, the practice of insurance has become a lucrative business in itself,such that it contributes enormously to the national development in items of employment opportunity provision as well as Gross Domestic Product (GDP)Thus, the interest of the research is aroused to carry out a study in this important,yet neglected sector of the economy with a view of sensitizing the students,business men and the entire public of the benefits derivable from the insurance business. The public policy makers shall be intimated as to the areas that require further regulations and or deregulation.
The researcher therefore employed and secondary sources of data collection in order to do justice to the topic. Chi-square technique of data analysis was used to fully digest the sourced information. This technique is quantitative and its choice was informed by its ability to give a pictorial view of the research findings numerically. Similarly, NICON insurance company was the focus as a case study.The most important among the research findings include the lack of awareness on insurance issues by the teaming Nigerian populations, minimal coverage of the industry’s activities in such important sector as health and agriculture, lack of adequate government as well as private sector participation in insurance business, death of professionally qualified staff operating with the industry to boost the confidence of patronizers; vague and intricate operational mechanism and of course public suspicion about the sincerity of purpose with which the insurance business is dispensed, the researcher, hence, proffered such remedial recommendations as infusion of deep sense of professionalism by practitioners in the industry with a view to fostering public confidence, inclusion of insurance training in schools curriculum right from secondary to post secondary institutions as mandatory especially for science students, sponsored programmes on point and electronic media outfits on insurance matters, increased government participation and deregulation of stringent rules barring the engagement of private sector into insurance business and up-front settlement of genuine claims as they fall due.
1.1 Background of the Study
The developments in our society have made living complex and risky to life and properties. This has become so great that the traditional methods of assisting those affected by misfortunes in our societies are no longer adequate. Therefore, societies call for a more reliable and adequate means by which risk or any misfortunes can be covered in the future, and here lies the importance of insurance which safeguard against risks or losses incurred by clients. Majority of the people in our society today are either ignorant or have a misconception of what insurance entails, what role it plays or its usefulness in the promotion of trade and commerce.
As a service industry insurance plays a very important role in the economic and social development of a nation. In appreciation of this, the government has continued to take steps to regulate the activities of the insurance business in order to crate a sound and efficient insurance market. Insurance business is one of the subjects that have been securing the public in this country. Many people outside the periphery of the business have looked at the institution with disdain and they are simply suspicious of the insurer and their styles of business. They claimed that insurer are only interested in collecting premium and hardly settle claims, whenever they arise.
1.2 Statement of the Problem
The insurance industry is one of the misrepresented or misunderstood businesses in the world. This is mainly due to lack of knowledge on the part of the public concerning their activities. The degree of knowledge varies from century to century and is relative to the state of socio-economy development in each individual country concerned, which may in turn be governed by the level of the literacy component of each community. In a developing economy, problems associated with the misconception of the impact of insurance are not as pronounced as in under developed countries, including Nigeria. All attempts in developing a sound insurance industry have been confronted by market distortions, high rate of inflation, various governmental regulations, unethical practices and fraudulent tendencies of the insuring public there are overwhelming. There are a few behaviors, which indicate that the Nigerian public, literate or otherwise, know little or nothing about the operation of the insurance business.
Consequently, many questions have been asked. Should insurance companies/brokers continue to exploit the general public as a result of their ignorance about the industry? Is there any need to control the business at all? What are the control measures? These are the questions, which shall be address my self within the essay together with same brief suggestions, and methods by which the loopholes discovered could be corrected. Therefore, this research work aims at highlighting the various function or importance of insurance industry to individuals and whole society of Nigeria.
1.3 Objective of the Study
On a cursory look at the insurance mechanism, it would be seen that insurance is a service rendering business.
There are special social characteristics of insurance that set it apart from tangible goods industries. Being mostly a contract of indemnity and more so that insurance is a commodity, which people pay for in advance and whose benefits are reaped in the future.
Furthermore, the objective of the study is to throw more light on the activities of the insurance with the view to arousing the awareness of the policyholders and prospective ones. This will be achieved by highlightingthe insurance mechanism, discovering the weak areas that need to be strengthened and recommendations will be proffered for further study.
Also the study is to highlight the fundamental principles of insurance, which the society has not been able to recognize. This work is made in such way as to highlight the need for insurance in our society. Taking all these into consideration, the following are the objectives of this study:
- The main objective of this study is to outline the functions, roles and contribution of insurance companies to the development of the national economy.
- To identify if insurance companies are useful to our day-to-day activities.
- To ascertain if insurance companies actually perform their financial roles diligently.
- To suggest ways of improving the functions of the insurance companies.
1.4 Assumptions of Study
The following hypotheses are developed to ascertain or otherwise of our identified problems.
- Most Nigerians do not know the use of the insurance companies in our day-to-day business activities.
- Majority of the public does not have confidence in the insurance industry in Nigeria.
- Most Nigerians see insurance companies as embezzlers of invested capital.
1.5 Significance of the Study
The research is done in such a way that it will contribute to the body of knowledge of insurance. The research work will help in popularizing the importance of insurance companies towards the achievement of the economic goals of the country.
The research work will give the general public the chance to learn about the principle on which insurance companies operate and to remove any doubt in the mind of people with regards to the business style of insurance companies.
Finally, it is hoped that this research work would also make a great contribution to academic development.
1.6 Hypothesis of the Study
To establish the fact about insurance companies and their impact on economic development in Nigeria the following hypotheses have been formulated: –
- HO: There is no relationship between smooth trade and commerce with organized insurance business.
- H1: Smooth trade and commerce depends on organize insurance industry.
- H1: Trade can still achieve their desired goals in a nation without insurance company.
- H0: People that insure their insurable properties are more advantageous than those who do not, in terms of losses.
