MOTOR VEHICLE INSURANCE RATING IN NIGERIA

CHAPTER ONE

INTRODUCTION

BACKGROUND OF STUDY

Losses and risks are inevitable, but human societies have created novel ways of reducing the burden of loss, the most effective being insurance. Insurance is a means whereby a person pays some sum of money called premium in order to indemnify self against loss of a belonging worth much more than the premium.
When the belonging being indemnified is an automobile – Car, SUV, Bus, Truck, Pickup, etc such insurance is called a auto insurance or vehicle insurance. It may also be called motor vehicle insurance or car insurance.

In Nigeria, there are two types of auto insurance offered by most insurance companies in Nigeria, namely third party and comprehensive auto insurance policy:

THIRD PARTY AUTO INSURANCE POLICY

Third party auto insurance is compulsory in Nigeria and protects car owners from losses caused by their cars on other people. For example, if your car runs into a pedestrian, kill someone, some ones property, or another car or you accidentally break another cars headlamp. However, in most such situations Nigerians will end up arguing or in a police station.

This is because although Third party auto insurance in compulsory most drivers do not know what it means. In fact, most Nigerian drivers just see it as one of the vehicle documentations they have to carry about to prove their ownership of their vehicle. This ignorance has allowed for lots of illegal insurance companies issuing fake and worthless third party auto insurance to unsuspecting Nigerians.

If you go for a third auto party insurance from  a registered insurance companies, you will be able to save yourself of the cost associated with causing damage on others. Assuming your car injured a pedestrian, the insurance company will pickup the medical bills saving you from being torn apart by the relatives of the injured.

Third party auto insurance pays for damages your car cause on others and ignores any loss you personally incurred in the process. Let us say you have a third party insurance and your car ran into another car and deformed the door and as a result, your bonnet was also deformed, the insurance company will only pick the bill of the loss your car caused on the other car leaving you to your fate. To protect yourself and any third party go for a comprehensive auto insurance policy.

Note that the claim you can make on an auto insurance policy is limited. So, find out the limit to the loss the insurance policy covers before subscribing. For example, an auto insurance policy may only cover loss up to a certain amount say N1,000,000. This means that if the property you damaged is worth more than that the insurance company will only provide N1,000,000.

To get a third party auto insurance policy contact a registered insurance company or use the services of an insurance marketer.

COMPREHENSIVE AUTO INSURANCE POLICY

Comprehensive auto insurance is third party insurance and more. The  more being that, Comprehensive auto insurance also indemnifies you from any personal loss. If you want to indemnify yourself against car theft, vehicle fires then you need a comprehensive auto insurance policy. Although not compulsory under Nigerian law, we recommended comprehensive auto insurance for all vehicle owners.

Most authorised auto dealers will give you comprehensive auto insurance cover as an option when buying a car. The auto dealer or an insurance company may also offer you a car-tracking device.

Note that auto dealers are not insurance companies, but only have relationship with them. So, make sure the insurance company the auto dealer is working with is registered and has good experience and reputation in auto insurance industry.

To get a comprehensive auto insurance policy, contact a registered insurance company or use the services of an insurance marketer. Comprehensive auto insurance policy covers private cars, Commercial vehicles (Taxis, Buses, and Hire Cars), Motorcycles, Tricycles, etc.

STATEMENT OF PROBLEM

 The basic principle in underwriting is that the premium paid by the insured should be adequate to cover the risk brought into the ~portfolio. This fact must have inflamed the learned judge to define premium as “a price adequate to the  risks. However,’ it is important to know the law maintains that the adequacy of the premium is entirely a matter for the ‘ insurer and not of any concern to the court, In view of this, minimum premium is normally prescribed to be paid by the . government for certain classes of business, for example, motor vehicle and other types of insurance made compulsory by legislation. Under life assurance, the insurer is sure that the event assured must occur, Therefore claims must ultimately be made with respect to each policy except for term policy. In nonlife, there is a chance that the events insured may not occur and claims would not be made, The basic problems now are:-

 (a) how to determine the appropriate and fair premium so that enough fund will be accumulated in order to settle claims as and when due,

 (b) calculate rates that are not exploitative and therefore encourage the insured  potentials  insured  to come for business, bearing in mind that the insurers are there to make profit,

 (c) make rates adjustable  taking  cognizance of the high and rising inflation, cost of living and health condition of the people,

 (d) determining whether government’s intervention in the area of premium rating is desirable and the extent, e determine whether the  non-acceptance of insurance services is a function of premium rate or poor public enlightenment, (f) determine the extent to which non-availability of statistical data has affected premium rating in the country.

RESEARCH OBJECTIVES

The objectives of this research in the light of the problems identified include:-

1, To find out the history of motor vehicle insurance in Nigeria.

 2, To attempt rating as factor affecting motor vehicle premium.

3, To explain the problems that affect motor vehicle premium rating in the country,

 4. To Find out  if the motor vehicle rating practice  in Nigeria   has contributed to the poor patronage by the public.

5. To find out  the  effect of government  Intervention  in the area  of premium  determination.

 6, To find out if premiums reflect the realities of the prevailing economic situation in the country.

7. Attempt to make appropriate recommendation for better premium motor vehicle rating in Nigeria

RESEARCH QUESTIONS

Objectives of this research in the light of the problems identified include:-

1, What is process and issues involved in determining motor vehicle  premium available to the reader?

 2, How does rating factor affect motor vehicle premium in Nigeria?

3, What is the problems that affect premium rating in the country?

 4. To what extent does the motor vehicle rating practice in Nigeria contributed to the poor patronage by the public?

5. What  is  effect of government  Intervention  in the area  of motor vehicle premium  determination?

 6, Does  motor vehicle premiums reflect the realities of the prevailing economic situation in the country?

SIGNIFICANCE OF THE STUDY

The study attempts to highlight the issues, problems and solutions involved in premium rating by the insurers and associated bodies in Nigeria, Insurance as a discipline is new, very interesting and important, As a business undertaking, it is very sensitive, risky and challenging, In terms of its contribution to the economic and social development of any nation, very basic, Yet it is least understood both by the student, practitioner, insured and potential insured and the government, The price or what forms the consideration in the insurance contract is difficult to determine, without it, services would not be provided by the insurers, Therefore any meaningful attempt to explain the issues involved would be of immense benefit not only to the students, the insuring public, but also to the insurers. This is because, it will aid the calculation and administration of a fair price. The fair price will encourage the public to insure and bring in money into the coffers of the insurance companies out of which claims would be settled, The economy will also gain by way of increased investment and money corning into government purse through taxation.

HYPOTHESIS

 In furtherance of the above objectives, the following 8 hypothesis will be tested with the data obtained from the respondents:-

1.      The amount of premiums being charged by the insurers is fair and adequate considering the rate of inflation in the country.

2.      Government intervention in the area of premium rating is very necessary instead of leaving it entirely to the insurers.

3.      The issue of delays in the settlement of claims is as a result of high and rising inflation rather than low premium charged.

4.       Non-acceptance of  insurance services by the public is more because of poor mass enlightenment than high premiums,

LIMITATIONS

It was not easy to have access to many books or articles that treated premium determination. This is because many authors skip this subject not only because of lack of obvious insight but the fact that government intervenes in the fixing of maxima and minima premium rates for non-life business. Materials that are available mainly treated life assurance in developed countries where the information and materials are available, If it were to be in Nigeria, these pieces of information would – be classified, In other words, the basic materials that are used in this work are primarily first hand information based on observed and informed. practices of experienced practitioners in this area. Although  the data was complemented by published 3 materials which are not: very current because of the practice by government bodies to publish in arrears, the lag is not significant enough to adversely affect the result of this study.

MOTOR VEHICLE INSURANCE RATING IN NIGERIA

THE IMPACT OF INSURANCE IN THE GROWTH OF THE PETROLEUM INDUSTRY IN NIGERIA (A CASE STUDY OF LEADY WAY ASSURANCE AND I.G.I)

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Before independence and shortly after the words, Nigeria depended solely on agricultural products for her foreign exchange earnings. The oil boom in the 70’s led to the Nigeria economy becoming an oil economy with a resultant neglect of the agricultural sector.

The boom, attracted many oil producing company to Nigeria, exploration and production of crude oil started on both onshore and coasts of Nigeria. Among the early oil production companies to insight crude oil in Nigeria are: The British Petroleum Company (now shell), Agip, Mobil, Total and most recent. Unipetrol, chevron, to mention but a few, the most recent development in the petroleum industry in Nigeria is the establishment of the petrochemical companies by the federal government.

It is a common knowledge that the sector is currently dominated by the international companies, which has the financial muscles and technical expertise to invest in this highly capital incentive, highly risk and technologically driven sector. It is unfortunate to note that after over five decades of oil exploration and production, Nigeria could only boast of less than 20% local input in the industry, that is generating over 90% of Gross National Product. On the other hands, countries like Brazil, Malaysia and Norway has grown their local content to enviable levels.

The poor participation of Nigerians in the oil industry led the federal government to initiate the “Nigerian content” development policy in 2001 by selling up the national committee on Nigerians contents (Adepoyigy 2006).

The committee has defined “Nigerian content as “the quantum of composite values added to, or created, the Nigerian economy through a deliberate utilization of Nigerian human and material resources and services in the exploration, development, exploration, transportation, and sales of Nigerian crude oil and gas resources, without compromising quality, health, safety and environment.

Petroleum products is used in all major aspect of human endeavors, this include household, manufacturing, transportation and communication. The petroleum industry has become an important ingredient in the modernization process and industrial growth of all nations. In addition, for developing countries, petroleum is a source of revenue generation, foreign exchange earner and a high contributor to the National Gross Domestic Product. Little wonder therefore that our age has being described as the “age of petroleum”. In their publication on “petrochemical and the Nigerian economy”, NNPC defined petrochemical as the product base on chemicals derived from oil and natural gas”.

As the country’s economy depend solely on oil, product chemical derived from oil and natural gas, then one wonders various types of risk that the petroleum industry are exposed to. The insurance industry ensures that oil companies which have enormous risk are insured. The insurance industry advice on.

