Problems Encountered By Intermediaries In The Nigeria Insurance Industry And The Future Prospects

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Problems Encountered By Intermediaries In The Nigeria Insurance Industry And The Future Prospects


Insurance is an intangible service. It is a promise to provide for financial losses to individuals and companies upon payment of an annual premium as the consideration and is compensated once any insured perils operate. The loss has to be unforeseen and accidental. This study looks at the problems encountered by insurance broker in Nigeria insurance industry. The study was conducted on the insurance companies registered and licensed by the Nigerian Insurances Regulatory Authority. Data was collected using questionnaires which were hand delivered to insurance companies targeting business development executives in self-addressed envelopes. Some questionnaires were emailed to the officers in the different companies to the convenient of the respondents. The results were analyzed using descriptive cross sectional design as well as chi-square statistics due to the qualitative nature of the data.

Chapter One

1.0 Introduction

1.1 Background of the Study

The need for intermediaries in insurance market in Nigeria is an issue which its important cannot be over emphasized. Research has shown that the problems encountered by the intermediaries has an impact on the growth of insurance level in our society, there is a wide spread of lack of what benefit it is to the society. Research has shown that there is a significant relationship between the extent to which one understands and the importance one attaches to insurance. The more clear and understandable one finds insurance to be and the more likely it is that the insurance intermediaries will be know the importance of insurance before the facilitators can be recognized. This shows that low level of literacy constitutes to the problems encountered by the insurance intermediaries. Because the intermediaries work for the insurance company, any problem that affects the company affects them.

The experience of some people who had be dealings with insurance over the years ha snot be very cordial such unfavourable relationship had been publicize over the years that it has created a poor perception of insurance intermediaries and the insurance companies to the general public. Insurance have not help issues by their reticent in publishing their activities. One has to be aware of insurance before one makes a conscious effort to understand what it is all about. The insurance industry has the duty to create awareness of the existences of their intermediaries and their industry in the minds of the public.

Individual insurance companies have the responsibility of letting the public know that its intermediaries exist and what functions they perform. Literature such as one of the roles of insurance companies and intermediaries to individuals and the society in general should be widely circulated.

Handling of insurance claim is another area were insurance intermediaries encounter problem. This is obvious because when an insurance company could not settle her claim with the insured (policyholder) the impact fall on the intermediaries that facilitate contractual relationship between the insured and the insurance company. This makes the general public to call both the intermediaries and insurance companies fraudsters. A good insurance transaction lies essentially on the ease with which are insurer claim cheque is received. Claims handling is one area were an effective communication is necessary, as well as reaching prompt decision immediately all facts are known. The inability of the insurance companies to do this makes it difficult for an intermediary to help his clients in sorting out their claim with the company.

Location of the insurance company also is one of the problems encountered by intermediaries because they find it difficult to transact business in rural area. There is no comparison between an insurance company situated in the city and that of rural area. Insurance company situated in a rural area might not be progressing because of the low level of literacy of people in the area.

1.2 Statement of Problem

The image of insurance industry and their intermediaries is noting to write home about. This is to those who do not know what insurance is all about. Having complied with the rules and regulations of the insurance supervisory authorities in which they operate, though there are still problems in the insurance companies and the among them are as follows.

  1. Ineffective publicity, lack of information about different classes of insurance and benefits behinds each classes of insurance to the policyholder is acting as one of the problems being encountered by the insurance companies and their intermediaries.
  2. Public unawareness of the essence of insurance takes time for the brokers and agents to be known in the public. Many of our people today are still ignorance of what insurance is all about and this is really telling on the insurance companies.
  3. Location of the insurance company is one of the problems being encountered by insurance intermediaries.
  4. The find it difficult to transact business in a small area. Take for instance, an insurance company whose Head office is at Ngwo will be loosing a lot while other competitors situated in the city such as Lagos are progressing.
  5. Competition among the brokers and agents by using unorthodox method which is due to variation in rates. There has been always difficult among these intermediaries. Another problem is what affects the insurance companies also affect them.

1.3 Objective of Study

This study is aimed at achieving the following objectives.

  1. To find out the causes of the problem that the intermediaries encounter.
  2. The important of intermediaries in the insurance industry.
  3. Who are insurance intermediaries.
  4. To make suggestion on how to eradicate the problem.

