Management Of Life Assurance Fund In Nigeria Insurance Industry (A Case Study Of Union Assurance Limited)

Project and Seminar Material for Insurance

Management Of Life Assurance Fund In Nigeria Insurance Industry (A Case Study Of Union Assurance Limited)


Abstract


It is common to see report of business falling than business succeeding almost always, the failure or success of a business can be attributed to its management. When a business is mismanaged, it will lead to liquidation, the company will not meet their solvency margin thereby running away from their obligation as to settle claims which in turn portray ugly insurance image. This study there for is exploratory study designed to determine how life assurance fund are properly managed. The population of the study comprises both staff and customers of union assurance Enugu. A sample size of fifty (50) was selected made up of 20 staff and 300 customer both primary and secondary data were collected. Questionnaire coupled with personal interview were the main research instrument. The data was analyzed by the use of chi square statistical method. The study came out that for proper management of life insurance fund, the premium should be invested both in short band long term investments so that insurance company will meet their obligation as to settle claims. It was recommended that all the stakeholders, including management of insurance companies, policy makers and policy holder should collaborated come out with conductive business climate to ensure effect management of life assurance funds for great returns to investors.


Chapter One


Introduction

1.1 Background of the Study

It is common to report of business failing than business succeeding almost always, the failure or success of a business can be attributed to its management. When a business is mismanaged, it will lead to liquidation the company will not meet their solvency margin thereby running away from their obligation image. However it will also have a drastic effect on the Nigeria economy when it failed. In order top nurture the interaction, this research focus on insurance industries and how they management life assurance premium, to know if the premium are invested as stipulated by law, how they handle claim and the beneficiaries and also how life assurance fund help in the economic development of Nigeria.

Moreover, management of life assurance fund in insurance industry related primarily to the way the industry management life assurance premium in order to achieve organizational goal and objective using available fund efficiently and effectively.

However in context to management, union assurance limited. Limited is an associate of union bank of Nigeria plc. The company was registered as an insurer on November 18, 1993 and actually commence business in 1998. At the time, it was the first attempt by any bank top venture into universal banking. It therefore become the life assurance specialist’s underwriter with in the same period. recently, union assurance is redefining those strong potential to challenge industry management with the top five brackets.

Apart from restructuring its operations, the company is diversifying and expanding at a period where competitor mare contracting due to uncertain economic conditions. (a new management driving change and excellence is in place and venturing into new frontiers that were uncultivated. The changed in management has also brought to bear on the company’s operation innovation which are impacting passively on the work culture in union assurance) union assurance also has a robust investment portfolio cutting across assets in the equity, money bond and property marked totaling over N5 billion they also employs a conservative but dynamic investment strategy geared towards increasing the company income and profitability.

More so, in managing life assurance fund money is pooled together with that of other investors to create a single strong fund that provide significant investors benefits which include an instant increase in buying strength there by contributing towards economic development in Nigeria. However, life assurance fund accumulate through payment made by the assured person called premium so that should death occur, prior to a specified date or upon survival at an agreed period funds would be made available from the scheme to pay whatever benefits that are due. The idea for assistance and association is not new to the Nigeria society various town and clan union and social clubs have various ways of showing benevolence to their bereaved. It is customary for people to pay condolence visit and present a sympathy purse. Practices are similar to mutual life assurance.

In addition to this, there are also the long-term needs to create and sustain an enable environment that will engender safe practice against destructive runs in managing life assurance funds, protecting and ensuring fair play among insures in the industry.


1.2 State of Problem

Complex set of interrelated problem are identify as following:

  1. Mismanagement
  2. Inability to invest life assurance fund in varieties of security due to lack of experts.
  3. Ineffective investment management of life assurance fund which affect expectations of the insuring public and growth of the industry.

1.3 Objective of the Study

Having been exposed to the problem the research tends to achieve the following:

  1. To described implication and suggest possible ways of managing life insurance fund.
  2. To assess the factors that determines the area of investments of life assurance fund.
  3. To ascertain whether life assurance fund are invested more on short- term investment than on long-term investment instrument or vice versa.
  4. To promote investors confidence toward life assurance.

1.4 Research Question

  1. What appropriate strategies can be put in place to ensure effective management of life assurance funds?
  2. What factors determine the areas of investment of life assurance fund?
  3. What form of investment is life assurance fund put into most (long term or short-term investments insurance)?
  4. What are the trend expectation of the insuring public?

1.5 Research Hypothesis

The research work tends the following hypothesis listed below:

  • HO: Management of life assurance has no positive effect on the economic growth and development of Nigeria.
  • H1: Management of life assurance fund has positive on the economic growth and development of Nigeria.

1.6 Significance of the Study

It is aimed that study will help the insurance to plan organize and control life assurance fund in order to maintain proficiency and standard in insurance practice thereby investing life assurance fund in varieties of investment. In turn have adequate fund to settle claim which portray good insurance image and bring development in Nigeria economy.

It will also aid the candidate or student having HND in insurance to know the various areas where insurance can invest.


1.7 The Scope Limitations of the Study

This research work limit to one of the insurance companies in Enugu, union assurance company of Nigeria to be precise.

There are a lot of constraints in the gathering of information of the research work but the major constrain are following are to be precise.

a. Time:

in report to the theoretical and practical work the time allowed the project was limited beside there was carried out with other academic assessments.

b. Financial:

Due to high rate of academic fees, I could not be able to carry out research with easy as I was planned.