1.2  STATEMENT OF THE PROBLEM

1.    The impact of the insurance services is not adequately felt in the oil and gas industry   

2.    Petroleum industry do not know how to handle their various insurance policy document.

3.    Nigerian insurance industry are not actually practicing local content policy to its fullest.

1.3  OBJECTIVE OF THE STUDY        

i.     To examine the impact of insurance services in oil and gas industry.

ii.    To educate workers in petroleum industries on how to handle various insurance policy documents.

iii.    To make sure that Nigerian insurance industry actually participate fully in the development of the local content initiative.

1.4  RESEARCH QUESTIONS

1.    Do you know why insurance services are not adequately felt by oil and gas workers?

2.    Why is it that oil and gas workers does not known how to handle various insurance policy document?

3.    Nigerian insurance industry are not adequately participating in local content policy, what are the reasons for this?

1.5  RESEARCH HYPOTHESIS

Ho:  Nigerian insurance services are not felt by the oil and gad workers.

Hi:   Nigerian insurance services are felt by the oil and gas workers.

Ho:  Nigerian oil and gas workers do not known how to handle insurance policy documents properly

Hi:   Nigerian oil and gas workers know how to handle insurance policy documents properly

Ho:  Nigerian insurance industry do not actually practicing local content policy to its fullest

Hi:   Nigerian insurance industry do  actually practicing local content policy to its fullest

1.6  SIGNIFICANCE OF THE STUDY    

i.        To reveal the risk exposure units in the petroleum industry, to enable them make decision on which one to recommend for insurance protection.

ii.       The study will show the level of development achieved in the industry by the implementation of the local content policy.

iii.     This study will act as a means of creating more awareness on the importance of insurance to the petroleum industry as well as the general public.

iv.     This study will serve as a foundation for further study        

v.      The recommendations made at the end of this study will be a great importance to the insurance industry, graduates, the government as well as general public.

1.7  SCOPE AND LIMITATIONS OF THE STUDY

This stud will evaluate the impact of the insurance in the growth and development of the petroleum industry. It also discuss the areas in which insurance has contributed in the oil industry.

Data were sourced from many areas, example internet, textbooks, libraries and journals relating to the topic. Selected insurance companies in Enugu such as Leadway assurance.

IGI

Although it is the intention of the researcher to cover the whole activities of the oil industry, but this research is no exception to such problems

1.      Finance: There was no sufficient to carryout the research and also in the buying of the research instrument.

2.      Time: The time frame for this project work was too short as other academic work almost cut in time of investigation and data collection.

3.      The unco-operative attitude of some respondents who see this research work as such that it will pose threat  to their work and position and this posed a limitation of this research work.

4.     Lack of research materials: because of inadequate material also contributed to the limitation of the research work.

1.8  DEFINITION OF OPERATIONAL TERMS    

Insured/Assured: The insured or assured is a party that receive the sum insured/assured (indemnify in the case of non life assurance at the happing of the insured perils).

Insurance: Insurance has been defined as an agreement between two partiers, namely the insured and insurer, whereby the insured agreed to pay a small amount of money called premium to the insurer, and the insurer promise to compensate him/her at the event loss insured against following the terms, condition and within the period of the policy.

Premium: This is the monetary consideration paid by the insured to the insurers for in return for promise to pay the sum-insured at the event of loss

Risk: It can be defined as uncertain event; it is the uncertainty as to the occurrence of an economic loss.

Nigerian Content: The committee set up by the federal government has define Nigerian content as the quantum of composite values added to or crated in the Nigerian economy through a deliberate utilization of Nigerians human and materials resources and services in the exploration, development, exploitation, transportation and sale of Nigerian crude oil and gas resource, without compromising quality, health, safety and environment.

Local content: It is a requirement that the local market should manage about 45% of every energy risk and place between 55 and 60% abroad through accredited reinsurance brokers.

Petroleum: According to oxford dictionary, it refers to mineral oil is found under the ground or sea ands its used to produce the gas or patrol on the land rather than  at sea.

Onshore: Blowing from the land to the sea. It means the operating of oil drilling on the land.

Offshore: This is the operation of oil drilling on the sea.

Petrochemical: Is a chemical substance obtained from petroleum or gas.

Refinery: Is a factory where substance such as oil and other substances are refined or purified.

Drill: Is a tools or machine with a pointed end for making holes

See page: a place where water or petroleum seeps up of the ground to form a root.

Indemnity: It is the principle of insurance whereby the insured is being compensated by placing him in the position he was before suffering a loss.

GNP: Gross National Product, it can be defined as the total market value of all final goods and services produces in the economy in one year.

THE IMPACT OF INSURANCE IN THE GROWTH OF THE PETROLEUM INDUSTRY IN NIGERIA (A CASE STUDY OF LEADY WAY ASSURANCE AND I.G.I)

INTANGIBILITY OF INSURANCE POLICY AS A SET BACK TO BETTER SERVICE DELIVERY IN NIGERIA

 CHAPTER ONE

INTRODUCTION

Government reforms in the insurance industry through the current process of Insurance policy and consolidation are to restore confidence of the public in the market and enhance international competitiveness of local operators.

Consequently, the principal objective of the reform is to have emergence of bigger and stronger players in the industry with enhanced capacity. The Nigeria insurers in time past had operated on marginal scale and that accounted for the reason why the market had not benefited much, especially in the oil and energy business. The country is much more likely to experience sustained growth if her insurance market develops properly.

Insurance market development is related to improve financial sector performance and insurance markets do not develop adequately without both public and private sector development in their infrastructure. The reform is made to develop an insurance sector that drives and protects the economy through effective and efficient market structure.

1.1 BACKGROUND OF THE STUDY

Today the insurance industry consists of 103 insurance companies, five Reinsurance companies and 350 insurance brokers in Nigeria. The industry has underperformed its role in the financial sector of the economy when compared with its counterparts in other parts of the world.

The history of insurance business can be liked to the olden days. Before the advent of the British merchants in Nigeria, there was no organized insurance business as we know it in recent days. But, there existed some traditional system of risk sharing, which could be described as crude or primitive forms of mutual and social insurance schemes. Age grade association, extended family system, town or clan unions were some of he mutual insurance-like schemes for showing benevolence to their members who had suffered some  misfortunes such as death, ill-health, fire ravages or court cases.

However, it was these British merchants who established trading posts, on west coast of Africa that introduced modern insurance business into Nigeria in the 19th century. They arranged insurance for their trading concerns on the London insurance market. By 1900, at least two insurance companies were known to have appointed agents in Nigeria. At that time, the development of Nigeria insurance market patterned the British way. It had sluggish growth and a number of factors were responsible for it.

It was after this that the insurance Act of 1961 which was enforced in 1968 came out. This Act however, did not regulate the investment of insurance funds. Not long afterwards, it became evident that many of the companies licensed under insurance Act 1961 were not investing their funds in Nigerian securities. This situation was corrected by insurance (Miscellaneous provision) Act 1994, which provided that every insurer should invest two-fifth of its previous year’s premium in Nigeria securities.

The post independence insurance business in the country was characterized by low capital requirement of N50,000 for registration, relatively loose pre-registration condition, and little or no postregistration control. These led to proliferation of inadequately capitalized indigenous insurance companies often managed by inexperienced and poorly qualified personnel. Such state of affairs gave rise to the use of the term “mushroom” insurance companies to describe poorly capitalized and ill-managed insurance companies.

In September 2005, the minister of finance announced new capital requirements for insurance companies in Nigeria. The share capital for life business N2billion, Non-life N3billion, Re-Insurance N10billion and composite company N5billion. Insurance companies are expected to meet this new capital requirement by February 2007.

The Insurance policy process will lead to consolidation of the insurance industry. This will invariably increase the financial stability and capacity of the insurance companies within the industry. It will also raise the entry barrier and create mega players. The consolidation will herald the emergence of solid and professional institutions that can play their role effectively both in the local and international market.

1.2 STATEMENT OF THE PROBLEMS

There are several problems associated with this Insurance policy exercise in the insurance industry and these are the following:

• Stress associated with merger and acquisition: Re-capitalization is a corollary of consolidation and consolidation  exercise entails the process of merger or acquisition. When two  or more companies are merging, they integrate their IT  systems. Pattern of working assets etc.

 The integration of these things involves expenses and it  consumes time that would have been used for other income  generating activities.

•              Risk of reinsurance protection: the newly prescribed capital          base of the insurance company when fully implemented may           tempt the insurers to assume unnecessary risk in the name of            corporate strength and neglect the benefits they can derive  from reinsurance or retrocession transaction as the case many be.

•              Expertise service: The Insurance policy process will require the  services of the professionals such as the accountants, lawyers  etc because the process is tailored towards the general or  entire national development and this would also constitute  further expanses on the part of insurance companies.

•              Development of social vices: The process of Insurance policy  could lead to the emergence of some social vices such as  falsification of records, illegal business practices, money  laundering etc. people who engage in illegal business like hard  drugs might cease the opportunity to transfer their money. They  might invest the money in buying shares from the capital  market, thereby encouraging such acts.

1.3  RESEARCH QUESTIONS

The problem of insurance business in this country has ever remained a complex one. The following research questions are proposed for the purpose of this study:

1.           What are the factors that hindered the effective performance of insurance companies?

2.           Will the on-going Insurance policy exercise change the operation of insurance sector positively?

3.           What is being the fate of insurance companies that were unable to meet up with that minimum paid-up capital before the deadline?

4.           Would this consolidation exercise constitute a problem to the merging companies?

5.           Considering the high rate of inflation in the country, would the prescribed minimum paid-up capital be suitable?

6.           What are benefits of Insurance policy of the insurance sector on the Nigerian economy?

7.           Can the capitalization process restore back the lost public confidence in insurance sector of the economy?

1.4  OBJECTIVE OF THE STUDY

Insurance companies play crucial role in the Nigerian economic development like the bank does which is through the provision against the various risks that often arise within the economy. In the course of this study, it is the researcher’s wish to examine the role of the proposed Insurance policy exercise in the Nigerian insurance industry to the economic development of the nation.

