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ABSTRACT
This research work is set out to analyze immensely the importance of insurance to corporate existence and it’s profitability. Chapter one of the work, deals with the existence of insurance, it scrutinizes gradually the important attributes of insurance that lead to its existence. Chapter two lay more emphasis on review of related literature in relation to the practices of insurance business in Nigeria, the role of insurance industry in the economy and the profitability of insurance business. While chapter three focuses on the research methodology. Chapter four deals with data presentation and analysis, whereas chapter five is the summary of research findings, recommendation and conclusion. It was found out that the importance of insurance to corporate existence cannot be over-emphasized considering the roles played by insurance in the development of a nation’s economy
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Winston Church hill once referred to insurance as “bringing the magic of averages to the rescue of million.” This magic is the outcome of voluntary economic co-operation by human beings. Before this, was the working out of the law of average, which tell the profitability, or change that an event will, or not happens. Insurance is an arrangement by which one party (the insurer) promise to pay another party a sum of money, if something unexpected should happen which cause the insured to sustain a financial loss. The responsibility of paying such losses is then transferred from the policy holder to the insurer. In return for accepting the burden of paying for losses when they occur, the insurer charges the insured a price, the insurance premium.
The development of the insurance industry in Nigeria, dated back to 1921. Furthermore, growth was not phenomenal until the Nigeria economy of the 60s and early 80s, often described as the “mush room era” of the market.
The importance of insurance to cooperate existence cannot be over emphasized, for insurance is a system in which the loss of an individual or corporate body, are spread over a large group. The entirety of a corporate business, comprising of it capitals, Assets, trade debtors and even its members are protected by the system of insurance, which sole aim is risk management. Risk exist in life and business, for every life and business have basic risk in the course of their operations. Every corporate body has a chance of suffering a loss, economic risk, injury and so on.
A lot of opinion exists as to the primary objective of going into any business. Most people have always argued that the ability to make profit has always been the motivating force before going into any business.
Onyrna (1988) Writes: In the so called capitalist world, profit is the bottom line for every enterprises, the end for all the struggles and hard work of entrepreneurs all over the world.
The insurance company in this country is not an exception in this drive to make profit.
It is no longer surprising to see new insurance companies springing up almost every year in the country. The number of insurance companies
Obviously, a lot of mal practices, especially, no claim settlement crept into the industry which the earlier laws of 1961 and 1965 could not effectively cope with.
There were cases of insurers denying liabilities on the rubbery of a car on the ground that only theft cover is granted springing up daily testifies to the fact that the insurance industry is making it real good in terms of profit generation.
Having established the fact that any form of loss can befall a corporate body and insurance being the only solution to managing all forms of risks that may result to losses, must strive to remain in business, thereby it makes profit out of business.
1.2 STATEMENT OF THE PROBLEMS
The theme “that insurance provides security and peace of mind” is a sure one. But not all individual and corporate bodies are aware of this fact. Since corporate bodies tend to retain their business risks, which when result to a loss, have adverse effect on their businesses. Therefore, the insurance industry must strive to acquaint this corporate bodies what they stand to gain should they obtain an insurance policy.
Obviously, despite the existence of insurance industry, they (insurance industry) have been faced with very many problems which hinder this existence. For instance, lack of insurance facilities in some of the insurance companies. Numerous dispute claims between insurer and the intermediate as regard the performance of their functions. These make insurance to look somehow less important to corporate existence and therefore, hinder the profitability of insurance companies.
The value of insurance, not only to corporate existence, but also to the economy of the country, is not easily appreciated by the general public.
The fact that insurance is an expert in loss prevention is gradually becoming known but parts played by branches such as fire in fire protection and crime protection are still not widely known. The public are slow to recognize that in many respects, insurance provides what almost amounts to a social service, a facet which is more readily appreciated where other industries are concerned.
These and other factors will constitute the focus of this project work.