1.8 Definition of Terms

i. Management:

This is the act of running and controlling a business or similar organization so as achieve the organizational goal.

ii. Insurance:

Is a contract between two parties insured whereby the insured pay small amount of money called premium and the insurer promise to compensate the insured when the specified risk insured against occur.

iii. Life Assurance:

Is a contract of insurance on party called the insurer agreed that subject to some term exception and condition and condition that he would pay some money on the dearth of life assured on the precious maturity of the policy

iv. Fund:

This is an amount of money that have been saved or made available for particular purpose.

v. Premium:

Is the monetary consideration paid by the insured for insurance covers ie the price of service rendered.

vi. Investment:

To put money effort Time into some things to make a profit or get an advantage. It can buying of property or share in a company as to make profit out of it

vii. Management:

To organize or control a business badly.

viii. Liquidation:

To cause a because to close, so that its assets can be also to pay its debts ie the process by which a company or part of a company is bought to an end, and the asset and property of a company redistributed these can also be seen as winding up of a firm by selling off its free (unpledged) assets to convert them into cash to pay the firm’s unsecured creditors.

ix. Solvency Margin:

This is a minimum excess on an insurance assets over its liabilities set by regulator. It can be regard as similar to capital adequacy. It is also company ability to pay claim.

x. Policyholder:

Is a person or a corporation whop owns an insurance policy. It also the owner if an insurance policy: usually, but not always the insured.

xi. Stakeholder:

A person group or organization that has interest or concern in an organization i.e person, group


Chapter Five


Summary of Findings, Conclusion and Recommendations

5.1 Summary of Findings

Insurance funds generally play a major role in the economic development of every country. Basically, they intermediate between the surplus and deficit unit of an economy among other functions by taking fund from those who have them but do not have any immediate need fort hem and channel these funds to those in need of them.
One critical decision life insurance firms face is the choice of investing life insurance premium. Among others, this choice is necessary for the profit determination and the via ability of firms. What this means is that insurance firm that are able to make to make their decisions (financing decisions) prudently would have a competitive advantage in the industry and this make superior profit or else breaks –even. Nonetheless, it is essential to recognize that this decision can only be wisely takes if and only if the insurance firms know how their management investment decisions and policies influence their profitability and viability.

This study examine the management of life assurance funds, it was gathered that insurance funds are invested in long term investments as well as in short term investments and they each have impact on the profitability and performance of union assurance company which was the study area for this research work.

Based on the researcher findings there are method of valuing premium which is.

  1. Using life assurance mortality table. that is by considering cubic capacity of the value assured as provided ie standard life, sub standard life and average life.
  2. It was also discover that investment of insurance funds does not affect premium income but rather it increases the yields.
  3. There are good number of educated manager with professional qualification in union assurance company.
  4. The study showed that a combination of poor education of customers and lack of positive experiences leave life insurance client and potential client without understanding the nature of insurance as a risk mitigation tools band this people cannot grasp how having a life insurance products might make them and their families better prepared to lops with certain risks.

5.2 Conclusion

From the foregoing discussion, it could be sent this work is trying to develop a standard framework for assessing and analyzing the trying to development patt3eerns and utilization of life assurance fund in Nigerian insurance industry, adopting the union assurance company as a case study area.

On the basis of the made from the study analyses the following conclusion are made.

  1. Premium income is the main back bone producing the bulk of life insurance funds. About two thirds of the total funds of life insurance companies is generated from premium income, proper management of life fund would minimized risk. It is indisputable that any insurance fund is bound to achieved its objective in a most economic manner by adopting vigilance and protection measures to check hazards.
  2. The factor that determine the area which influences investments of life assure fund is concluded that investors before buying life insurance policies generally thinks of their retirement benefits (the retirement benefit of the policies) risk coverage, tax benefits and family protection. Therefore this study may be helpful to actuaries of life insurance sector of the insurance industry in determining or deciding either to lunch such policies in the schemes of the existing polices in the schemes of the existing policies to cover up those behaviours of investors.
  3. The past trend, where more of life assurance funds of Nigerian insurance companies were put in short term investment instrument as analyses have change in recent time as grater proportion of life insurance funds are channeled into long term investment instruments in accordance with prescription of the national insurance commission and on section 25 of insurance act 2003. This is a positive move toward the development of the nations economy as it has the ripple effect of helping, building and strengthens the infrastructure base of the country for it development.
  4. Again looking at the finding of union assurance company in line with its investment activities it can be concluded that the survival and future growth of the company depends on its management knowledge about the behavior of its customer. this mean that, management of the company needs to be proactive and should always take into consideration when it comes to investment decisions

More so, in today’s competitive era of cosmic customer based customer contentment and customer fidelity bare the important parameter on which a life insurance service provider depend upon. To achieve all these characteristic the strategic managers of the life insurance sector must know the investment behavour of the customers, so that they can accordingly design their marked campaign for company’s continued survival and strong future growth.
Lastly, it is the fervent believe of the researcher that the finding of this study will be found helpful to the management of life insurance companies as well as policy formulator and for that matter government in formulating effective policies regarding management activities of life assurance funds.


5.3 Recommendations

Based on the objectives and main finding of the study it is important for management of life insurance firms (for that matter unions assurance company) to stay focus and institute pragmatic measure and strategies to help manage the investment of their company so as to produce maximum returns to share holder and stake holder at large. In this wise therefore, the following recommendation are put forward for management consideration:

  1. Insurance companies should ensure that adequate training is given to their staff to be insurance experts and to have vast knowledge on investment.
  2. Effort should be made to control the investment behavior of the companies in other to protect the personnel saving and the company should be ruined and organized in such a way that interest of the policy holders’ shareholders, workers government and general public are not jeopardized.

5.4 Suggestion for Further Studies

It is therefore hoped that further academic research will be undertaken by interested student into the study of management of life assurance fund in Nigeria insurance industry.


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