This study is therefore designed towards achieving the following major objectives:-

i. To review the effect of the Insurance policy exercise on the Nigerian economic

 ii. To analysis and review the prospects of the Insurance policy to the existing and potential insurance companies in the Nigerian economy.

iii.           To identify the challenges faced during the course of the Insurance policy exercise.

iv.          To disclose those factors or problems that are likely to hamper these insurance companies’ reformation.  

1.5  RESEARCH HYPOTHESIS

The main research hypotheses considered for the purpose of this study are:

i.             Ho: The Insurance policy of the insurance sector will not have impact on the service delivery.

            Hi:       The Insurance policy of the insurance sector will have impact on the service delivery.

ii.            Ho:  The on-going Insurance policy exercise will not positively change the operations of the insurance sector.

Hi:  The on-going Insurance policy exercise will positively                change the operations of the insurance sector.

1.6  SIGNIFICANT OF THE STUDY

The study shall be of great significance to educational institutions, insurance companies, corporate and government bodies, the insuring public and the nation at large.

The researcher’s motive of embarking on this intensive research process is to contribute his quota to the already developed work on the issue.

In order to provide the basis of recommendations for improvement of insurance business on the Nigerian economy, the researcher had made it a task upon him to review the activities of insurance companies and the benefit of its Insurance policy to the Nigerian economy as a whole.

It is also possible for the insurer, through this study, to know the prospects, challenges and problems associated with Insurance policy of the industry.

The insuring public through this study will understand the purpose and importance of insurance in our economy and also develop more confidence in our insurers.

Conclusively, it will be useful or important for academic purposes; it will also serve as a data base for students who will carry out research regarding this in the future.

1.7  SCOPE AND LIMITATION OF THE STUDY

The scope of this study is based on the introduction of new capitalization for insurance industry in Nigeria as announced by the honorable minister of finance which is in accordance with sector 9 (4) of insurance act, of 2003.

The study revealed some of the prospects, challenges and problems that might emanate from the Insurance policy exercise.

The researcher will use the regressional analysis (ordinary least square regression) to analyses the effect of consolidation exercise on the Nigerian economy. The Insurance policy process would be fully represented with the revenue or realization from the insurance sector of the economy while the Nigerian economy will be fully represented with the Gross domestic product of the nation.

It is very crucial to state at this juncture that the secondary source of data will be used on which the ordinary least square regression analysis test would be carried-out.

Moreover, the issue of inadequate funds cannot be over looked as a constraint during the course of this study. Funds at the researcher’s disposal for the conduct of this study may not be sufficient. Closely linked to this the insufficient time to carry-out detailed analysis on the study. Through, there exist limitations but the researcher had made it a priority to come out with reasonable and useful conclusion on the study.

1.8          PLAN OF THE STUDY

Chapter one contains introduction while chapter two deals with literature review whereas chapter three is concerned with research design and methodology where chapter four contains data presentation and analysis when chapter five is summary, conclusion and recommendation.

INTANGIBILITY OF INSURANCE POLICY AS A SET BACK TO BETTER SERVICE DELIVERY IN NIGERIA

AN ASSESSMENT OF ADEQUATE RISK RECOGNITION AND MANAGEMENT IN NIGERIAN INSURANCE COMPANIES

CHAPTER ONE

INTRODUCTION

1.0  BACKGROUND OF THE STUDY

Insurance is a security device used by the inured to protect himself against a risk purchased from the insure and the right to be indemnified if the risk should materialize. The purchase price which the insured pays the insurer is known as the premium, often paid on  monthly or annually basis and the insurer in return compensate the insured in event of loss.

THE DEVELOPMENT OF INSURANCE INDUSTRY IN Nigeria begins in 1950 during the colonial era period characterized by a market dominated by Europeans company which virtually held the monopoly of insurance business over the continent of Africa. At that time most Nigerians citizens are not aware of insurance and it importance. After Nigeria independence in 1960 most of the industries managed by the Europeans are been taken over by Nigerians. As they begin to managed those companies, the awareness of insurance and it importance was known.

In the 1980, insurance companies operating in Nigeria begins to grow in numbers and the need to enlighten the citizens on insurance was carried out by some of the employee of those companies. Who went to the street to educate they people on the danger of risk that might occur in many ways, such as fire, theft, accident, rain storms etc. and the responsibility of the insurance is to compensate the unfortunate person who has suffered losses by placing him in the same position as he was before. However, some people agreed to take up an insurance policy but the number of those that patronize the company at that time was very few.

In Nigeria today, most industries and commercial business have insurance cover. This is because insurance ensure the growth and development of all industries and business established and spread all over the country. Apart from business most people don’t insure their houses, cars farms etc. they show reluctant attitude towards taking up insurance policy for such assets and also think it’s a waste of money. Giving great consideration to the above statement, the researcher is compelled to carry out a research on the topic in question an assessment of adequate risk recognition and management in Nigeria insurance companies. In order to re-oriented the people toward changing their attitude and belief about insurance industries.

1.2. STATEMENT OF THE PROBLEM

The insurance industry over the years has been going through a lot of problems, which hinders their effectiveness and efficient rendering of services. These include.

  • Lack of survey of risk transferred by the insurance companies, as such risk are just assumed without properly scrutinizing the situations and circumstance surrounding such risk.
  • Lack of adequate claims settlement procedures which are characterized with bureaucracy.  
  • Lack of proper fixed and computed premiums which endangers the solvency and profitability of the insurance companies.

1.3. OBJECTIVES OF THE STUDY

The following are the objectives of this study?

  • To assess hoe insurance companies render their services.
  • To determine the effectiveness of how they handle the risk that is being transferred to them.
  • To encourage insurance companies to have financial strength that will contain the risk of losses that they have agreed to assure.

1.4. FORMULATION OF HYPOTHESIS

Null hypothesis (Ho( insurance is not a security device used by the insured to protect himself against a risk.

Alternative Hypothesis (H1) insurance is a security device used by the insured to protect himself against a risk.

1.5. SCOPE OF THE STUDY

The scope of this study will be based on risk recognition and management in the insurance industry with specific interest on lead way assurance firm from 2008 to 2010.

1.6. SIGNIFICANCE OF THE STUDY

  1. The research write up will serve as a source of data for subsequent project and research work.
  2. The write up will also help in creating awareness among the insuring public on the relevance and value of the services offered by the insurance industry.
  3. The research study shall be an immense reference materials to students and other researchers who might want to expands the research topic.

1.7. HISTORICAL BACKGROUND OF THE CASE STUDY

Leadway Assurance company limited was in corporate in 1970 as a limited liability company. The company started it operation as a direct motor insurance company and further expanded in the early 80’s to cover more risk.

The company’s remarkable success has been possible as a result of its sound professional and business standards backed by the uncompromising level of integrity of its Directors. Such uncompromising level of integrity was instilled by it late founder sir (DR) Hassan .O. Odukale as an honest businessman, the founding managing Director sir Odukale nurtured the company to an eviable position in the Nigeria insurance industry. Leadway is a private company with 28 share inventors and trust corporation. The statutory deposit of leadway with the C.B.N as at 2002 stands at over 13.5 million being 15% of their statutory paid up capital as provided by pre 2003 insurance act. This further affirms their position as a full fledge composite insurance company under writing all classes of insurance in Nigeria.

The company, however announced it achievement of 5.5 billion capital base as at April 30, 32006 which implied that the company has already met the statutory of N5 billion capitalizations for composite firms. The company authorized share capital has raise from 2 billion to 4 billion in order to meet statutory requirements and accommodate increasing need for higher capital structure. The increase as given the company the necessary leeway to keep increase its paid up capital steadily and also enable it to accommodate new investors.

  1.8. DEFINITION OF TERMS

  • Proposal forms: This is a document that is drafted by the insurer to seek answers to the main materials aspect of the risk that will be insured.
  • Premium: This is an amount that the insured pays at every month ort annually to the insurer
  • Proximate Cause: It used to determine whether the loss sustained by the insurer was cased by the risked insured against.
  • Cover: Protection provided by the insurance company to the insured against a risk.
  • Indemnity: This is process whereby the insurance company compensates the insured in the event of loss.
  • Insurer: An insurer is the insurance company who managed risk that was insured.
  • Re-Insurance:  Is a process whereby the insurance transfer part of the risk it assumed to another insurance company.
AN ASSESSMENT OF ADEQUATE RISK RECOGNITION AND MANAGEMENT IN NIGERIAN INSURANCE COMPANIES

THE IMPACT OF INSURANCE POLICES TO BUILDING PROJECT CONTRACT

CHAPTER ONE

INTRODUCTION

1.1 Background of Study

A clear understanding of risk management process and practice within the construction industry is an important model for exploring the application and barriers of risk management in Nigeria. It will also help in identifying the ever present risk factors and their probability of occurrence in Nigerian projects. This chapter summarizes the whole work carried out for this study.

Risk concept varies based on people’s understanding, experience and attitude (Belel and Mahmood, 2012). Many people recognize events in a dissimilar way due to different attitude, emotions, judgments and beliefs. This means that the definition of risk will differ to different people. Risk in its simplest form means uncertainty with recognized probability distribution (Barkley, 2004). According to Holmes (2002), risk is not the actual being of a problem rather it is a possibility that a certain problem may arise in the future. Baloi and Price (2003) define risk as the likelihood of an unfavorable incident occurring to a project. It is widely accepted across the construction management society that a project risk is any event or series of events, whether motivated internally or externally, that when occurred will negatively affect the project objectives of functionality, performance, time and cost(Devripasadh,2007). Risk within the construction industry is understood to be a mixture of activities that can affect the project goals. Risks are major component of the overall cost of projects and their distribution has significant effect on project financial plan.