- H1: People who insure their insurable properties have no advantage over those who do not in terms of losses.
1.7 Scope of the Study
The scope of the study has been limited to the insurance companies in Nigeria. The research work is centered on the impact of insurance companies on economic development in Nigeria and the importance of insurance to individuals. The importance includes the function, benefit of insurance to the society as whole.
1.8 Limitation of the Study
In the Course of gathering the data for this research study, the following problems were encountered:
- The degree of cooperation received was not encouraging especially from employees and top management of NICON Insurance Corporation.
- Officers to be interviewed were mostly not on sit and those that are around could not attend to me due to the pressure of work as claimed.
- Finally, funds and Time constraints serve a very important limitation to this research work.
1.9 Plan of the Study
This project has been divided into five chapters, the first chapter is the introductory part, this chapter introduces the study and highlights the statement of the problem, purpose, scope and plan and also the significance of the study.
In realization of the need for adequate theoretical background, the second chapter deals with the review of existing literature. The literature consists of information gathered from written sources textbooks, magazines, journals and the likes.
The third chapter presents the research methodology. Hence it describes the various research methods used, method of data collection and analysis adopted for the successful completion of the project.
The fourth chapter is exclusively on data presentation and analysis. This contains the major work done by the researcher.
Finally, the fifth chapter ends the project by giving a summary and conclusion and making the necessary recommendations for better performance.
Summary, Conclusions and Recommendations
This project work is aimed at highlighting the various functions and importance of Insurance Companies to the Nigerian economy.
This project work has five chapters, the first chapter consist of the Nature and origin of Insurance in Nigeria which deals with the statement of the problem, assumption of the study objective, significance, hypothesis, scope, limitation and plans of the study.
The second chapter is the literature review, it contained the data collected from documented materials or published information such as annual reports, magazines, journals etc. The chapter also contained discussions on impact of Insurance Companies on the development of Nigerian economy and the role of the Nigerian Insurance market.
In the third chapter, which is the research methodology, attempt was made to explain the design of the research project and the method used in collecting data that were relevant to the study.
The fourth chapter deals with analysis and interpretation of the data collected.
And finally, in the concluding chapter, we present a summary of the study, conclusions, recommendations, and suggestions for further studies.
This study has attempted to highlight the impact of insurance and its major contributions to the economy. It has revealed the significance of the insurance industry, in national economic development. The industry is still quite young, however, the regulatory body, MAICOM are laying down regulations in an attempt to revitalize the industry.
The insurance industry acts as an absorber of the risks and uncertainties normally associated with economic activities, it is our conclusion that enactment and implementation of laws that would enhance the growth of the industry that would increase its contribution to the gross domestic product. We cannot have a buoyant economy if it is not insurance backed. Hence, we must support our insurance industry to enable it play an effective role as the nation’s risk bearing industry, capable of propelling the national economy to greater heights and further growth.
Also, the entire insurance mechanism and the national economy can only function effectively in a peaceful and orderly environment under the rule of law.
The future of this industry looks promising if the professionals will remain united, having the same vision and pursuing the same goals.
The industry has been under serious criticisms on account of its reluctance in the settlement of claims and alleged unclear terms of insurance, which were often interpreted against the interest of the clients. These misconceptions have given the industry bad name, to the extent that members of the public consider it a waste of resources to insurance any property.
According to Late Mrs. Stella Obasanjo, as quoted in a meeting tagged FIICEN (forum of Insurance Institutions chief executives and National Insurance Commission) said “There remains this belief that the insurance company will manufacture some excuse not to settle your claim in the event of accident”. According to her, an efficient and reliable insurance Industry should constitute a major element in the overall economic development plan, adding that it remains one of the ways in which investors could be persuaded on the security of their investment.
The fact that the performance of the insurance industry depends to a large extent on the social, economic, and political environment in which it operates, the insurance industry of any nation is to a large extent, a reflection of the level of performance of the nation’s economy.
In this light therefore, to have a viable insurance-backed economy that is to improve on the efficiency of insurance industry, we recommend followings:
A revolutionary promotion of knowledge and education: the number of professionals in this field is too limited. In an effort to improve the status of the industry, there must be a revolutionary promotion of knowledge amongst the brokers. Insurers, reinsurances, activities and loss adjusters. The industry must now begin to recruit young graduates for training as future leaders in all sectors of the industry.
Marketing culture: For the industry to develop there is the need to be more creative and innovative especially in marketing initiatives. Due to lack of marketing orientation, the level of awareness of insurance business has remained low in Africa.
Agricultural and Health Insurance: The present Government of the country has to give more emphasis on agriculture and health insurance, because they are the areas that demand urgent coverage by insurance industry.
This is because at this stage of our development it is obvious that our survival as a nation depends on our ability to feed ourselves. Therefore, the funds accumulated by the Nigerian Agricultural Insurance Company should also be used to assist the small-scale farmers, so that they will use the fund to purchase fertilizer and other tools and farming equipment.
Further more, the problem of health care and medication has become so costly, that there is a yearning need for health insurance scheme in Nigeria. Nigeria is highly populated, the benefit of large number will make the health insurance viable.
Government policies and programmes should be geared towards the promotion of insurance awareness by making it mandatory by certain class of insurance in the interest of the public. For example, the employer’s liability to their employees for death or injuries at work, fire insurance for all installation in office buildings, factories etc, would have the advantage of promoting awareness and availability of funds thereby increasing the investment power.
Insurance company could also further invest in the construction of housing estates in urban and rural areas that could be rented out to members of the public at a reasonable amount. Also the educational sector needs the insurance companies to provide special funds for under privileged children, orphans and also for technical training in order to learn a trade.
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