ROLES OF INSURANCE IN THE NIGERIAN BUSINESS SECTOR

ROLES OF INSURANCE IN THE NIGERIAN BUSINESS SECTOR
(A CASE STUDY OF NICON INSURANCE)

ABSTRACT

This work is titled role of insurance in the Nigerian business sector. The researcher used primary data and the technique of analysis adopted is chi-square with the use of questionnaire. The findings revealed that insurance has played a vital role towards the business development in Nigeria. Finally the insurance has been found to be an important tool for boosting business development in Nigeria. The researcher recommended that insurance industry should be made known to all people and business enterprises in the country to known the importance and benefits of insurance.

CHAPTER ONE
INTRODUCTION

1.1 BACKGROUND OF THE STUDY
Insurance is a form of risk management primarily used to hedge against the risk of a contingent uncertain loss. Insurance is an intricate business and social device for the handling of risks of life and property. It is social in nature because it represents the cooperation of various individuals for mutual benefits by combining together to reduce the consequence of similar risks. As new area of risks emerges with every passing day a new insurance package is introduced to take care of risks associated with it.

Insurance can also be seen as involve the transfer of risk from an individual to a group of sharing losses on an equitable basis by all members of the groups.

By the end of the 19th Century by European trading companies mostly British started effecting their insurance with established insurers in the London Insurance market. As time went on, some British insurers appointed Nigeria Agents to represents their interest in the country. These agents later metamorphosed into full branch offices of their parent companies in Britain.

Osun Kunle (2002) opined that the first branch office in Nigeria was the Royal Exchange Assurance in 1921, later followed by other British companies, indigenous Nigeria Insurers and re-insurers later followed such as National Insurance Corporation of Nigeria (NICON) established in 1969 and Nigeria reinsurance companies operating in Nigeria today. Lynch (1992) Opined that insurance companies have continued to be on the increase since early sixties. This has been due to liberal financial legal requirements. With the increase in insurance business in Nigeria, the insurance play a very important role in the mobilization and utilization of investible resources in the business sector. It also acts as the absorber of risk and uncertainties associated with business activities. Insurance is a business like any other business in the country and the aim of every legal business is to contribute meaningfully to the development of business sector and social well being of its nation. The increase in insurance industry in Nigeria, it is anticipated that it should be able to contribute to the growth of the business sectors. More so, as insurance provides a hedge against loss, it is supposed to increase enterprise, thereby increasing national productivity.

1.2 STATEMENT OF THE PROBLEM
There is no doubt that insurance business have developed from stage to another and have contributed immensely to the economic development of Nigeria but not without problems with which it has and is contending with.

Among this problems are:
i. Ignorance: The problem of ignorance as regard the benefit of insurance products. Many do not know what insurance is all about even the educated ones.

ii. Unskilled InsurancePractitioners: The presence of unqualified staff and firm have created a greater problems as some dubious practitioners goes around collecting premium without remitting same to the appropriate quarters.

iii. Lack of favourable government policy: Over time past there has been little or no effort by the government to enact favourable policies and enabling environment for insurance business to strive. This area has not been brought to limelight by Nigerian researchers.

In view of the above problems it is becomes important to research into the contribution of insuranceindustry to the Nigerian business sector, so as to proffer possible recommendations that could remedy the challenges facing the sector.

1.3 OBJECTIVE OF THE STUDY
i To examine whether insuranceindustry is relevant to the Nigeria business sector.

ii To assess the extent of insuranceservice provided to client in Nigeria

iii To evaluate the contribution of insuranceindustry to the development of business sector in Nigeria.

iv To identify the challenges facing the insurance business in Nigeria.

v To make policy recommendation.

1.4 SIGNIFICANCE OF THE STUDY
The study is important because the result and findings of the study will be useful to the following class of users:

1 Policy makers: They shall consider this research work as basis for making economic policies.

2 Academia: The research work is also significant to lecturers and students as an addition to existing literally works, thereby serving as a resource material to all who wish to further the study of the subject matter.

3 Other researchers: The research work is significant because other researchers of related subject matter will make use of it as a resource material.

1.5 RESEARCH QUESTION
a. What are the roles of insuranceindustry in the Nigeria business sector?

b. To what extent has the insurance services been made available in Nigeria

c. To what extent has insurances industry contributed to the development of business sector in Nigeria?

d. What are the likely challenges facing insurance business in Nigeria?

1.6 RESEARCH HYPOTHESIS
H0: The Insurance industry does not play any vital roles in Nigeria business sector.
H1: The Insurance industry plays a vital role in Nigeria business sector.

1.7 SCOPE OF THE STUDY
The scope of the study is confined to the role of insurances industry in Nigeria business sector, with particular interest to NICON Insurance Abuja.

1.8 LIMITATION OF THE STUDY
The challenges encountered by the researcher in the course of the study range from:
a. Accessibility to relevant data: it was not easy to get relevant data that will help researcher to develop more idea on the topic.

b. Time constraint: this is another problems, the time limit is not much for a researcher to carry out more study on the work.

c. Financial challenge: is also the most important problem that the researcher encountered during researching which involves travelling to relevant organizations and companies to get relevant data and information, so limitation in data collection went a long way in affecting this research work.

1.9 DEFINITION OF TERM
a. Agent: One who solicits, negotiate and effects contract of insurance on behalf of insurer(s) within a defined limit of authority and subject to statutory and common laws. An agent may be a full time sales employee of an insurer or appointed on a part-time basis.

b. Broker: A broker is an independent operator whose main duty is to bring parties to an insurances transaction together for a commission. The broker conducts his business for all and sundry and does not represent any particular insurer to the exclusion of others. The broker is professionally liable to the insured in view of his professed expertise in insurance.

c. Cover: A contract of insurances, to effect insurance, that is to ‘cover’ and insured for example, motor insurance with effect from a given time.

d. Excess: The portion of a loss which an insured is expected to bear while the insurer will be responsible for any amount of the insured loss over the portion. This is mainly applicable to motor insurance.

e. Insurance: This is a contract in which the insurer, for a consideration or for a sum of money which is called premium, agrees to pay to the insured a sum of money or its equivalent whenever the event that was insured occurs.

f. Indemnity: The maximum amount payable by an insurer to beneficiary of loss. The principle of indemnity implies that the claim does not profit from the loss.

g. Insurer: An individual or company who through a contractual agreement undertakes to compensate specified losses liability, or damages incurred by another individual. Proportion of its insured risks which it cannot bear with another insurance or reinsurance company.

h. Premiums: This is the amount paid by the insured to the insurer for the insurancee cover provided in the policy.

i. Pool: An agreement between a group of insuranceand reinsurance companies to cede a percentage of some defined classes of business to a common source from where premiums, losses and expenses are shared in agreed proportion amongst them. Pools are usually formed to cater for volatile classes of business as to increase local retention capacity markets.

j. Reinsurance: The contract made between an insurancecompany and a third party to protect the insurances company from losses. insurances is the equitable transfer of the risk of a loss from one entity to another in exchange for payment.