Project management is the scientific application of skills, tools and technique to fulfill project activities in order to meet the expectation and requirement of clients or stakeholders (Deviprasadh, 2007). A project is always trying to bring in some type of modifications or changes, a new invention, work or structure. This change involves uncertainty, which cause projects to have a possibility of being blown off by a possible future event. Risks and uncertainties are present in all activities of a construction project (Odeyinka, 2000). It is very important to know the distinction between risk and uncertainty (Carpenter and Frederickson, 2001). According to Hillson (2004) risk is measurable uncertainty while uncertainty is immeasurable risk.

Risk management is a comprehensive and systematic way of identifying, analyzing and responding to risks to achieve the project objectives (Banaitiene and Banaitis, 2012). It is also defined as a planned form of identifying and evaluating risk and selecting, establishing and applying options for the handling of the risk (Kremljak, 2004). It is the recognition, prioritization and appraisal of risk followed by an organized resource application economically to reduce, monitor and manage the possibility of unfortunate events or to maximize production or outcome (Ehsan et al. 2010). 

The basic function of insurance is risk transference; risk is transferred from one party (the insured) to another party (the insurer). The transfer of risk by no means eliminates the possibility of misfortune, but the insurer provides financial security and tranquillity for the insured when the insured risk occurs. In return, an insured pays a premium in a very small amount when compared with the potential losses that may be suffered (Morton, 1999).

1.2 Statement of Problem

Development of infrastructure is one of the key drivers in business over the globe; it increases the GDP of a nation (Awodele et al. 2009). This encourage countries to prioritize infrastructural development and make provisions in their budgets for financing its infrastructure. This leads to new challenges considering the risks involved in the design and production. Construction projects due to its nature allows a lot of possibilities for many environmental, socio-political and other problems during pre-contract, contract and post-contract stage leading to completion time problem, cost overruns or exceeding budget in projects and poor quality finish (Akintoye and Macloed, 1997). In order to avoid or reduce the losses, management of the risk involved in the construction project is required. Nevertheless, saying Nigerian construction industry is poor, is an understatement as the industry is characterized by frequent setbacks or interruptions, cost overruns and abandonment of projects (Awodele et al., 2009). These are caused by different kind of risks involved in construction projects. Risk factors are believed to be familiar to Nigerian construction professionals, yet the probability of occurrence and its impact at precontract and post-contract stage is yet to be investigated. However, there are few researches conducted on risk management within the construction industry in Nigeria. In Nigeria, the construction industry mainly depends on government’s budget and the industry is performing very poor due to avoidable risk. The need for understanding how to manage project risks becomes a very important issue.

1.3 Research Objectives

The research broadly sought to assess the extent to which SMEs adopt insurance as a risk management tool and the benefits there in. Specifically, the research intended to achieve the following objectives to:

 1. Identify the various construction risk faced by construction industry

2. Examine the response of construction industry towards the use of Contractors All Risk policy (CAR)

3. Assess the benefits Construction industry derive from using insurance as a risk management tool;

4. Identify any problems Construction industry encounter in using insurance

5. Find out solutions to the challenges that construction industry encounter in using insurance.

Research Questions

1. What are the various construction risk faced by construction industry?

2. What is the response of construction industry towards the use of Contractors All Risk policy (CAR)?

3. What are the benefits Construction industry derive from using insurance as a risk management tool?

4. What are problems Construction industry encounter in using insurance?

5. What are solutions to the challenges that construction industry encounter in using insurance?

1.5 Significance of Study

The study would help identify the reasons for the level of patronage of insurance as a risk transfer mechanism and create a changed behaviour of the owners of Construction industry in Nigeria. The research would benefit, risk managers, construction project consultants and building planners by identifying areas that they might need to consider when preparing disaster recovery plans, particularly for construction project. Findings that emerged from the study would serve as a spring board to generate interest for further research into the other aspects of insurance challenges. The research work would also be of enormous assistance to various levels of educational institutions in the country, especially the universities as reference material for further studies and research work on insurance as a risk management strategy. The study would further contribute to the existing literature on mitigating and providing confidence to contractors in their planning decisions.

1.6 Scope of Study

The study was aim at evaluating the impact of insurance to building project in Nigeria with particular to five construction firms in Anambra state. The study recognize some contraction insurance policy in Nigeria.

THE IMPACT OF INSURANCE POLICES TO BUILDING PROJECT CONTRACT

AN EVALUATION OF INSURANCE REFORMS IN NIGERIA

ABSTRACT

This research work examined by An Evaluation of Insurance Reforms in Nigeria. The study become a necessity due to the fact that there are still various goals and objective of the insurance reforms, the impact of the reforms on the industry, the performance of the industry after the reforms on the and to evaluate the Effectiveness of the reforms in the industry to achieve this objectives, primary source of date were gathered and descriptive method of investigation was used. Two hypothesis were tested using the chi-square (X2) the findings reveals that the reforms has not played a significance role in enhancing patronage of insurance business product and ensuring a significant increase in the contributions of the industry to the national economy. It was conduced that although the reforms have some positive achievement in the industry more could still be done to ensure that it yields better productivity and efficiency for the industry. It was therefore recommended that compulsory insurance products could be introduced as strong regulatory bodies be put in place and also the need for continuous reform exercise in the insurance industry.       

CHAPTER ONE

1.0   BACKGROUND OF THE STUDY

1.1   INTRODUCTION

A major development in the financial sector of the Nigerian economy is the advent of insurance business. Insurance can be rooted for back to 1900 but its first significant indigenous incursion took place in 1969 when the National Insurance Corporation of Nigeria (NICON) was established. The practice of insurance business has growth dramatically since its existence in Nigeria and is now a major mechanism that reduces the adverse impact f loss caused by risk.

        Over the years, the insurance industry has under performed its role in the financial sub sector of the economy when compared with its counterpart in order part of the world. Some of the factor responsible for this include low capitalization high receivable, poor public perception, and low investment in information technology amongst others. The growth of the insurance industry in Nigeria was also impeded factors responsible for these impeded growth includes poor national insurance culture and awareness, fraud and fraudulent claims, proliferation of companies, disunity and indiscipline in the industry, high production costs, perceived poor public image amongst others.

        The opinion of rebranding the insurance sub-sector of the economy and making it a mega player in the global financial market as a part of the vision 2020 goal brought about the insurance reform in Nigeria. The insurance reforms can e seen to be a statutory framework set and implemented by the Federal Government and Central Bank of Nigeria in the interest of the national economy and growth of the insurance industry. The reform process includes recapitalization of the insurance industry\, reconsolidation of the industry, agricultural insurance reform, oil and gas insurance reform, pension scheme reform, national health insurance scheme, issues in corporate governance, issues on statutory deposit.

        The reform process on the insurance industry generally was introduced in September 2005 when the federal. Government through the honourable miniter of finance, Dr (Mrs) Ngozi Okonjo Iweala announced the new minimum share capital for insurance and re-insurance business operating in the country. The minimum share capital is as follows; for life business 2 billion naira, for non-life business 3 billion naira for composite business 5 billion naira and for re-insurance business 10 billion naira.

        The objective of this reform is to increase the industry’s low retention capacity, attract foreign capital infusion into industry, and create a competitive environment etc. However, there are shortcomings and loopholes in the performance and outcome of the reform exercise carried out in the insurance industry.

        It is therefore against this background and also the aim of the researcher to critically examine the pre-post evaluation of the insurance reform in Nigeria.

1.2   STATEMENT OF THE PROBLEM

        The Nigeria insurance industry has been an eyesore in the past year. Despite the various advantages and importance the industry has played in enhancing the development of the Nigeria Economy, there are lots of criticisms on the operations of the insurance industry in Nigeria these criticisms include inefficiency in claims handing procedure high cost of insurance products, inefficiency in insurance operations, etc.

        In other view, there are also other factors that impede the insurance business in Nigeria.

        They include poor national insurance culture, fraud and fraudulent claims, proliferation of companies, brokers, agent, disunity and indiscipline in the industry etc. All these factors put together has brought about or contributed to be downfall of the industry.

        In view of the above and in a quest to rebrand the financial sector of the economy, the federal government introduced the reform process in which insurance sub-sector is also inclusive. All looks bright for the industry. This is in view of the recapitalization which is aimed at positioning the insurance industry for new challenges in this ever dynamic world.

        However, there are accusations and counter accusations on the performance of the insurance industry after the reforms. While some believe it has enhanced the efficiency and productivity of the sector, other believe that the reform exercise has not been successful in attaining its objectives. It is based on the above that this work will be undertaken to examine the pre-post evaluation of the insurance reforms in Nigeria.

1.3   OBJECTIVE OF THE STUDY                                    

        The objective for which this research is conducted is

Ø  To find out the performance of the industry after the reforms

Ø  To find out the performance of the industry before the reforms

Ø  To find out the impact of the reforms on the industry

Ø  To find out the objectives of the insurance reofmrs.

Ø  To evaluate the effectiveness of the reform on the industry.

1.4   RESEARCH QUESTION

1.     To what extent has the objective of the reform been achieved?

2.     Has there been increase in the patronage of insurance product as a result of the reform?

3.     Is there any increase in the performance of the insurance industry as a result of the reform   

1.5   RESEARCH HYPOTHESES

1)     There has not been a significant increase in the patronage of insurance products due to the reforms

2)     The insurance industry has not played any significant role in contributing to the GDP of the economy.

1.6   SIGNIFICANCE OF THE STUDY

        This research would significantly help to know the areas in which the reform has made impact.

        This study would help to compare the performances of the insurance industry before and after the reform.

        It will also serve as an important source of information to students and others who may intend to research more on the topic.

1.7   SCOPE AND LIMITATION OF THE STUDY    

        This study is designed to examine the pre-post evaluation of the insurance reforms in Nigeria the scope of this study would be limited to the insurance sector of the Nigeria economy.

        For analytical purposes and comparisons, the period for which the would cover will be 1999-2009.

        Dearth of materials like test books, journal and other publication on the subject matter will also the scope of the study of the researchers.

1.8    ORGANIZATION OF THE STUDY

        This study is organization into five chapter as follow: chapter one, the introductory chapter embodies the background of the study, statement of the study, objective of the study, significance of the study, scope and limitation of the study,  research questions and research hypotheses.

