THE IMPORTANCE AND ROLES OF INSURANCE INDUSTRY IN NIGERIAN ECONOMY

By

AGHAJI HENRY NWABUEZE

Presented To

Department of Accountancy

TABLES OF CONTENT

Title page

Approval page

Dedication

Acknowledgement

Table of contents

CHAPTER ONE:

INTRODUCTION

1.1 Background of the study

1.2 Statement of problem

1.3 Objective of the study

1.3 Scope of the study

1.4 Definition of terms

CHAPTER TWO

2.0 Review of related literation

2.1 Meaning of insurance

2.2 Types of insurance

2.3 Roles and importance of insurance industry

2.4 Summary of related literature

CHAPTER THREE

3.1 Summary

3.2 Findings

3.3 Recommendation

Reference

CHAPTER ONE

1.0 INTRODUCTION

Insurance industry is a very vital aspect of Nigeria economy,

and its importance and roles can not be overemphasized, in this project work the researcher want to identify the history of insurance industry in the Nigerian economy and also the actual roles and the importance of insurance industry to the common man and the society at large, such roles and importance includes in every sector of the economy, like, the banking sector, Agricultural sector, aviation sector, Business sector etc.

The research work also treated the types of insurance industry in Nigeria, here the researcher compared it with the types operated overseas, and the method used to the standard. Also the project work, focused on the problem encountered by the industry and all the necessary measures that can be used to improve Nigeria insurance up to the world's standards. Such problems are viz:

(a) Lack of government support;

(b) Illiteracy in the part of the common man, since Nigeria is still developing;

(c) Lack of adequate infrastructures etc. and the measures to solving them are:

i. public awareness campaign

ii. Adequate finding by the government

iii. Co-operation of the government and the insurance industry to help improve the economy etc.

1.1 BACKGROUND OF THE STUDY

The development of insurance industry, in Nigeria has passed

through three distinguishable phases: the initial open door phase, roughly between 1990 and 1960, the transitional phase which concludes with the first national development plan period, 1962 - 1969 and the take off phase (1990 to the present times), withness the toughening of the framework of government regulation and represents a radical change in government's attitude toward the control the industry.

THE COLONIAL ERA:

There was when the insurance market were dominated with European companies who monopolies the insurance industry, during this early period, a number of factors did not ensure an active market. Economic activity is at low level, there was no insurance consciousness by the populace, due to non-existence of some legislation, like that of motor vehicle and other things, it made Nigerian market to grow in a low pace and also the third world war hindered the growth of the market.

After the war, Nigeria experienced a lot of improvement, and after that was the introduction of the worker's compensation act of 1940 and the road traffic act of 1945 which came into force on 1^st April 1950. Due to the increase in insurance industry in Nigeria.

TRANSITIONAL PHASE:

This was after Nigeria had their, independent, there was a rapid increase in the number of company establishment, and an increase in insurance industries and some of the foreign companies were turned to indigenous companies. The first step was to regulate the operations of the insurance companies to ensure a sound and efficiency insurance market, which would not only discharge its duties to members of the insuring public but would constitute the solid foundation for future growth and development. It was also discovered that some of the insurance companies are not investing in Nigeria, because there was no provision in the law. This lead to the Act of 1964 which states that any insurer should invest two - fifth of its premium in Nigeria.

As Nigerian's insurances industry increases, it was discovered that it is operated by some inexperience people, and it led to problems, and the government arrested the situation by appointing Dr Karl Reichel in October 1966 a United Nations expert. The most far reaching action of government, which improves insurance business in Nigeria was the establishment of the National Insurance Corporation of Nigeria (NICON) in 1 July, 1969. in June 1970 the post of the superintendent and deputy superintendence was credited. This phase experience increase in adoption of direct mechanism, a charging situation which was the inevitable result of the growing belief that effective control of the economy must necessarily accomply the achievement of political independence.

