THE ROLE OF INSURANCE COMPANIES IN THE DEVELOPMENT OF NIGERIAN ECONOMY

ABSTRACT

This study was intended to evaluate the role of insurance companies in the development of Nigerian economy. This study was guided by the following objectives; to know the roles of insurance companies in the development of Nigerian economy, to help the nation at large in knowing the roles all insurance companies play in the country, to find out services of insurance companies to Nigeria, and to know the advantages of insurance companies. The study employed the survey design; questionnaires in addition to library research were applied in order to collect data. Primary and secondary data sources were used and data was analyzed using the chi-square statistical tool at 5% level of significance which was presented in frequency tables and percentage. The respondents under the study were 28 staff of an insurance company in Lagos Metropolis. The study findings revealed that the role of insurance companies in Nigeria include but not limited to helping in reduction of financial risk; provide protection from loss due to unforeseen circumstances; provide safety and security; promote economic growth and serve as financial intermediaries. The services of insurance in Nigeria include but not limited to life insurance; health insurance; auto insurance; agricultural insurance; deposit insurance; mortgage insurance and property insurance.

The outcome of the study will make a huge contribution of the sub-sector to the growth and enhancement of the country.

CHAPTER ONE

INTRODUCTION

Insurance is the modern means of protecting himself against losses.  It is the device, by which man is able to protect himself against risk. In other words, insurance is the system where an insurance company upon the receipt of a certain amount of money from a person, agrees to pay compensation or render certain services, to the person, if, and whenever that person suffers the kind of loss that was specified in the insurance agreement.  What this means is that insurance is the means by which people can save money to take care of unforeseen dangers and accidents.  When a person agrees to take insurance, policy to protect himself against certain accidents, he will pay a sum of money (which is called premium) to the insurance company.  Once the insurance company (who is called the insurer) accepts that premium from the person who intends to take insurance cover (such a person is called the insured) the insurer has thus agreed to pay an amount of money (called claims or compensation) to the insured whenever the insured loss occurs.  This agreement is usually contained in a document called a policy.

Premiums, that is the cost of purchasing an insurance, are not fixed arbitrarily.  They are usually calculated by insurance experts, mathematicians called actuaries.  High risks usually attract high premiums.  For instance, if a 20-year old man is taking a life insurance policy, his premium will be much less than that of an 80-year old man who insists on taking a life insurance policy.

Since insurance contract as may other commercial, activity.  It is these principles that make for its validity, insurance contract is subject to the general principles of Nigerian Law not only does it affect insurance, but it operates in every other commercial aspect of life.  They are as follows:  offer and acceptance, consideration, capacity to contract, legality, consensus ad idem (parties should be of one mind) and intention to create legal obligation/ relations.

BACKGROUND OF THE STUDY:

Insurance did not emerge completely and perfectly, which in every detail, but, it developed slowly over the centuries in order to satisfy the needs of those concerned with the protection of individuals, business, other organisation and governments.

Insurance which is believed to have originated from the ancient practices of the inhabitants of the valleys of Rivers Tigris and Euphrates in present day Iraq in about 400 BC rose to the earliest trace of interest in modern insurance in England, dates to 1666AD.  Up to the Lloyd’s of London which occupies the central position in today’s global insurance market, started as a small coffee house which was patronized by merchants, bankers and insurance underwriters.  Originally, Llyods was the world’s dominant insurer of marine risks.

Although modern insurance started in Nigeria in the early part of the 20th century, historians and sociologists argue that what is today known as insurance was totally alien to indigenous Nigerian culture.

Presently, insurance has grown to meet the increasing demands being made on the practicing insurers.  Following the historical development of insurance, it should be observed that covers those risk affecting, individuals, business organization and government as an insight into the protection of risk and form of savings to the insured.

However, insurance has extended far beyond the actual protection of risk, but is concerned with the development of Nigeria economy at this particular time.

STATEMENT OF THE PROBLEM

Insurance services have beenacknowledged by both individuals and corporate bodies to be active and productive tools for the remitting of risks which are very important for economic development. This service assists individuals to perform their economic activities not considering the adverse impact of this risk.

Irrespective of this, the sub-sector is confronted with numerous challenges like deformation, high rate of inflation, different government policies and uncultured practices and fraudulent tendencies from both the insuring public and the practitioners. It has become a necessity and paramount to carefully look deeply into the importance of the insurance business in a growing economy by testing the major development pointers and suggest the needed steps the authority should inflict in other to adopt more important insurance system.

OBJECTIVES OF THE STUDY:

The broad objective of this study is to know the roles of insurance companies in the development of Nigerian economy.  Bit it individuals or corporate bodies, or government, the objectives of this study will help the nation at large in knowing the roles all insurance companies play in the country.

So also is the government who needs a good balance, of payment in the country, in this process, the insurance companies plays a great roles in their own part.  By this process, the insurance companies are able to do as long as they are able to utilize and carries the risks well and also utilizes their financial resources properly.  For them to do this, is specifically for the objectives of the study which includes:

1. The role of insurance companies in Nigeria
2. The services of insurance companies to Nigeria
3. The advantages of insurance companies
4. To make recommendation based on findings,
5. To create awareness of the importance of insurance to the public.

SIGNIFICANCE OF THE STUDY

The outcome of the study will make a huge contribution of the sub-sector to the growth and enhancement of the country.

SCOPE OF THE STUDY

The study is centered on insurance company in Lagos Metropolis.

Limitation of the study

Time and financial constraints are the two factors that limited the research work.

RESEARCH QUESTIONS

1. What are the roles of insurance companies in Nigeria?
2. What are the services of insurance companies to Nigeria?
3. What are the advantages of insurance companies?
4. How can the awareness of the importance of insurance be created to the public?

HYPOTHESIS

There is no significant relationship between insurance companies and the development of Nigerian economy.

 DEFINITIONS OF TERM

The following terms are defined based on the way they are presented in this study.

1.  Premium:

Is the monetary consideration passing, from the insured to the insurer for their undertaking to pay the sum insured in the event of the risk insured against happening.

2.     Insurance companies:

These are the insurers that cover individuals, corporate bodies and government against risks when sum of money is being paid to them.

3.     Insurable companies:

This is the type of risk that can be insured.  That is, insurers easily accepts – covers on this type or risk.

4.     Risk Management:

A systematic procedure devised to minimize the adverse effects of possible financial loss by identifying potential source of loss, measuring the consequence of a loss and deciding how each risk can be treated.