        Chapter two, shows a review of the related literature. Here the expert opinion of our topic of study is reviewed. The sources of the literature include textbooks, journals, on-line document, and newspapers. It includes an overview of the insurance in Nigeria, the pre-reform stage of the industry, the reform Exercise in the insurance industry, the impact of the reform, and the post-reform era of the insurance industry.

        Chapter three, presents the design or methodology of the study, here, the null hypothesis is presented and the methods used in analyzing the data.

        Chapter four, presents analysis and interprets data collected to falls explain the findings.

Chapter five, the final chapter contains the summary, conclusions and recommendations of the study.

AN EVALUATION OF INSURANCE REFORMS IN NIGERIA

PROBLEMS AND PROSPECTS OF EXTENDING INSURANCE SERVICES TO OBA IN ANAMBRA STATE; A case of Agricultural Insurance

Chapter One

Introduction

1.1 Background to the Study

The agricultural sector is a major economic sector and a critical source of livelihood in many developing countries (Mahul, 2011). Agricultural production has long been characterized by risk and exposure to such perils as drought, flood, fire outbreaks, and pests and diseases (Phillip and Ezeh, 1988). Risks and uncertainty have adverse effects on the effectiveness of decision making, particularly as relating to input use and output supply (Agadaet al., 1997). As a result, farmers in every agricultural system have remained largely active, devising ways to cope with the various unfavourable events within their production settings (Phillip and Ezeh, 1988

While risk elements have differed with commodities, places, and even time, the consequence has largely been reflected unambiguously in non-optimal allocation of resources at farm levels. Actually, in the case of empirically more prevalent risk-averse behaviour, farmers have responded to risk by under-employing resources and, of course, under-supplying outputs (Phillip and Ezeh, 1988).

Natural and biological events, often of catastrophic and epidemic proportions, some of which have potential for recurrence, have been witnessed in Nigeria. Examples include: (i) the drought, which caused considerable financial losses in crops and livestock, and (ii) the attack on groundnut crop by aphids, which both occurred in the early 1970s. These two prominent events together contributed immensely to Nigeria‟s exit from the World groundnut market (Phillip, 1988).

Other events which have occurred during the past decades, and could therefore be regarded as risk elements in the Nigerian agricultural sector include erosion and flood in the southern parts of the country, locust attacks on crops in the northern (especially the semi-arid) parts, and the ravaging of farmlands by accidental fires, particularly in the savannah (grassland) areas of the country (Phillip, 1988). Several more cases can be cited to press the point that agricultural production in Nigeria, like in most other ecological sub-regions in the world, is characterized by risk elements, many of which have (and could still) manifest themselves unfavourably (Phillip, 1988).

Insurance has long been identified as one of the logical options, whenever an economic activityis subject to knowledge imperfection that is no more than risk (Heady, 1952). Essentially, when a farmer buys an insurance policy, he sells his risk to the insurer. The farmer moves out of a risky world into certainty with respect to the peril he insured against. If the farmer suffers a loss, he receives compensation according to the terms of the insurance policy. Otherwise, he keeps his earnings, less the amount paid as premium (Hey, 1979).

1.2 Statement of Problem

Insurance is one of the tools that farmers and other stakeholders can use to manage risks that are too large to manage on their own (risk layering) (World Bank, 2011). Part of that risk is transferred to another party, who takes it in return for a fee (or premium). Where available and affordable, agricultural insurance (crop or livestock) can provide great benefits to farm households (World Bank, 2011).

At present, most households in Africa do not buy insurance for a variety of reasons, namely: (i) people are unaware of the availability of insurance; (ii) insurance products are not well designed for them; (iii) people cannot afford to buy currently available services; and (iv) people consider insurance schemes dubious because of the well-known inefficiencies and delays in claim processing (Markowski, 2001).

1.3 Research Questions

What are the socio-economic characteristics of the respondents in the study area?

What is the proportion of respondents that are aware as well as participating in Nigerian Agricultural Insurance Scheme?

What are the socio-economic characteristics of farmers influencing participation in Nigerian Agricultural Insurance Scheme in the study area?

What is the impact of participation in Nigerian Agricultural Insurance Scheme on farmers‟ income?

v. What are the problems associated with extension of Nigerian Agricultural Insurance Scheme in the study area?

1.4 Objectives of the Study

The general objective of the study is to evaluate farmers‟ participation in Nigerian Agricultural Insurance Scheme in Kaduna State. The specific objectives are to:

 To describe the socio-economic characteristics of the respondents in the study area.

 To determine the proportion of respondents that are aware as well as participating in Nigerian Agricultural Insurance Scheme.

To determine the socio-economic characteristics of farmers influencing participation in Nigerian Agricultural Insurance Scheme in the study area.

To determine the impact of participation in Nigerian Agricultural Insurance Scheme on farmers‟ income.

To identify and describe the constraints associated with implementation of Nigerian Agricultural Insurance Scheme in the study area

1.5 Significance of the Study

In many developing countries, farmers operating all sizes of farms retain the risk of crop and livestock losses (Herbold, 2010). The occurrence of unfavourable events in agriculture could be accompanied by substantial costs to society, if there are no proper risk management and reallocation of risk-bearing (Phillip, 1988). Akinola-Bello (1985) argues that protection against financial losses through insurance enhances (i) the efficiency of resource allocation; (ii) the productive capacity of society; and (iii) confidence in business transactions.

 Appropriate risk management tools for agriculture such as agricultural insurance systems are, therefore, critical for agricultural development. In order to contribute to knowledge on agricultural insurance in Nigeria, it is important to determine, amongst other objectives, the extent of participation of farmers in the scheme, farmers‟ preferences of insurance cover for crop, livestock or both enterprises, the impact of the scheme on farmers‟ income and to obtain quantitative estimates of the factors influencing participation in agricultural insurance schemes and to assess the 6 policy implications for further development of the schemes. It is envisaged that the results of this study will provide useful information on the workings of agricultural insurance schemes to farmers, policy makers, researchers, government agencies, the general public as well as international agencies interested in the improvement of agricultural production and rural development through the development of innovative and sustainable agricultural insurance products and services. This will help address some of the problems of rural-urban migration, poverty, and food insecurity in the rural sectors of developing countries.

1.6 Scope of the Study

The study examines the problems and prospect of extending insurance services in rural areas with case study 0of Oba in Anambra state. Due to the complexity of the insurance service and also with reference to the study area which is a rural setting, the study will focus on Agricultural insurance scheme or services provided to rural farmers.

PROBLEMS AND PROSPECTS OF EXTENDING INSURANCE SERVICES TO OBA IN ANAMBRA STATE; A case of Agricultural Insurance

FACTORS INFLUENCING PERFORMANCE OF THE INSURANCE COMPANIES IN GHANA: A CASE STUDY IN METROPOLITAN INSURANCE COMPANY

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The insurance sector is one of the sectors with the highest investment ratio in the world. There are lots of insurance companies with large high capitalization density and funds employing very large numbers of employees with ease, and much larger numbers of people and business organizations which are covered by insurance benefits on the other (Majmudar and Diwan, 2005).

         Therefore the fundamental goal of every company is to improve organizational performance while meeting the interest of its stakeholders. Managers and business analyst have over the years been concerned about the significant factors that drive the increased performance of businesses. The reason for the attention to research on the performance of insurance companies is due to the importance of industry to economic growth and living conditions of the population together with its impact on national wealth. Kaya, E.O, (2015) identified the loss ratio, current ratio and premium growth rate to have a direct impact on profitability for non-life insurance companies in Ghana.

         A strong insurance industry can relieve pressure on the government budget, to the extent that private insurance reduces demands on government social security programs and insurance can be an important part of personal retirement planning programs (Das et al., 2003). The insurance sector also contributes to the development of capital markets because it makes a pool of funds (that is, net premiums generated) accessible to both borrowers and issuers of securities. This is due to the fact that they have longer term liabilities than insurance companies. Catalan, Impavido and Musalem (2000) studied the relationship between the development of contractual savings (assets of pension funds and life insurance companies) and capital markets and found that the growth of contractual savings Granger cause the development of capital markets.

         Leveraging their role as financial intermediaries, life insurers are a key source of long-term finance. Because life insurance is so important to trade and development, the United Nations Conference on Trade and Development (UNCTAD) in 2004 at its first session formally acknowledged that “a sound national insurance and reinsurance market is an essential characteristic of economic growth”. The importance of the industry cannot be overemphasized given the numerous benefits, as such there is a need to study what influences the growth of individual life insurance companies since the performance of any firm not only plays a 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.

1.2 STATEMENT OF THE PROBLEM

The insurance sector is one of the fast growing sectors in the Ghana economy; the contribution of the insurance companies ranges from socio-economic development to safe guarding lives and properties. Despite the contributions of the insurance companies in Ghana; there are still some constraints to tackle in order to enhance effectiveness and overall performance. Some of the issues faced by most of the insurance companies include government policies, the expectations from customers and maintenance of good structure of the insurance companies in Ghana. It is to this regard that the researcher desired to carry out a study on the factors influencing the performance of the insurance companies in Ghana using the metropolitan insurance company as the case study.

1.3 AIM AND OBJECTIVES OF THE STUDY

The main aim of this research is determine the factors influencing the performance of the insurance companies in Ghana. Other specific objectives of the study are:

1.  to determine the relationship between the determinants of the performance of the insurance companies and economic development in Ghana

2.  to determine the extent to which the insurance companies has secured life and properties in Ghana

3.  to ascertain the need for the introduction of insurance companies in Ghana

4.  to determine the relationship between the performance of the insurance companies and customers’ expectations in Ghana

5.  to determine the effect of government policy on the performance of the insurance companies in Ghana

6.  to proffer solution to the above stated problems

1.4 RESEARCH QUESTIONS

The study came up with research questions so as to ascertain the above stated objectives of the study. The research questions for the study are:

1.     What is the relationship between the determinants of the performance of the insurance companies and economic development in Ghana?