PRESENT STAGE:

These were all the problems and weakness, in the previous stages was corrected, and the government had control or exclusive public ownership of very strategic industries. The policy of the Federal Military government to participate in a number of key industries was formulated and implemented. They set up their own institutions and also participated in equity holding of viable foreign owned enterprises. The government also helped in the promotion, supervision and control of insurance industry in other to protect the investing public.

One of the recent development is the creation of reinsurance, which was mainly operated by Europeans and others. And also the lunch of the National health Insurance Scheme (NHIS) by president Olusegun Obasamnjo GCFR on 29^th may, 205.

The present stage has thus exhibited the features of the "take of phase", the market is greatly boosted by legislative provisions for compulsory insurance; set owned industries dot the industrial map of the company, again with the indirect effect of boosting the insurance business new legislation is passed with a view to indulgencing the insurance industry and providing a strong financial base for the companies and ensuring a high standard of insurance practice in Nigeria.

1.2 STATEMENT OF PROBLEM

In this section the researcher focused on the prevalence

problems that has led to the insurance industries in Nigeria not performing so well. These problem militating against the insurance industries roles in Nigeria economy are as follows:

1. Ignorance in the part of the member of the public.

2. To a certain extent, lack of experts in the field.

3. poor infrastructures and information technology

4. limited number of insurance company with a maximum capacity to sustain heavy loses

5. lack of information

6. non-compliance/disclosure of material fact by the subscribing public to the insurance company.

7. poor management of the existing insurance industry

8. poor liquidity in the some insurance industries

1.3 OBJECTIVE OF THE STUDY

The objectives that made the researcher to go into this topic

are as follows:

i. To find out the major roles and importance of insurance industry in Nigeria economy.

ii. To find out a way to increase the roles to the standard in the world today.

iii. To find out if there are possible approach, which can be used to eliminate the poor standard of insurance services in Nigeria.

iv. To bring to the knowledge of the public the importance of insurance industry in the economy.

to make suggestion and recommendations that could be useful in

solving the identified problems.

1.4 SCOPE OF TH STUDY

In a study of this nature, one would like to gather/accumulate

data from many areas. And due to the important of insurance industry in Nigeria economy. The researcher choice to consider the run down of the roles and importance of the industry to the whole economy of the country.

1.5 LIMITATION TO THE STUDY

Besides, there were many other problems tamed up during the

research work in which some of them are as follows;

TIME CONSTAINT:

The time at my disposal as a student to carry out this topic is extremely short, coupled with other academic commitments.

FINANCIALCONSTRAINT:

As a student, their was not enough capital to spend in transport and fact finding and borrowing of necessary literature that would have helped in the writing of this research work.

MANAGEMENT CONSTRAINT:

The respondents, especially top official in many insurance organization who has the answer at their disposal, some of them refused to respond or corporate as expected.

All this problems notwithstanding, did not prevent the continuation of the research work.

1.6 DEFINITION OF TERMS

RISK: It is the centre of insurance, and its has several definition which includes; risk as the chance of loss, which implies that chance of loss may be used to indicate a state where there is an exposure or a possibility of loss.

INSURABLE INTEREST:

It is the "legal right of insure", this simply implies that a person can not have a binding contract without being in possession of the insurable interest. And insurable interest is what distinguish insurance and gambling.

INDEMINITY:

It is the monetary compensation given by an insurer to an insured following a loss caused by an insured risk.

SUBROGATION

It is an exercise, for one's won benefit, of rights or remedies possessed by another against third parties.

CONTRIBUTION :

It is the right of an insurer to call upon others similarly but not necessarily equally liable to the same insured to share the cost of an indemnity payment.

PROXIMATE CAUSE

This means the active efficient cause that set in motion a train of event which brings about a result without the intervention of any force started and working actively from new and independent source.

PREMIUMS

It is the monetary consideration passing form the insured to the insurer form their undertaking to pay the sum insured in the event of the risk, insured against happening. It is a necessary element in the formation of an insurance contract.