INSURANCE COMPANIES AND THEIR IMPACT ON ECONOMIC DEVELOPMENT OF NIGERIA

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INSURANCE COMPANIES AND THEIR IMPACT ON ECONOMIC DEVELOPMENT OF NIGERIA

ABSTRACT
Business produce goods and services to satisfy the demand of customers. Much as these businesses declare profit year-in-year-out, they also face element of risk
and uncertainties that may causes losses. This includes fire, theft, damage by artificial or natural agents and so forth. The business men in the olden days
engage into economic activities with pessimism and fear of incurring losses. This inhibits large scale production which is capital intensive. However, with the advent of the insurance business, things improved for the between, as business men become encouraged to commit more of their resources in production activities,
knowing fully well that the insurer will reimburse item in the event of damage or
loss. Simply put, insurance is a contract of utmost good faith in which the insurer
will pay compensation to a policy holder for loss or damage of insured items.
Meanwhile, the practice of insurance has become a lucrative business in itself,
such that it contributes enormously to the national development in items of
employment opportunity provision as well as Gross Domestic Product (GDP)
Thus, the interest of the research is aroused to carry out a study in this important,
yet neglected sector of the economy with a view of sensitizing the students,
business men and the entire public of the benefits derivable from the insurance
business. The public policy makers shall be intimated as to the areas that require
further regulations and or deregulations.

The researcher therefore employed and secondary sources of data collection in
order to do justice to the topic. Chi-square technique of data analysis was used to
fully digest the sourced information. This technique is quantitative and its choice
was informed by its ability to give a pictorial view of the research findings
numerically. Similarly, NICON insurance company was the focus as a case study.
The most important among the research findings include the lack of awareness on
insurance issues by the teaming Nigerian populations, minimal coverage of the
industry’s activities in such important sector as health and agriculture, lack of
adequate government as well as private sector participation in insurance
business, death of professionally qualified staff operating with the industry to
boost the confidence of patronizers; vague and intricate operational mechanism
and of course public suspicion about the sincerity of purpose with which the
insurance business is dispended, the researcher, hence, proffered such remedial
recommendations as infusion of deep sense of professionalism by practitioners in
the industry with a view to fostering public confidence, inclusion of insurance
training in schools curriculum right from secondary to post secondary institutions
as mandatory especially for science students, sponsored programmes on point
and electronic media outfits on insurance matters, increased government
participation and deregulation of stringent rules barring the engagement of private
sector into insurance business and up-front settlement of genuine claims as they
fall due.

CHAPTER ONE
BACKGROUND OF THE STUDY
The developments in our society have made living complex and risky to life
and properties. This has become so great that the traditional methods of
assisting those affected by misfortunes in our societies are no longer
adequate. Therefore, societies call for a more reliable and adequate means
by which risk or any misfortunes can be covered in the future, and here lies
the importance of insurance which safeguard against risks or losses
incurred by clients.
Majority of the people in our society today are either ignorant or have a
misconception of what insurance entails, what role it plays or its usefulness
in the promotion of trade and commerce. As a service industry insurance
plays a very important role in the economic and social development of a
nation. In appreciation of this, the government has continued to take steps
to regulate the activities of the insurance business in order to crate a sound
and efficient insurance market.
Insurance business is one of the subjects that have been securing the
public in this country. Many people outside the periphery of the business
have looked at the institution with disdain and they are simply suspicious of
the insurer and their styles of business. They claimed that insurer are only
interested in collecting premium and hardly settle claims, whenever they
arise.
1.2 STATEMENT OF THE PROBLEM
The insurance industry is one of the misrepresented or misunderstood
businesses in the world. This is mainly due to lack of knowledge on the part
of the public concerning their activities. The degree of knowledge varies
from century to century and is relative to the state of socio-economy
development in each individual country concerned, which may in turn be
governed by the level of the literacy component of each community. In a
developing economy, problems associated with the misconception of the
impact of insurance are not as pronounced as in under developed
countries, including Nigeria.
All attempts in developing a sound insurance industry have been
confronted by market distortions, high rate of inflation, various
governmental regulations, unethical practices and fraudulent tendencies of
the insuring public there are overwhelming. There are a few behaviors,
which indicate that the Nigerian public, literate or otherwise, know little or
nothing about the operation of the insurance business.
Consequently, many questions have been asked. Should insurance
companies/brokers continue to exploit the general public as a result of their
ignorance about the industry? Is there any need to control the business at
all? What are the control measures? These are the questions, which shall
be address my self within the essay together with same brief suggestions,
and methods by which the loopholes discovered could be corrected.
Therefore, this research work aims at highlighting the various function or
importance of insurance industry to individuals and whole society of
Nigeria.
1.3 OBJECTIVE OF THE STUDY
On a cursory look at the insurance mechanism, it would be seen that
insurance is a service rendering business. There are special social
characteristics of insurance that set it apart from tangible goods industries.
Being mostly a contract of indemnity and more so that insurance is a
commodity, which people pay for in advance and whose benefits are
reaped in the future.
Furthermore, the objective of the study is to throw more light on the
activities of the insurance with the view to arousing the awareness of the
policyholders and prospective ones. This will be achieved by highlighting
the insurance mechanism, discovering the weak areas that need to be
strengthened and recommendations will be proffered for further study.
Also the study is to highlight the fundamental principles of insurance, which
the society has not been able to recognize. This work is made in such way
as to highlight the need for insurance in our society. Taking all these into
consideration, the following are the objectives of this study:
The main objective of this study is to outline the functions, roles and
contribution of insurance companies to the development of the
national economy.
To identify if insurance companies are useful to our day-to-day
activities.
To ascertain if insurance companies actually perform their financial
roles diligently.
To suggest ways of improving the functions of the insurance
companies.

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