2.  To what extent has the insurance companies secured life and properties in Ghana?

3.  What is the need for the introduction of insurance companies in Ghana?

4.  What is the relationship between the performance of the insurance companies and customers’ expectations in Ghana?

5.  What is the effect of government policy on the performance of the insurance companies in Ghana?

6.  What is the way forward to the problem facing the insurance companies in Ghana?

1.5 STATEMENT OF RESEARCH HYPOTHESIS

H0: there is no significant relationship between the determinants of the performance of the insurance companies and economic development in Ghana

H1: there is significant relationship between the determinants of the performance of the insurance companies and economic development in Ghana

1.6 SIGNIFICANCE OF STUDY

The study on the factors influencing the performance of the insurance companies will be of immense benefit to the metropolitan insurance company and other insurance companies in Ghana in the sense that the study will address the issues faced by the insurance companies in Ghana. The study will look at the factors influencing the performance of the insurance companies and also try to relate the determinant of the performance of the insurance companies and economic development in Ghana. Secondly the study will serve as a repository of information to other researchers that desire to carry out similar research on the above topic. Finally the findings of the study will contribute the body of the existing literature on factors influencing the performance of the insurance companies in Ghana.

1.7 SCOPE OF THE STUDY

The study will cover on the factors influencing the performance of the metropolitan insurance company from 2000-2017

1.8 LIMITATION OF STUDY

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, and bank of Ghana (BOG)).

Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work

1.9 DEFINITION OF TERMS

Insurance: Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss

BOG: bank of Ghana

ROA: return on assets of the metropolitan insurance company, Ghana

ROE: return on equity of the metropolitan insurance company, Ghana

FACTORS INFLUENCING PERFORMANCE OF THE INSURANCE COMPANIES IN GHANA: A CASE STUDY IN METROPOLITAN INSURANCE COMPANY

THE EFFECTIVENESS OF INSURANCE IN MINIMISING BUSINESS RISK IN NIGERIA (A CASE STUDY OF UYO LGA)

CHAPTER ONE

INTRODUCTION

1.1            Background to the Study

Risk is an essential part of business because firms cannot operate without taking risks. Risk is commonly associated with uncertainty, as the event may or may not occur. Risk implies exposure to uncertainty or threat (Kannan and Thangavel, 2008); and ‘a decision to do nothing explicitly avoids the opportunities that exist and leaving the threats unmanaged’ (Hillson and Murray-Webster, 2007:26). Traditionally, risk has been viewed as negative consequences and unfavourable events. The consideration of risk from the negative perspective is restrictive and misleading for two main reasons. First, uncertainty may manifest in either negative (threat) or positive (opportunity) form, or both; and second, the way a risk is perceive influences the manner in which it is handled (Hillson, 2002). Managing risks from negative perspective may result to complete omission of opportunities (benefits/gains) in the event being considered. However, perspectives on risk differ, as the risk definition depends on and is affected by the risk observer (Kelman, 2003). Moreover, risk sometimes entails some economic benefits, as firms may derive considerable gains by taking risk. Business grows through greater risk taking (Drucker, 1997). Risk is, therefore, integral to opportunities and threats which may adversely affect an action or expected outcome (Kaye, 2009; Lowe, 2010). Moreover, getting rid of risk undermines the source of value creation; thereby truncates potential opportunities (Knight and Petty, 2001; Grazino and Aggarwal, 2005; Garvan, 2007). In essence, to business enterprise risks are ‘uncertainty that matter’ (Hillson and Murray-Webster, 2011:19).

Life is full of risks; expected or unexpected. In recent years there have been a lot of disasters and uncertainties affecting personal lives and the business environment across the globe. These events have had adverse effects on the socioeconomic activities on developed and developing nations; particularly Nigeria. There have been violent floods, fire outbreaks, traffic accidents, occupational hazards, accidental damage to properties and harm caused to lives, theft and armed robbery, as well as other unforeseen events that impact negatively on various economic ventures; especially the private sector investment activities. These mishaps remind us of the need to adopt risk management measures. Risk is everywhere but the business world is much exposed to it. To overcome the losses arising from these risks some take up insurance, others do not.

Aizenman and Marion (1999), highlight the adverse effects of risks on investment using macroeconomic data from more than forty (40) developing countries. They emphasized the fact that the uncertainty about business decisions in the future and the resulting gains cannot be optimistic.

Despite efforts by successive governments through economic reforms to heighten the private sector to complement government’sinvestments and enhance economic growth, the

sector’s                        response   is   relatively   low;   and   thi

Entrepreneurs make decisions regarding their investment in a dynamic and risky environment.

1

The outcomes of their decisions are generally not conclusive due to the uncertainties associated with the future outcomes. Variability in future outcomes is the biggest source of risk, particularly among Small, and Medium Scale Enterprises (SMEs). The use of insurance as a risk mitigation tool provides confidence and prospects in successful business decisions, however to some degree.

The basic function of insurance is risk transference; risk is transferred from one party (the insured) to another party (the insurer). The transfer of risk by no means eliminates the possibility of misfortune, but the insurer provides financial security and tranquillity for the insured when the insured risk occurs. In return, an insured pays a premium in a very small amount when compared with the potential losses that may be suffered (Morton, 1999).

Insurance as a risk management tool in Nigeria is made extensive and mandatory by the Insurance Act, 2006 (Act 724). The Act makes it compulsory for private commercial property owners such as hotels, restaurants, hospitals and clinics, Auto shops, manufacturing firms and many other related businesses to obtain fire and liability insurance just as it is compulsory for vehicle owners to obtain the Third Party Motor Insurance cover under the compulsory third party

motor insurance Act 1958 (Act 42). Sections 1 not construct or cause to be constructed a commercial building without insuring with a registered

insurer the liability in respect of construction risks caused by negligence or the negligence of servants, agents or consultants which may result in bodily injury or loss of life to or damage to property of any workman on the site or of any member of the public; every commercial building shall be insured with an insurer against the hazards of collapse, fire, earthquake, storm and flood, and an insurance policy issued for it; the insurance policy shall cover the legal liabilities of an

2

owner or occupier of premises in respect of loss of or damage to property, bodily injury or death suffered by any user of the premises andical thir satisfaction and financial leverages to investors buying insurance to safeguard business interests.

The compliance of the Act (Act 724) is in doubt: as the 2007, ENGAS company filling station gas explosion at Asokwa in Ashanti Region did not fulfil its obligation per the law; the 2011 fire explosions at the Western Steel and Forging Ltd in Tema caused injury, death and damages to people and properties; also, the destruction of properties at Kantamanto Market and the VRA computer room (housing its server) by fire evidence the need for insurance covers to minimize the effects of hazards to SMEs, Government Agencies and Departments; hence, the call on government with other stakeholders to assist victims.

1.2            Problem Statement

Risk is one of the most overlooked areas in SMEs in spite of the fact that it is clear to

most entrepreneurs that, operating any business involves risk such as losses associated with property, income, injury and liability. These risks are inevitable to most entrepreneurs in businesses. Prudent business owners take steps to minimize the risk of their businesses in other to maximize returns on investments. A good risk management system is a continuous process of analysis and communication to select the appropriate tool to manage risk.

SMEs in Nigeria serve as vital indicative sources of growth, technological innovation and flexibility. However, they are saddled with towards growth and development strategies. SMEs are exposed to many risks in their ordinary

course of business, such as interest rate risk, foreign exchange risk, market risk, natural disasters, political risk, and technological risk and so on, that minimize their profit by increasing their

3

financial losses. However, insurance enshrined in sections 183 and 184 of the Insurance Act, 2006 (Act724) to serve as a buffer in the event of mishaps is not given the attention it deserves regardless of its significance to mitigate the effects of risks resulting from disasters or unexpected events. In Uyo, the level of patronage of insurance by SMEs as a risk transfer mechanism to mitigate risks such as collapse of building, fire outbreaks, accidents, burglary, business interruptions, and dishonesty of personnel tend to be wavy. What were the recovery measures in the wake of the potential losses and financial hardships?

In view of this, the researcher examined the extent to which non-life insurance was used as a risk management tool by SMEs.

1.3            Objectives of the Study

The research broadly sought to assess the extent to which SMEs adopt insurance as a risk management and minimizing tool and the benefits there in. Specifically, the research intended to achieve the following objectives to:

  1. Identify what business risk(s) SMEs face;
  2. Examine the response of SMEs towards the use of non-life insurance to mitigate pure risk(s);
  3. Assess the benefits SMEs derive from using insurance as a risk management tool;

4.       Identify any problems SMEs encounter in using insurance; and

  1. Find out solutions to the challenges that SMEs encounter in using insurance.

4

1.4            Research Questions

The main research question addressed was: do SMEs use insurance to mitigate business risk(s)? The specific related questions to solve the research problem included the following:

1.     What were the risk exposures that an SME was faced with?

2.     Did entrepreneurs of SMEs have enough insurance for their businesses?

3.     What was the level of response to using insurance as a risk management tool?

4.     What benefits did SMEs derive from using insurance as a risk management tool?

5.     What were the problems that SMEs encounter in using insurance?

6.     What were the solutions to overcome the challenges that SMEs encountered in using insurance?

1.5            Significance/Justification of the Study

The study would help identify the reasons for the level of patronage of insurance as a risk transfer mechanism and create a changed behaviour of the owners of SMEs. The research would benefit, risk managers, business consultants and business continuity consultants by identifying areas that they might need to consider when preparing disaster recovery plans, particularly for SMEs. Findings that emerged from the study would serve as a spring board to generate interest for further research into the other aspects of insurance challenges. The research work would also be of enormous assistance to various levels of educational institutions in the country, especially the universities as reference material for further studies and research work on insurance as a risk management strategy. The study would further contribute to the existing literature on mitigating and providing confidence to entrepreneurs in their investment decisions. Also, the insurance

5

regulator in the country should find it useful to adopt pragmatic means to enforce the unenforced insurance Acts in the country. Lastly, it might influence the level of premium incomes of non-life insurance companies in the country.

