EXAMINATION OF FACTORS THAT AFFECT THE GROWTH OF INSURANCE BUSINESS IN NIGERIA
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Background of the study
Regulation of Nigeria’s insurance industry has become substantially intensified in the last two decades. This paper critically evaluates the philosophy and challenges of insurance regulation in the context of post-authoritarian governance and increasing economic liberalization in Africa’s potential largest insurance market. The last two decades has witnessed among others, government regulatory intervention through the establishment of a regulator and mandatory recapitalization.
Temporally, the trajectory of developments in the last decade which coincides with post-authoritarian military rule in the country is significant. As a developing economy, the Nigerian insurance industry presents an example of untapped and gross under-utilization of its boundless potentials. Adopting a qualitative approach, this paper explores the factors responsible for the industry’s slow growth in comparison with its huge human and material resources and what lessons might be learnt to chart a way forward.
The first part of the paper traces the origin of insurance in the country to its colonial heritage. The second part examines the rationale for regulating insurance business. The focus then shifts to regulation of insurance in Nigeria. The paper is yet to be concluded as there are outstanding issues for analysis in on which research is still in progress.
Nigeria, a country of more than 140 million people with a landmass of about 923,768.64sq. km and immense human and material resources is a former British colony. Hence, the country shares almost all its political and economic settings from its former colonial heritage. Before the introduction of the modern form of insurance, some form of social insurance had existed in the Nigerian society. These social schemes evolved through the existence of extended family system and social associations such as age grades and other unions (Osoka, 2008). Until 1966, Nigeria copied British parliamentary system of government. This British system still dominates aspects of the country’s socio-economic settings. For instance, the legal practices in Nigeria still reflect its colonial heritage. Economic institutions such banks and insurance companies, in practice, copy the British style of conducting their businesses.2 However, the country’s progress since independence in 1960, has however been undermined by long years of military rule, political instability and systemic corruption. In 1999, a civilian government was finally elected to office after a successful political transition process.
The development of insurance are intertwined with the advent of British trading companies in the region and the subsequent increased inter-regional trade. Increased trade and commerce led to increased activities in shipping and banking, and it soon became necessary for some of the foreign firms to handle some of their risks locally (Uche and Chikeleze, 2001). Trading companies were therefore subsequently granted insurance agency licences by foreign insurance companies. Such licences made it possible for such firms to issue covers and assist in claimssupervision.
The first of such agency in Nigeria came into force in 1918 when the Africa and East Trade Companies introduced the Royal Exchange Assurance Agency. Other agencies included Patterson Zochonis (PZ) Liverpool, London and Globe, BEWAC’s Legal and General Assurance and the Law Union and Rock (Osoka, 2008). There was an initial slow pace of the growth of the insurance industry in the country, particularly between 1921 and 1949. This has been traced to adverse effect of the World War II on trading activities both in United Kingdom and Nigeria. As soon as the war ended, business activities gradually picked up again, and insurance industry in Nigeria began to record remarkable improvement in growth. It was not until 1958 that the first indigenous insurance company, the African Insurance Company Limited, was established (Nigeria Re, 1993). At independence, only four of the then 25 firms in existence were indigenous.
1.2 STATEMENT OF PROBLEM
The problem militating against the development of insurance in Nigeria are: Inadequate orientation about insurance and its benefits in the rural communities One of the earliest and the most resilient problems the insurance industry, and the broking firms in particular has been contending with and will continue to contend with is the problem of ignorance as the benefits of insurance products. Many do not know what insurance is all about; even the educated ones.
Some believe insurance is a smart way of extorting money from the people. The problems created by some dubious practitioners who will collect premium without remitting same to the appropriate quarters do not help matters either.
Poor knowledge of the benefits of insurance by Nigerians It is believed that insurance practitioners, especially the brokers will still need to do more in this area, especially in educating the public on the numerous benefits of insurance products and how such benefits can be harnessed. Furthermore, as a result of the persistent political and economic crises, we have been unable to educate the public about what they stand to gain from insurance.
Poor attitude of Nigerian towards insurance business in Nigeria
Hence the old attitude towards the insurance that was based on ignorance keeps rearing its ugly head against the growth of the industry, especially the broking subsector.
1.3 OBJECTIVE OF THE STUDY
The aim of this research work is to examine the factors that affect the growth of insurance business in Nigeria.
The specific objectives of this research work are to:
1. To find out how insurance cover are sold to the consumers.
2. To examine the extent of growth of insurance in Nigeria
3. To find out the factors militating against the growth of insurance business in Nigeria.
4. And also proffer solutions to the problems identifies.
1.4 RESEARCH QUESTIONS
The following research questions were formulated by the researcher:
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How is insurance covers sold to the consumers in Nigeria?
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What is the role of insurance policy in the development of Nigeria?
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What is the extent of growth of insurance business in Nigeria?
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What are the factors militating against the growth of insurance business in Nigeria?
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How the problems militating against the development of insurance in Nigeria be solved?
1.5 RESEARCH HYPOTHESIS
The following are the hypothesis formulated by the researcher in this research work:
HYPOTHESIS ONE
Ho: Insurance covers is not sold expensively to the consumers in Nigeria.
H 1: Insurance covers is sold very expensive to the consumers in Nigeria.
HYPOTHESIS TWO
H 0: Insurance business do not have any role to play in the development of Nigeria.
H1: Insurance business has significant role to play in the development of Nigeria.
HYPOTHESIS THREE
H0: insurance business has no significant growth in Nigeria
H1: Insurance has significantly grow in Nigeria.
HYPOTHESIS FOUR
H0: there is no problem militating against the growth of insurance business in Nigeria.
H1: there are so many problems militating against the growth of insurance business in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
This research work will be of immense help to:
The student: it will help the researcher to know more on the factor militating against the development of insurance in Nigeria.
The Stake holders: this study will be of great importance to stake holders as it will enrich their knowledge on the effects of this problems on investment.
Insurance company: this will equally be of help to the insurance companies and financial institutions in Nigeria because when they abide by the recommendations provided by the researcher it will help them in time of financial crisis.
The country at large: this study will be of great importance to the country Nigeria as it will help the policy makers to prorogate laws that will guide insurance contracts in Nigeria.
1.7 SCOPE AND LIMITATION OF THE STUDY
The area of this research work is Enugu metropolis were the NICON insurance is situated and the study is on the limitations to the development of insurance in Nigeria.
The researcher in carrying out this study encountered numerous problems, which includes:
i) Fund.
ii) Time.
iii) Lack of research materials
iv) Responds of the respondents
i) FUND – This included lack of enough fund to move around and visit the various areas in the state, and also lack of money to buy enough research material which constitutes on impediment of to researchers high cost of transportation in the city due to long distance also imposed its own limitation on the researcher.
1.8 OPERATIONAL 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 or uncertain loss
INSURANCE INDUSTRY: 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
ECONOMIC DEVELOPMENT: Economic development is the process by which a nation improves the economic, political, and social well-being of its people. The term has been used frequently by economists, politicians, and others in the 20th and 21st centuries
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), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights 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
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