Problems And Prospects Of Extending Insurance Services To The Rural Areas

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Problems And Prospects Of Extending Insurance Services To The Rural Areas


Abstract


The interest to write in this particular topic “Problems and Prospect of Extending Insurance Services to the rural areas” grow out of the present significant roles of insurance industry in extending service to the rural areas. The researcher discovered that the problems facing the extension of the service to the rural area by the industry is poverty, illiteracy and geographical locations. However, the objectives was to examine whether insurance companies extends service to the rural areas or not and if not, to identify the problems and prospects in providing insurance service to the rural areas.

The scope of the study was limited to Oba in Anambra state as yardstick to other rural areas in Nigeria and leadway Assistance Co. Ltd to represent other insurance companies due to lack of time. Therefore, data interpretation gave the following findings that insurance industry should provide services to the rural dwellers that apathy and ignorance for insurance service hinder the extension of service to the rural people. This findings also recommended that all the insurance companies should start extending services to the rural areas and also assist in providing social economic activities


Chapter One


Introduction

1.1 Background of the Study

In today’s modern society, the need for extending insurance services to the rural areas by the insurance industry is of a great important. The insurance industries which part of financial institution exist for the purpose of indemnifying an insured in the case of any loss occurrence. Furthermore, the insurance industry in Nigeria and has not been accepted by its people as to take its rightful place in the nation’s economy.

The importance of the provision of insurance services has been recognized in modern Nigeria, through the various products offered by insurance firms, which are life assurance policies that is classified into individual life assurance, group life assurance and pension, and health insurance business while general insurance business like fire, marine, motor insurance business etc are offered to the consumers of insurance products who are individuals, social clubs, unions association etc.

However, products offered to these groups/ person(s) are for protection against losses incurred by them and keeping them in business. Similarly, it is a fact that the major problem facing the growth and development of the industry in Nigeria today is ignorance an apathy for insurance services in the country. For this purpose, business concerns which is also very peculiar to the rural dwellers who are not easily accessible due to geographical factors and lack of infrastructural facilities in the rural areas of the country.

Hence, the rural dwellers are mostly engaged in small medium scale activities such as subsistence forming, fishing, palm wine tapping, hunting e.t.c. which they may find difficult to buy insurance protection for their benefits against losses that might arise in the course of their daily activities.

Thus, poverty and high rate of illiteracy which is a real factor limiting against the development and growth of the industry in the rural area. In the essence, the industry should do well to solve the inherent difficulties faced by the rural dwellers in finding ways and means of taking insurance services to them at affordable prices(premium) increase their performance, efficiency and profitability by embarking on awareness campaigns and creating of good wills. Similarly, new products should be developed to suit their needs so as to attack and stimulate participation from the rural dwellers and to settle claims as at and when due with equity, modesty and quick response without prejudice.


1.2 Statement of the Problems

The following are the statement of the problems:

Rural areas do not know what is insurance; talk of insuring their risk. Poverty and high rate of illiteracy which is a real factor against the development and growth of the industry in the rural areas, lack of trained personnel lead to the unavailability of trained personnel who would work in local areas where the prospective insured dwells. Lack of adequate infrastructure lead to the absence of transportation and communication, also affect the extension of insurance services to the rural dwellers.

Ignorance and apathy to insurance services also bring about the high level of ignorance even among the so-called educated class and the meaning of insurance which is yet to be comprehended and by extension to the rural dwellers has affected the demand for insurance.


1.3 Objectives of the Study

The objective of the study is to evaluate the performance of the Nigerian Insurance Industry in the extension of insurance services to the rural areas. The main objective of this work is to:

  1. To find out whether the insurance companies extend services to the rural areas or not.
  2. To find out why the insurance industry has not been accepted by the rural dwellers.
  3. To evaluate the causative factors of these problems and to provide possible solutions.
  4. To determine whether geographical factors and lack of infrastructural facilities affect the location of insurance companies in the rural areas.
  5. To find out the reason for lack of insurance culture and to offer strategies for developing insurance culture in the rural environments.
  6. To make useful recommendations based on the finding and then give possible solution to it.

1.3 Research Questions

In the cost of this research, certain research questions were generated to guide the researchers in their findings.