1.6            Method of the study

The researcher made use of the survey method to generate primary data to achieve the objectives of the study, (Zikmund, 2000). A multiple stage sampling design was used to draw sample frame to avoid any bias. First, the metropolis was clustered into three electoral constituencies, constituting 19(nineteen) towns (Figure 3.1). A cluster sampling of 4(four) small scale businesses, 5(five) medium scale businesses were taken from each sample elements from the: central, south and north constituencies respectively. Nine (9) business units were clustered from each town. SMEs were divided into different clusters according to the number of employees. A total of 171 registered and non-registered SMEs were sampled and questioned. Different clusters of SMEs had the same number of employees as one sub-cluster. All thirteen insurance companies in the metropolis were

respondents to section “C” of the question were contacted.

Primary data was collected from respondents per the questionnaire. In gathering data, the researcher self-administered 13% of the questionnaire, while 87% of the remaining questionnaires were administered by trained personnel to administer and gather information from the entrepreneurs. The rationale for using this approach was to allow the respondents ample time with monitoring to answer at their own pace without taking them away from their work. The trained personnel read and interpreted questionnaires to non-literate respondents. In answering the questionnaire, the

6

respondents were asked to indicate their responses to the questions on a five point Likert scale, ranging from 1 (strongly disagree) to 5 (strongly agree),  (Likert, 1932). Also closed and opened ended response questions were analysed.

The researcher made use of qualitative and quantitative survey design for this study. The design involved the collection of data concerning the study. Frequency tables and percentages (%), figures and cross tabulation were used in analyzing the data with the aid of Statistical Package for the Social Sciences (SPSS).

THE EFFECTIVENESS OF INSURANCE IN MINIMISING BUSINESS RISK IN NIGERIA (A CASE STUDY OF UYO LGA)

IMPACT OF PENSION AND GRATIVITY ON THE LIFE OF RETIREES (CASE STUDY OF ADAMAWA STATE PENSION COMMISSION BOARD)

Abstract

In Nigeria, myriad of pension reforms have been undertaken to improve retirees’ welfare through sound pension administration but all to no avail. In Adamawa State, series of complaints have been lodged to Public Complaint Commission (PCC) in the State by the pensioners seeking for justice on the poor administration of their pension and gratuity usually seen through delay, under payment and stoppage of the payment of their retirement benefits by the Adamawa State Pension Board. The study therefore, focused on the Administration of Pension Scheme in Adamawa State Pension Board.  Specifically, it examined how delay in payment, under payment and the stoppage of the payment of retirees affect pensioners’ welfare in Adamawa State. The Social contract theory by Thomas Hobbes (1651) was used as a theoretical framework for the study, because of it can diagnose the contractual relationship between the government and its citizenry, particularly its retired workers. Primary and secondary data were utilized. Primary data were sourced through the use of  questionnaire, interview and observation instruments, while secondary sources comprise official documents such as Adamawa State Pension Law, PCC Register of Cases, Pensioners’ Register in the Pension Board, labour Act etc. The qualitative data from interview backed by observation were descriptively analyzed while Chi-square statistical tool was used to test the hypotheses formulated. It was revealed that delay in payment; under payment and the stoppage of the payment of retirees’ benefits have effects on pensioners’ welfare in Adamawa State. It was found that the effects of the maladministration on pensioners’ welfare via the indicators above, included their inabilities to meet up with the necessities of life such as shelter, health facilities, food, children’s school fees etc. it was also found that inadequate funding, political interference in the activities of the Board and inadequate trained personnel are responsible for the problems. It was therefore recommended that Adamawa State government should adopt the new contributory pension Act 2004 which is perceived as a solution to the problems of Pay As You Go Scheme currently in use by the state. Government should also be more committed in funding of the Board. Staff training should be adequate for efficient service delivery and there should be non-political interference in the activities of the Pension Board. 

CHAPTER ONE

 GENERAL INTRODUCTION

1.1 Background to the Study

The administration of pension scheme is not a contemporary phenomenal or practice. Memorably, it can be traced back to 13BC. The earliest record of payment of public sector pension dates back to the Roman Empire times when in 13BC, Emperor Augustus Caesar paid pension to the Military and loyal civil servants to boost their welfare. This was to secure the active loyalty of troops who were then the sole determinant of power in the realm and further conquest. Thus, it was a kind of reciprocal or compact arrangement. The pension was first paid from Augustus‟ personal funds and later taxes of 5% were levied on inheritances and 1% sales tax to meet the pension liabilities of the emperor. Three thousand denary was paid to Legionnaires after 20 years of active duty and 5 years in reserves. This had the effect of making beneficiaries‟ instant millionaires by the standards of the time.

According to Stephen (2012), the history of public pension in modern Europe started with disability compensation to soldiers. A good example was the scheme established by the British parliament in 1592. By the 18th Century all major European nations maintained some form of pension for their officer corps. However, these pension schemes were not very popular because of the perceived bias of the schemes for the military. The primary aim was to keep the military in total subjugation and commitment to the leaders of the time as military might guaranteed state power and sovereignty at the particular time in history.

Stephen (2012) maintained that in modern times, the United States public pension system, otherwise known as U.S. Social Security (Old Age, Survivors and Disability Insurance)

(OASDI) is a social security insurance created by the Republican Government of Franklin Delano Roosevelt in 1937 during the great depression, following the stock market crashes of the late 1920‟s and early 1930‟s. Retirement benefits payment is the largest component of OASDI.

The scheme was unfunded though as payment of retirees were financed by payroll taxes of current workers to enhanced their wellbeing or welfare depending on workers earning records at an age of retirement.

In Nigeria, Pension schemes were introduced into the public service in the early years of the 19th Century as evidenced in Pension Proclamation No. 14 of 1901 of the Northern Nigeria Protectorate and the Pension Ordinance No. 4 of 1902 of the Colony of Lagos and pension Ordinance 1951. Until 2004, there were a myriad of enactments that regulated the administration of pension schemes in Nigeria (Balogun, 2006). They include the Constitution of the Federal Republic of Nigeria, 1999 in Sections 173 and 210, the Pension Act Cap 346 Laws of the

Federation 1990, the National Provident Fund Cap 273 Laws of the Federation 1990 and the Nigeria Social Insurance Trust Fund Act, 1993 amongst others.

In order to have an in-depth knowledge and understanding of the direction of changes in pension reform, it would be useful to first of all understand the antecedents of pension system in Nigeria. In the public sector, (both civil and public services, statutory bodies), pensions were governed by the Pensions Act of 1979, later the Pensions Act of 1990 as amended by the Pensions Regulations of 1991. The Act provided for benefits in terms of gratuity and pension payments. Gratuity is a single, lump sum payment while pension is a periodic payment, normally on monthly basis for life (Olanrewaju, 2011). The scheme was a compulsory and noncontributory one, which created a right to monetary collection by public servants and an obligation on the part of government to make payment. Thus, the pension Act of 1990 as amended by Pension Regulation of 1991 has set a base for pension right to the retirees and contractual term between the retirees and the government of Nigeria including all levels of governments. Before April 1974, gratuity and pension for public servants were not treated as rights but as privileges. The applicable law provided that no officer shall have an absolute right to …pension or gratuity, Section 6(1). Nevertheless, with effect from 1974, they became rights to which a qualifying public servant was entitled to claim from the government. The general pension scheme for civil servants was financed from government general revenue on a pay-asyou-go basis (Olanrewaju, 2011). This implies that the payment of pension and gratuity become a compact between the state and the retired civil servants in Nigerian governments.

However, this scheme later suffered numerous problems between January 1976 and June 2004. Within this period, there were numerous maladministration in the payment of gratuities and pensions such as falsification of age, delays in payment, stoppage of payment, under payment, omission of names from the pay-roll, loss of files, long distant travels to receive payments, ghost pensioners, embezzlement of funds, mismanagement and diversion of funds (The Post Express June, 2000),in Olanrewaju (2011). These exploitative evils were purely bureaucratic or administrative. The pensioners had to cry out aloud in streets and mass-media for a positive change (Obi, 2002: 91-100). Thereafter, the Pension Reform Act 2004 was enacted on 25th June, 2004 and became effective on 1st July, 2004 to redress these problems in the scheme.

Adamawa State as a component unit of Nigeria federation, is not immuned from these problems mentioned above, and is yet to start the process of adopting the new (Act 2004) contributory scheme which is perceived as a solution to the problems of the Pay As You Go Pension Scheme as shown above.  (Daily Independent May 13th,2014) As such, pensioners in the State are still suffering from the inherent problems in the administration of Budgetary Scheme discussed above since the State is still yet to adopt the new contributory pension scheme. 

1.2        Statement of the Research Problem

 The non-payment of gratuity and pension to retirees in Adamawa State has become a problem since the creation of Adamawa State on the 27th August 1991 from the former Gongola State. The budgetary system or defined benefit pension scheme were in operation in the defunct Gongola State which was inherited by the Adamawa State till date. It was first controlled and managed by the Office of Establishment of the State before the establishment of the Adamawa State Pension Board. 

 Prior the year 2000, the administration of pension and gratuity of workers in Adamawa State had been an issue of serious concern. There are many records of unpaid pension and gratuity among retirees, stoppage of their monthly pension as well as delay in the payment of retirees their retirement benefits, among others. The non-payment of workers entitlement at the end of meritorious services in Adamawa State has led so many retirees into abject poverty and subject of ridicule in some localities, which in turn mutilates their welfare in the State and thwarts their social ways of lives.  

 In 2000, the Adamawa State government deemed it fit to establish the Adamawa State pension board and to provide for matters incidental thereto. The pension board following the law is mandated to ensure effective pension administration in the state via the budgetary or Pay As You Go Pension Scheme, to minimize the incidence of ghost syndicated pensioners, ensure efficient and prompt payment of gratuity to retired civil servants in the state, to further ensure regular payment of benefits to pensioners etc. (Adamawa State Pension Law, 2000).

