THE ROLE OF INSURANCE COMPANY IN NIGERIA AS NON-BANKING FINANCIAL INSTITUTION: PROBLEMS AND PROSPECTS

CHAPTER ONE

1.1    INTRODUCTION

        Insurance in its modern form was first introduced into Nigeria by the British long before the arrival of the British a lot of organized trading activities was going on in the Nigeria territory, but there was no organized insurance business, as we know it today. The first insurance company to have a full branch office in Nigeria was the Royal Exchange Assurance. It opened its first office in Lagos in 1921 and until 1949 it practically dominated insurance business in the country. Therefore, there was high degrees of awareness of the importance of insurance services to the economic growth and business world particularly in Edo State and Nigeria in general. At the end of 1989 to 1998, insurance companies were operating as registered companies in Nigeria and most are indigenous. The leading indigenes insurance company in Nigeria is the National Insurance Cooperation of Nigeria (NICON) which is fully owned by the Federal Government of Nigeria which underwrites about 25% of the total insurance business in Nigeria.

        Some of the objectives of the company is to encourage commercial houses, cooperation’s and companies to go into ventures by giving them cover against possible losses. It also encourages the spirit of savings by way of life assurance which provides benefits for the dependent, in case of untimely death of the assured. The board is run by experienced men and a set of businessmen and it headed by a chairman. The management of the company is completely Nigerianised (i.e. Nigerians) as mentioned before. The chief executive is the general manager who directly responsible to the board of directors. He supervised day-to-day running of the company and he is assisted by experienced and able senior management staffs who are in charge of finance, administration, life and pension and technical department. This was however, attributed to government stringent economic measure and poor economic situations of the country. According to the insurance Act of 1976, insurance in Nigeria is divided into two main classes. Thus life assurance and non-life insurance.

1. Life Assurance
   1. Whole life assurance
   2. Endowment
   3. Children education and assurance
   4. Mortgage protection
   5. Terms assurance
   6. Group business protection 
2.  Non-Life Insurance
   1. Motor vehicles
   2. Burglary house breaking
   3. Fire
   4. Cash-in-transit
   5. Goods-in-transit
   6. Bonds
   7. All risks/contractors
   8. Fidelity
   9. Workman’s accident

1.2    BACKGROUND STUDY OF BENIN CITY AND BUSINESS IN BENIN CITY

        The emerged of insurance company in Edo State can be traced to 1968 when the first branch of UNIC insurance company opened in Benin City. This awareness brought a boom to the insurance industry. It was during this period of boom in the insurance company that UNIC insurance company limited came into existence in Benin City. One of the main objective of the UNIC insurance company is to increase investment and better public awareness of the benefit of insurance to society at large. In the first two years of its inception the UNIC insurance company incurred net losses of N10, 000 and N54, 000 respectively of course, this was the formative years, then followed a period of modest growth and success during which profit were recorded. But between 1989 and 1991, there was a succession of high loss margin. This was however attributed to government stringent economic measures and poor economic situation of the country. However, UNIC insurance company offers all types of insurance protection. Some of the demerit of the UNIC insurance company is that poor public awareness regarding the principle of insurance has not helped, and even among those Nigerians that do know the benefits of insurance cover, there remains a widespread perception that Nigerian insurance are reluctant to settle claims.   

1.3    STATEMENT OF THE PROBLEM  

          The Nigeria insurance company has been described as undeveloped when compare with those in the developed countries. For some time now. Nigeria insurance company has be subjected to explosive criticism from economic, commercial educationist, even professionals in insurance field etc. so, many accusation have been levied against the insurance companies. The most common of such criticism is the one which relates to settlement of claims majority of the insurance companies customers and non-customers alike have been feeling dissatisfied about settlement of claims as many of them would say. When it comes to their (insurer) turn to pay claims, they will flimsy excuses.

1.4    OBJECTIVES OF THE STUDY     

          The fundamental and cardinal objectives of this study are to critically examine and determine the impact of insurance companies in the business world. The broader objectives of the study could be summarized as follows;

1. The probable impact of insurance companies constriction, in term of stimulation of business activities among the people of the nation.
2. The degree with which fear of risk has been removed from the minds of investor in the economy.
3. The determination of economic situation or atmosphere, of the contribution of insurance companies had created in the business economy.
4. The probable impacts of insurance companies on investment in the nation.
5. The degree with which the economic activities of businesses are accelerated through insurance companies.
6. Finally, possible ways in which the insurance companies have contributed to economic development of business world.   