1.3 PURPOSE OF THE STUDY
The function of the insurer is to make it possible for both business and personal activities to continue in a normal manner without disruption by accident and other unforeseeable events. The essential function of insurance is not simply to pay the motor accident claim or fire damage claims or to pay the court awards and also to ensure continuation of normal activities following a loss occurrence, but to also benefit from its business. Therefore, this study will analyze the following:
(a) The reactions of the insuring public against insurance industry and the solution to the industry for future purpose
(b) The value of insurance, not only for individuals, but also to corporate existence.
(C) To determine the extent to which variables such as volume of premiums loan and advances, investments etc., affect an insurance company profitably.
1.4 RESEARCH QUESTION
Answer will be provided for the following questions
- What has been the reaction of the public towards insurance?
- What is the profit situation of the company?
- Is Insurance policy necessary?
- Have you ever taken an insurance policy, if yes what kind?
- How important do you think insurance is to corporate existence?
- Has claim settlement affected your company’s declaration of profit for its shareholders?
- If yes how?
- The volume of risks assumed by your company does it affects its profitability?
- If yes how?
1.5 RESEARCH HYPOTHESIS
Analysis will be provided for the following research hypotheses:
- Null Hypothesis – Ho: There is a negative impact of insurance on corporate existence.
- Alternative Hypothesis – Hi: There is a positive impact of insurance on corporate existence.
- 2. Null Hypothesis – Ho: The volume of risks assumed by an
- Insurance Company do not determine its profitability.
- Alternative Hypothesis – Hi: The volume of risks assumed by an insurance company determines its profitability.
1.6 SIGNIFICANCE OF THE STUDY
The importance of this study will enable the insuring public to know the concept behind insurance practices and the rules guiding the insurer and the insured. It is the aim of this study to state clearly that insurance industry is not set up to collect premiums only but to reduce the risk whereby the insured is given peace of mind that in the event of damage or loss to his property or business, a certain sum of money will become payable.
On the policy holder’s perspective, the value of insurance to a corporate body and the world at lar ge, cannot be overemphasized, therefore, this work will give all insight into the value of insurance.
For the academic aspect, this study is important to the students and tutors in the sense that it broadens the knowledge of the students and tutors and their scope of study.
1.7 SCOPE OF THE STUDY
The scope of this study covers corporate bodies and insurance companies in Port Harcourt. The city has large number of corporate bodies and insurance companies. Therefore, where there are commercial activities, insurance companies are always found in such areas. This enables the researcher to have access to information and statistical data.
1.8 DEFINITION OF TERMS
- CLAIMS:- This is defined as a situation whereby the insured is oblige to demand for his legal right or call for settlement when damages or losses occur.
- CORPORATE:- Is therefore defined as those corporate bodies, forming a corporation such as the BBC at involving or shared by all the member of a group.
- CORPORATE EXISTENCE:- This is also defined as a corporate body, exist to enter into contract of insurance for the benefit of itself, its employees or third party as provided by the law.
- INSURANCE: – Is therefore simply define as an arrangement by which an insured transfer his risk (uncertain tendency to loss) to the insurer at an adequate fee called premium, on promise that the insured shall be indemnified or compensated upon the occurrence of the insured event.
- INSURED:- Is defined as the person who has made an agreement with an insurance company, by transferring risk to the insurer and also to receives indemnify it for instance illness or damages occur.
- INSURER:- This is defined as the person to whom the burden of risk is transferred under his care. And also, as a person with knowledge, skill and underwriting resources to indemnify,, evaluate, and measure risk exposure, necessary for acceptance or rejection of the proposed for insurance.
- POLICY HOLDER:- Is simply defined as a person or group of people that holds an insurance policy.
- PREMIUM:- Is defined as the consideration or a token amount paid by the insured in an insurance contract.
- PROFITABILITY:- Is therefore, defined as the process of providing a genuine policy, for the benefit of the people.
- RISKS:- Is defined as the uncertain tendency of loss occurrence, that is to say, risk is that process of or happening of a hazardous events.
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