1.4 Research Hypotheses

To aid the successful completion of the study, the following research hypotheses were formulated by the researcher;

  1. H0: Insurance broker do not play any significant role in the insurance industry
    H1: Insurance broker do play a significant role in the insurance industry
  2. H02: There is no significant relationship between insurance intermediaries and the growth of insurance business in Nigeria.
    H2: There is a significant relationship between insurance intermediaries and the growth of insurance business in Nigeria.

1.5 Significant of the Study

The study will be of immense value to brokerage firm, the insurance companies, the general public and to student of insurance and other related fields.

The work will be of immense help to future researchers who will make their own investigation into this subject area.
The study will reveal the important of these intermediaries to the insurance company. Having mentioned some of the jobs done by the intermediaries, there are other areas by which they are useful to the company.

1.6 Scope and Limitation of the Study

The area of this thesis is Nigeria. The research is to find out the problems encountered by intermediaries and the causes.

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study.

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Finance:

The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

1.6 Definition of Terms


Person who buys and sells for others. And regarded as professional expert. The gives advice and recommends to people.


Person who acts for or who manages the business affairs of other.


A little consideration which the insured pays to the insurer in view of the risk insured so that if loss occur the insurer will put the insured in the same financial position he was before the loss.


The party entitled to receive money under an assurance contract on the happening of a stated contingency.


State of being liable or responsibility for an act.

1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
  • Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to investigate the problem encountered by intermediaries in the Nigeria insurance industry and the future prospect.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given.

In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges encountered by insurance brokers or intermediaries in the insurance industry.

5.2 Summary

It has been observed that insurance practice in Nigeria is devoid of ethical orientation, as many firms do not have code of ethics that govern their operations. Second, the widespread unethical practices like rate cutting, premium loading, overriding commission, premium purchase, underindemnity, (Soares, 2004), (Irukwu, 2009) also bear testimony to lack of ethical behaviour in Nigeria insurance business practice. Recognizing the fact the ethical business relationship with stakeholders builds customer value and profitability through several competitive advantages such as customer loyalty and retention, product quality, efficiency in operations, insurance in Nigeria would perform outstandingly better, if she is ethically oriented. Although there are still some companies who believe that unethical business practices will not be discovered, or even when discovered it will not harm their business standing, there are still good reasons while service organizations should be concerned about their ethical reputations. First, business relations and operations affect its stakeholders. In service organization any company that is not trusted by its employees, customers, suppliers and other associates, would gradually and steadily decline in both growth and financial performance in the long term. Second, every business action has a trajectory effect – ethical or unethical. Continual unethical practices could lead to government intervention and regulations which will be more problematic than self policing in the first place (McMurrian and Matulich, 2006).

5.3 Conclusion

Insurance sector remains an important economic undertaking and a primary source of livelihood for many families in Nigeria. With a comprehensive management of the industry, it will no doubt play a vital role in economic growth. Therefore, all stakeholders at all levels should intensify efforts in the provision of infrastructures required to support growth of the industry. It is evident that the industry though showing significant growth since liberalization in 2000 the same still lags behind in penetration at 0.86 percent in 2010 compared to the world average of 7.5% (premiums as a percentage of GDP) source TIRA’s Annual Performance Report 2010. Therefore major interventions and measures ought to be taken into consideration for the industry to prosper.

5.4 Recommendations

Haven completed the study; the researcher therefore recommends that

  1. Insurance companies need developed and adapt their products to local demands. For instance, the large informal sector would be best served with micro insurance cover. This would help improve insurance penetration.
  2. Insurance potential buyers need to be educated on good risk management practices and benefits of insurance policies.
  3. Insurance regulation should have the objective of protecting the insurance consumer, investors and on the standardization of the conduct in insurance provision/delivery of service.
  4. Ethical business practices and relationship should be encouraged in all insurance business organizations. This would be the responsibility of ethical leaders who would be appointed to lead the organizations. As an ethical leader, he would be a moral person and a moral manager. As a moral person, he would be honest, fair and equitable in all his dealings with internal and external stakeholders of his firm. Second, he would also manifest as a moral manager, i.e. one who heralds ethical conduct, encourages followers to be ethical through rewards and discourages unethical behaviour through reprimand and punishment.

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