1.5    PURPOSE OF THE STUDY

          The purpose of the study is multi-dimensional. Its importance cannot be overemphasized. The insurance companies play an important role in the growth and development of the nation economy. The researchers purpose to this study therefore are summarized under the following headings;

1. To help clarify some misconception about the operation of the insurance companies, such misconception include non-payment of claims by insurers: pool of thieves etc will be clarified.
2. To identify and examine the ways in which insurance companies create in individual the sense of thrift that is how insurance practice help create in an individual the sense of thrift by saving through easy monthly installments.
3. To examine the willingness or unwillingness of business establishment in taking insurance policies. The various businessmen and individual are willing to take cover in any of the insurance policies and why some other firms and individuals do not want to take insurance policies.
4. To critically examine the contribution/impart of insurance companies to the economic development of business in Benin City, that is how they contribute to t he achievement of basic economic goals.
5. To examine how the insurers collect into pool the otherwise, uninvestable individual contribution, which provide a regular source of investment loan in the economy. Among income earners, only a few have small proportion of their disposable income as savings. This small amount which cannot be used for any meaningful investment project, can be saved through insurance contract or policy. This small amount of money from many insurance policy holders are pooled together which form a pool of investment loan.

1.6    SCOPE OF THE STUDY    

        The scope of the study is limited to the role of insurance companies in the business world especially in Edo State. Also, since Edo State is a very large state with local government areas, the researcher confined herself to Benin City, being the capital and a true representation of the whole state. Furthermore, since there is a large number of insurance companies in Benin City, a sample number of two insurance companies operating in the state capital we be chosen for source of data collection.

1.8    DEFINITION OF TERMS     

        This sub-section becomes imperative due to usage of technical terms or words that are either unfamiliar or are capable of having more than one meaning. The following under listed terms are given working definition.

Insurance: Is defined as a contract whereby a person called the insurer or assurer, agrees in consideration of money paid to him, called the premium, by another person, called the insured or assured, to indemnify the latter against loss resulting to him on the happening of certain events.

Risk: Generally, risk has to do with the occurs because of variation in outcomes or results. Uncertainty rather than certainly characterizes risks unpredictability not knowing, rather than knowing. All these are what individual has to face in his everyday endeavour as he pursues his source of livelihood.

Policy: This is a written statement of the terms and condition of a contract of agreement between the insured and insurer taking the actual insurance policy.

Premium: This is the amount paid by the assured or insured to the insurance company either monthly, quarterly, or yearly in respect of an undertaking to cover the against some specified uncertain risk.

Whole life assurance: This is suitable for those who want to provide for their dependants in the event of their death. Premiums are payable through the life of the assured.

Assurance: This is a variation in whole life assurance which is the cheapest way of insuring oneself as this given cover only for a stated number of years and nothing is paid out as claims if you live any longer.

Perils: These are regarded as the course of the risk, common examples of perils include fire, accident, theft, earthquakes, winds storm and hundred of other causes of uncertainty.

Hazard: These are the various acts or conditions, which increase the livelihood or severity of a loss.

Losses: The end result of risk is an economic loss, which usually undesirable.

Annuities: This is a method by which a person can receive yearly sum of money.

Fidelity: This is a policy aimed at protecting an employer against misappropriation of funds or embezzlement of employee appointed to a position of trust in which he may have been opportune to embezzle the company’s money.

Policy Form: After a contract has been made between the proposers and insurer, it is then recorded in a document called a policy.

Cover Note: Temporary insurance cover to enable the insured to enjoy the benefit of a policy while it is being prepared.    

Reinsurer: This is a company which accepts part of the insurance risk underwritten by another insurer with the public.

1.9    STRUCTURE OF THE STUDY

        The study has been designed to accommodate five chapters. There is the introductory chapter which takes on overviews of the study with the statement, objectives, purpose, scope, limitations; definitions of terms and background study of Benin City was clearly spell tout.

        The second chapter laid down literature review and principles of insurance operation, while chapter three laid more emphasis on methodology. The presentation and analysis of data result is done in chapter four. Summary policy recommendations and conclusion were rendered in the final chapter.