  1. Apathy and ignorance for insurance services hinder the provision of insurance services to the rural areas.
  2. Special packages at affordable price (premium) would attract participation from rural dwellers.
  3. Poverty and illiteracy limit factors against the development and growth of the industry in the rural areas.
  4. Geographical factors and lack of infrastructural facilities limit the extension of insurance services to the rural areas.
  5. Prompt payments of claims encourage the acceptance of insurance services by the rural dwellers.

1.4 Research of Hypothesis

The following hypotheses from the frame

  1. H0: Apathy and ignorance for insurance services does not hinder the provision of insurance services to the rural areas
    H1: Apathy and ignorance for insurance services hinder the provision of insurance services to the rural areas
  2. H0: Prompt payments of claims does not encourage the acceptance of insurance services by the rural dwellers
    H2: Prompt payments of claims does encourage the acceptance of insurance services by the rural dwellers

1.5 Significance of the Study

It is perceived that at the completion of the study, the findings will be of great importance to the policy holder as the findings will help them ascertain the approach of the insurer towards indemnity payment in the event of loss.

The study will also be beneficial to the management of insurance company as the study seeks to examine the ways of expanding their tentacles to the rural communities as this rural sector has been discovered as untapped gold mine for insurance business. The study will also be useful to researcher who intend to embark on a similar topic as the study will contribute to the pool of literature that already exist in the subject matter. Finally the study will be useful to students, researchers, teachers and academia’s as it will contribute to knowledge.


1.6 Scope and Limitation of the Study

The scope of the study covers the problems and prospect of extending insurance services to the rural areas. But in the cause of the study, there were some factors which limited the scope of the study:

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.


1.7 Definition of Terms

Insurance

Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss

Insurance claim

An insurance claim is when you have a loss or sustain damage that is caused by a peril insured by your insurance policy.

Indemnity

Indemnity is a contractual obligation of one party to compensate the loss occurred to the other party due to the act of the indemnitor or any other party

Insurance policy

In insurance, the insurance policy is a contract (generally a standard form contract) between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay.

Policy holder

A person who holds an insurance policy, especially the person whose life is insure


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 ascertain the problems and prospects of extending insurance services to rural areas.

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 of extending insurance services to rural areas.


5.2 Summary

This analysis aimed to provide a snapshot of the Nigerian population based on the Access to Finance in Nigeria 2010 survey findings, in order to gauge the potential for growth in the insurance market. The survey provides a wealth of information that could assist the market to better understand who their target market is, what their profile is and what innovation(in terms of products/distribution channels) would be needed to reach them. The current insurance reach in Nigeria is extremely low and the market is plagued by a number of challenges, many of them relating to distribution. Insurance is limited to the higher-income, formally employed male market and even those who are supposed to have compulsory insurance (e.g. vehicle owners) do not have it. The credit life insurance market isalso underdeveloped. On the demand side, large numbers of the population are poor, many of them live in rural areas and financial literacy, awareness of and trust in insurance is low.


5.3 Conclusion

Development insurance should be encouraged in Africa and most especially Insurance Market, other emerging markets in African can follow suit to help bring the benefits of insurance to the people. The importance of developmental insurance cannot be over emphasized given the array of its benefits both to the insurance industry and individuals. One important thing about the scheme is that it is built on the principle of social welfare and thrift. Insurance marketers are hereby advised to offensively use the models proposed in this write up when marketing any type of developmental insurance scheme. These models includes the cultural norms theory of communication, public relations transfer process models, attitudinal/KABP survey model, pedagogic models and development communication models.

People orientation towards insurance needs to be changed through proper attitudinal/change communication program. This will help in the desired insurance culture in Nigeria. Development insurance scheme has come to alleviate the sufferings of the common man. And to ensure effectiveness in the practice of development insurance scheme, both government and insurance companies should be deeply involved through appropriate supervisory strategies and education.


5.4 Recommendations

Quality of the service experience is heavily dependent on staff customer interpersonal relationship. Companies need to treat their employee well if customers are to be served well by their employees. To understand the prospects for insurance companies in rural area, it is very important to understand the requirements of Nigeria’s villagers, their daily lives, their peculiar needs and their occupational structures. The rural market offers tremendous growth opportunities for insurance companies and insurers should develop viable and cost- effective distribution channels, build consumers awareness and confidence.


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