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ABSTRACT
The study is carried out to examine “the Impact of Insurance Industry on Nigeria Economic Growth”. Structured questionnaire was designed to facilitate the acquisition of relevant data which was used for analysis, the chi-square method was used to test the relationship between insurance industry and the Nigeria economy growth. Descriptive statistics which involve simple table and percentage was applied in data presentation and analysis. The testing of hypothesis shows that there is a significant relationship between the insurance industry on the Nigeria economic growth. It was therefore recommended that the federal government should use policy actions to structure better, the insurance industry in the country. This would solidify the status and operations of the insurance companies in the country. and it was concluded that people should patronize the insurance companies as well as encourage insurance companies to always pay genuine claims promptly at the occurrence of the event insured against.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
According to Kanu (2003:1), insurance companies are crucial financial intermediaries in the Nigeria financial system. The insurance sector performs its main function as risk bearing as well as mobilizing funds in the form of premiums from policy holders or insured and invest the funds in other outlets such as bonds, stocks, mortgages and government securities.
The industry plays a catalyst role by assisting the government in achieving the desired economic goals. The insurance sector as a financial intermediary, acts as middleman between the surplus units and deficit units of the economy thereby sustaining the growth of the Nigeria economy.
According Nike Popoola (2009), the director general chartered insurance institute of Nigeria (CBN) Mr. Adegboye Adepegha notes that the country h as not fully maximized the potentials in its huge population like other developing countries with huge population.
According to Anyanwu (2002:1), insurance is the modern man’s means of protecting himself against losses. It is the device by which man is able to protect himself against risks. In other words, insurance is the system by which an insurance company upon the receipt of a certain amount of money from a person agrees to pay compensation or render certain services to that 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.
Generally, we have life and non-life insurance business in the economy. According Kanu (2003:24) he envisaged that life Insurance is a branch of insurance that concerns the insurance of the individual persons. It gives income to the person or his dependants at the end of a given period or at the death of the assured. While non-life insurance concerns the insurance of property and other non-human situations as the subject matter.
Life insurance business has suffered setback with its insignificant contribution to the industry’s premium which have an impact in the growth of Nigeria economy. In developed economies that have strong insurance industries, the life insurance usually drives the sector by contributing the highest, unlike what is obtained in Nigeria, where it contribute just about 16 percent of the industries premium. According to the NAICOM statistics (2008), world’s life premiums stood at #2.5tillion from a total premium of #54.7 billion.
NICON (2008), in Nigeria the life insurance raked in #0.19 billion out of total premium of $1.24 billion in the year under review. Life insurance has the potential to stimulate individual patronage through innovative products, while also carrying less risk compared to non-life insurance business. Due to preference for non life insurance in the past, most insurance company employees prefer to work with non-life than life business. This has subjected life insurance business to human capital problem because workers do not understand them.
Since a branch of the insurance business has been hindered due to some critical circumstances, this research paper would help the industry to resuscitate the lost glory in the declined branch of the business for full positive impact in the growth of Nigeria economy.
1.2 STATEMENT OF THE PROBLEM
The insurance industry has been managed and controlled by the socialists. But since it was capitalized by different stakeholders, they have been faced with different problems which have been hindering their success in the growth of the economy. They are:
Poor supervision by the regulators.
Highly fragmented industries.
Insufficient capital.
Perception of Nigerians that it does not pay on claims.
Lack of adequate and computerized records on policies.
Over staff.
However, most marketing firms and product developers, especially in the insurance industry ignores the significance of marketing research.
It is observed that most insurance firms do not sources for relevant information through marketing research before embarking on new product development projects. As a result, most insurance firms face liquidation e.g. Globe Insurance CO. Ltd., Rivbank Insurance Co, Destiny Insurance Co. Ltd. Etc. Their new products did not stand the test of time and these recognized problem called for this research.
1.3 OBJECTIVES OF THE STUDY
- To enjoin the injection of much needed capital into the system by the government
- To ensure that the consolidations that are taking place will address the most critical problem it faces.
- For market perception of its services
- To position the industry to ride the economic boom of the country both in oil and non-oil sectors.
- To regain the confidence of numerous clients.
- To analyze the problems and prospects of the industry and give suggestions on how the performance of the impact of insurance on the economic growth of Nigeria can be improved.
1.4 RESEARCH QUESTIONS
- Is NAICOM the only regulator of the insurance companies?
- Do insurance industries mobilize funds for economic growth and development?
- Is the insurance industry structured or positioned to meet the needs of investors in the economy?
- Has the insurance industries adapt to modern changes in technology?
- Does insurance industry has any new package or product for market perception of its services, so as to regain the confidence of its clients?
1.5 RESEARCH HYPOTHESES
Based the research questions the following hypothesis were generated:
Ho: There is no significant relationship between insurance industry on the Nigeria economic growth
Hi: There is a significant relationship between the insurance industry on the Nigeria economic growth.
1.6 SIGNIFICANCE OF THE STUDY
The benefits of impact of insurance industries in the growth of Nigeria economy cannot be left behind. It revolves round the students, government, organization, institutions and amongst others. Furthermore, individuals who may have interest in insurance business will find this work useful. Students can source this paper as secondary information, thereby enhancing their knowledge generally on the concept of insurance business.
Finally, it is valuable to insurance companies as it will enhance a sound decision making in the system. This in essence will solidify the system before four to five years ahead.
1.6 SCOPE AND LIMITATION OF THE STUDY
This project covers the impact, challenges and prospects of insurance industry in the areas of economic growth with special reference to NICON AND HALLMARK INSURANCE PLC. The factors that militated against the success of this work are financial factors, time factor and attitude of the insurance workers towards accepting the questionnaires. Financial factor and time factor are like two facet coin, when you manage to get capital resources necessary for the research, you might not have the time factor to explore the work. Also, the attitude of the insurance workers, most of them are not skilled in the job and as such they find it difficult to answer the questions stipulated for them while some dump it inside their drawer.
1.8 ORGANIZATION OF THE STUDY
This study is organized into five chapters. chapter one takes on overview of what is contained in the study such as background of the study, statement of the problem, objective of the study, research hypothesis, significant of the study, scope and limitation of the study and definition of terms.
while chapter two takes a look at what other scholars has written concerning the subject matter. The chapter three deals with the source of data, research design, population of the study, sampling and sampling technique and also variable in model, model of specification and model of analysis.
The chapter four is about presentation, analysis of data and interpretation of result and hypothesis testing.
The chapter five give the recommendation, summary, and final conclusion and recommendations of the research work done.
1.9 DEFINITION OF TERMS
- PREMIUM- The money paid to the insurer by the insured.
- INSURANCE POLICY- A typical legal document drawn up by lawyers and designed to describe exactly what is covered e.g. motor, marine insurance etc.
- INSURER- The insurance company or underwriters.
- INSURED- The policy holders or investors.
- COMPENSATION- To indemnify for loss. Security against damage or loss.
- INSURANCE FUNDS- financial resources or money, which is normally channeled, back into the economy.
- PERILS- Serious danger
- RISKS- Uncertainty as to financial loss.
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