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Abstract
The study examines the implication of inflation on life assurance claims. This study is a descriptive survey aimed at using a questionnaire to collect data on problems militating against the implication of inflation on life assurance claims. The population of the study comprised of the implication of inflation on life assurance claims. The study covers Rivers State with reference to three selected insurance firms including Cornerstone Insurance, Nicon Insurance Limited and Oasis Insurance Group. The simple random sampling techniques were used to draw one hundred (100) respondents from the selected insurance firms in Port Harcourt. The main instrument for the study is a self-designed questionnaire on the implication of inflation on life assurance claims. The researcher went personally to the selected insurance firms in Port Harcourt, Rivers State and administered the questionnaire to prospective assured and assurers. The chi-square statistical test was employed this test was used due to the nature of the questionnaire designed for the hypothesis testing. The hypotheses will be tested electronically with SPSS Version 22. The study revealed that there is influence of inflation insurance business in Nigeria. The study also showed that Inflation affects life insurance underwriting and that inflation affect insurance policies in Nigeria. Based on the finding of the study, we recommend that the fact that inflation trend affects the insurance firms negatively; we recommend that efforts be seriously made to overturn the negative impact into a positive impact, the inflation tendency should be checked by the government of Nigeria to forestall the negative financial performance since the insurance firms is expected to trend and the proactive action should be mounted to cheek the effect of growth rate on inflation.
CHAPTER 1
INTRODUCTION
1.1 Background of the Study-
Insurance as a capital intensive industry generates long-term capital which is required to build infrastructural projects that have a long gestation period. Like every other business sector the industry follows a business year calendar. At the end of every business year the performance of the industry is weighed. The performance of any firm not only plays the role to increase the market value of that specific firm but also leads towards the growth of the whole industry which ultimately leads towards the overall prosperity of the economy. Measuring the performance of insurers has gained importance in the corporate finance literature because as intermediaries , these companies are not only providing the mechanism of risk transfer but also helps to channelizing the funds in an appropriate way to support the business activities in the economy . Insurance companies have importance both for businesses and individuals as they indemnify the losses and put them in the same positions as they were before the occurrence of the loss. In addition, insurers provide economic and social benefits in the society i.e. prevention of losses, reduction in anxiousness, fear and increasing employment. Therefore, the current business world without insurance companies is unsustainable because risky businesses have a capacity to retain all types of risk in current extremely uncertain environment.
Macroeconomics encompasses the study of the rate of consumption of goods and services by consumers with a view to studying the effects. When the demand for goods exceeds the supply, it may lead to unwanted macroeconomic factors like inflation and unsustainable periods of economic activities. This sort of intense period of economic activity is known as a period of economic boom. The reason it is undesirable is because it is not sustainable and often leads to a period of downturn, also known as a depression. Usually, inflation pulls an adverse consequence on the general price level. It discourages investment in financial assets given that it reduces the present value of the expected benefits. This is because inflation is assumed to have long-run effect on insurance penetration of Nigerian insurance industry. It covers Insurance industry operational in Nigeria. This involved obtaining and combining data on Life and Non-Life sectors of the insurance industry, i.e. total industry data were used.
1.2 Statement of the Problem
It is believed that while high inflation is bad for an economy because of its adverse effect on economic performance, zero inflation is equally harmful because it will lead to eventual stagnation of the economy since its presence at a mild level is needed for economic growth. The Nigerian insurance industry deals primarily with transferred risk evidenced in the form of premiums paid by insured to insurers. Given the uncertainty in the time of occurrence of risks, it proves very risky for insurers not to have money of sufficient value to match the loss incurred at any time by the insured. This sort of risk facing the insurance industry can be influenced by macroeconomic factors. There exist a lot of studies on a wide number of macroeconomic variables. Operations of the selected variables and the insurance industry were covered from 1985 to 2016. 1985 was chosen as the base year of the study because it was a year following the beginning of the Structural Adjustment Programme in Nigeria; a period that marked the upward swing of the selected macroeconomic variables in this study from which they have not gone down till date.
1.3 Objectives of the Study
The main objective of the study is to examine the implication of inflation on life assurance claims. The specific objectives are as follows;
1. To examine the extent to which inflation influences insurance business in Nigeria.
2. To the extent to which inflation affect life insurance underwriting.
3. To examine the extent to which inflation affect insurance policies in Nigeria.
1.4 Research Questions
1. To what extent does inflation influences insurance business in Nigeria?
2. To what extent to which inflation affect life insurance underwriting?
3. To what extent does affect insurance policies in Nigeria?
1.5 Research hypotheses
H01: There is no influence of inflation insurance business in Nigeria.
H02: Inflation does not affect life insurance underwriting.
H03: Inflation does not affect insurance policies in Nigeria.
1.6 Significance of the Study
This study will be of immense value or beneficial to life assurance companies and their intermediaries because it will increase their knowledge of the problems of inflation in life assurance underwriting and aid them in adopting strategies to overcome the identified problem and will also help students for further research or in their academic furtherance.
It is believed that this study will go a long way in educating Nigerians, and enlighten them on the benefits of purchasing life assurance policies. It ensures that the financial growth of life assurance companies is met.
Moreover, this study will go a long or will reveal the importance of life assurance to the entire society. Having mentioned the beneficial role played by life assurance companies in the survival of business and individual within the society. It is as difficult like and uphill task for one to live without life assurance because man by nature is exposed to different kinds of risk which it’s occurrences, are very fortuitous in nature.
1.7 Scopes of the Study
The scopes of the study are to examine the implication of inflation on life assurance claims. The study limits scope to selected insurance firms in Port Harcourt, Rivers State which include Cornerstone Insurance, Nicon Insurance Limited and Oasis Insurance Group. It is delimited to term life assurance and whole life assurance policies.
1.8 Limitation of the Study
The most limiting factor I encountered in the course of carrying out this research work, was unavailability of needed material is sourcing of materials, was a difficult task due to the fact that some materials were not available at the onset of this project. Another excruciating challenge was lack of finance at the time of this project I was not financially equip as to carry, out or meet up with some financial need which are necessary such as, internet fee, payment some relevant textbook and transportation to some selected insurance companies.
Again, discouragement from respondent which I administered the questionnaire to, in the aspect of not being well educated on how to fill some important form in the society like questionnaires. Out of one hundred (100) questionnaires administered, eight were not responded to because of low level of education. Also, discouragement from friends that I cannot write the project on my own intellectual ability, unless I employ an expert in research work who can write it on my behalf.
Lastly, the nature of the project topic also created another challenge because the topic contain all the life assurance policies which some of them can or are not suitable in such policies.
1.9 Definition of Terms
Life Assurance: Is a contract between the policy holder and the assurer, where the assurer agrees to pay a sum of money (benefit) upon the occurrence of the assured’s death or other events such as terminal illness or critical illness in return of the payment of a stipulated amount called premium at regular interval or in lump sum by the assured.
Problem: This refers to as difficulty or inferences in the existence of a particular thing or it’s progress.
Research: This refers to as a careful study of a specified subject matter with the intention of discovering new facts and information about it.
Company: This refers to as business organizations that make money by producing and selling goods and services.
Assured: The person whose life is the object of the insurance policy.
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