 In spite of the efforts by the government through the establishment of the Adamawa State pension board in order to redress the aforementioned problems, there still seems to be an increasing cases of delay in the payment of pensioners‟ retirement benefits, under payment of pension and gratuity and the stoppage of the payment of pensioners‟ monthly pension to the extent that it forced or compelled so many retirees to involved themselves into  the act of some societal vices such as theft, loss of trust by their debtors, house to house begging and even fraudulent attitudesto earn living. The frequencies of these abnormalities recorded  for example include 34 cases of under payment of pension and gratuity, 33 cases of delay payment of retirees, 20 cases of nonpayment of death benefits, 39 cases of omission of names from the pay-roll, 40 cases of loss of files of pensioners, and 37 cases of unpaid pension and gratuity within the period of the study (2004-2014) among others. In addition, some administrative or bureaucratic irregularities including the channeling of numerous grievances or complaints to the Public Complaints Commission (PCC) in Yola, are rumpus, (PCC Register of cases, 2014). As a result, many pensioners were owed months of pension benefits which hypothetically undermined their welfare.

 The study therefore attempts to investigate why retirees are suffering from cases of unpaid gratuity, pension and other related allowances in spite strides made by the Adamawa State government by establishing the Adamawa State pension board and charged with viable functions to mitigate the problems of pension and other related matters therein.

1.3        Research Questions

i.             To what extent has delay in the payment of pensioners‟ retirement benefits has affected the welfare of pensioners in Adamawa State? 

ii.           How under payment of gratuity and pension entitlement affected the welfare of pensioners in Adamawa State?

iii.         iii. To what extent has stoppage of the payment of pension benefit affected the welfare of pensioners in Adamawa State? 

1.4        Objective of the Study

The main objective of the study is to assess the impactof administration of pension scheme and pensioners‟ welfare in Adamawa State pension Board. Specifically, the study seeks to:

i.  examine the extent to which delay in the payment of pensioners‟ benefits affected pensioners‟ welfare in Adamawa State.  ii.  determine how under payment of gratuity and pension entitlements has affected the welfare of pensioners in Adamawa State. 

iii.  determine how stoppage of the payment of pension benefit affected the welfare of pensioners in Adamawa State.

1.5        Hypotheses 

Ho1:  Delay in the payment of pensioners‟ retirement benefit has no effects on pensioners‟ welfare in Adamawa State.  

Ho2: Under payment of pensioners‟ gratuity and pension entitlements does not affect the pensioners‟ welfare in Adamawa State.

Ho3:   Stoppage of the payment of pensioners‟ pension has no effect on pensioners‟ welfare in Adamawa State.

1.6        Significance of the Study

A study carried out by Olu et al (2005) study on the “management of pension scheme in Nigeria” focused on the upward review of pensions and gratuities in the

administration of pension scheme in Nigeria. Their study revealed that the upward review of pensions and gratuities in the country without appropriate financing the scheme is the major problem of pension administration in Nigeria.

The study by Olu et al (2005) left a wide gap that desired to be filled. For example, the study failed to take note of some of the administrative deficiencies such as workers‟ inefficiencies, inadequate skilled personnel, political interferences in the activities of the pension officers, corruption and lazier-fare leadership leading to delay in the payment, under payment and the stoppage of the payment of retirees‟ benefits which this study attempt to fill. Also, a study by Omoni (2013) on „an overview of the administration of new pension scheme and teachers‟ level of awareness in Delta State of Nigeria” left a lot of loop-holes. For example: Her methodology was not good enough to generate all relevant data in order to strike balance and ovoid bias, since only questionnaire instrument were used and was served only on the teachers and sidelined staff of the primary  schools Board and ministry  of Education. The study also neglected one important unit of the population completely, that is staff of the pension administration and dealt with only primary and secondary schools teachers. 

Obi (2013) conducted her own study on the Corrupt Practices in Nigeria‟s Retirement and Pension Scheme; she focused on delay in the payment of gratuity and pension. Here methodology also was weak because she used questionnaire instrument only on pensioners and neglect the pension officers completely as if the views of the pension officials are not important to the study.Besides, the studies also did not cover Administration of Pension Scheme and

Pensioner‟s welfare, and did not focus on under payment as well as stoppage of the payment of retirees; therefore they failed to determine the effects of the stoppage and delay in the payment as well as under payment of pensioners‟ benefits on the pensioners. 

In respect of the significance of the study therefore, this study attempts to fill the identified gaps or loop-holes of the studies above. Beside these ones above, it is an undisputable fact that several efforts have been put by government and practitioners alike, as well as scholars to mitigate the problem of bureaucratic or administrative problems in the administration of retirement benefits; there are still some major gaps to be filled in this area which this study seek to fill them as well. 

Another importance or significance of this study cannot be over emphasized, in view of the fact that little or no study has been done by scholars or researchers in relation to

Administration of Pension Scheme and Pensioners‟ Welfare in Adamawa State. Hence this study or research work will go a long way in contributing to the few existing literature on this aspect, especially in Adamawa state.

 It can also serves as a stepping ground for other researchers on the topic. Similarly, it will serve as an eye opener to the general public, most especially to the civil servants in Adamawa State, and Nigeria at large, to see the need to make adequate preparation before retirement from service in terms of saving. And also to prepare psychologically perhaps one may be faced with challenges of uncertainty in life after retirement.

1.7        Scope and limitation of the Study 

The scope of this study is viewed from three perspectives. It measures scope in terms of geographical coverage, scope in terms of time limit and scope in terms of substance of the work.

In terms of geographical coverage, the study covered Adamawa State as a whole and all Public Service in Adamawa State. The justification for this coverage is based on the fact that the organization under study is heterogeneous in nature; its members or beneficiaries come from every nook and corners of the state and covered all the public organizations.

In terms of time frame, the study covered a period from 2004 to 2014. The justification for the choice of this period stemmed from the fact that in the history of Adamawa State, this period had recorded the highest or massive retirement of civil servants in the State.

It can also be justified on the ground that based on the secondary dada available; the frequencies of complaints received by the Public Complaint Commission on delay in the payment, under payment, stoppage of the payment of retirees‟ benefits from retirees in the State falls within this period and kept on increasing. 

 Scope in terms of substance, this study covered Administration of Pension Scheme and pensioners‟ welfare in Adamawa State (Pension Board). It limits its self to bureaucratic operations because the issue under study is purely within the ambit of bureaucratic operation. And it is restricted only to budgetary pension scheme that is fully (100%) funded by the government (Defined Benefit or Pay As You Go Scheme) which Adamawa State is still practicing up to date, and not the Contributory Pension Scheme.  

However, the study is not without limitation in terms of drawback. Focus group

discussion with the association of retirees would have been part of the methodology which would have added quality to the study, unfortunately all effort to do that were shattered due to the state of insurgency in the State as at thatmoment, where the leader of the union sought for the guarantee of their security against any uncertainty from the researcherand their transport faire before he would agree to array his members for that purpose.Unfortunately, the researcher had no capacity to guarantee any security of a person or group of persons, particularly that period, and had no money to transport them from their various destinations for the group discussion.                      Also, Mubi north from the Adamawa Northern Zone would have been part of the sample areas of the study as was designed in the methodology, but the researcher was retrained from reaching out the area due the said insurgency which engulfed the whole Nothern part of the State as at the time of sourcing of the data. This led the researcher to pick Yola South one of the constituent of

the state capital in the place of Mubi North since most of the survivors of the insurgent from the Northern Zone fledto the State Capital.

The Nigeria freedom of information act 2011 also was not respected by the staff of the pension Board. A lot of unclassified information which would have added quality to this work was denied the researcher during the interview. Also, time and finance were not at the advantage side of the researcher. 

1.8        Operational Definition ofConcepts.

 This aims at operational definition of all unusual terms whose meanings are not obvious or the meanings are not ordinarily known. Such terms are defined the way they occur or used in this study. This is to avoid confusion and misinterpretation by a reader. However, the researcher chooses to define such concepts or terms conceptually or authoritatively first, before operational definition will follow where necessary. This is to provide a reader better understanding and help to distinguish between the authoritative and working(operational) definition of each term.

1           AdministrationofPension Scheme:  

According to John (1960) in Paul (2013) administration is the determined action taken in pursuit of conscious purposes. It is the systematic ordering of affairs and the calculated uses of resources, aimed at making those things happen which we want to happen, and at the same time preventing developments that fail to square with our intentions.Pension scheme according to Tijjani(2007) can be seen as government plan or program in form of policy through which retirees or somebody else pays regular amount of money to enhance the state of his welfare.

However, Administration in this study is operationally defined as the mobilization and direction of effective human and financial resources for the prompt, regular, continuous and correct payment of the retirees‟ retirement benefits (pension and gratuity) to the extent that there would be no delay in the payment, no under payment and no stoppage of the payment of pensioners‟ retirement benefits (pension and gratuity) in Adamawa State Pension Board.   On the other hand, pension scheme is operationally defined as old budgetary pension scheme that is 100% sponsored by government or an employer.  

2           Delay in the payment

The Adamawa state pension law section 8 (1) specified that the procession of benefits of retired civil servant of the State shall be completed and ready for payment one month to the officer‟s official retirement date to avoid financial handicap at retirement. Based on this provision, delay means if an officer is not paid his pension and gratuity as soon as he/she is retired.

However, delay in payment as used in this study or operationally defined as failure to pay the retirees their pension and gratuity within two months time (60 days) after their retirement.   

3          Under payment  

Under Payment is operationally defined as the payment of the retirees their gratuity or pension less than the official amounts that were supposed to be paid to them.

4          Stoppage of Payment

This is a situation where the payment of monthly pension is suddenly cut-off or stopped and the retirees no longer get their monthly pension. 

5 Pensioners’ Welfare: Williams (1976: 281) viewed welfare as a concept derived from well-fare that is “well” in its still familiar sense and “fare” primarily understood as journey or arrival but later also as supply of food, well-being, happiness, health and prosperity of a person. Also Pa‟ag (1993:31) perceived welfare as the evaluation assigned by the individual to income or, more generally, to contribution of our well-being from those goods and services we can buy with our money.

However, pensioners’ welfare in this study is operationally defined as the prompt payment of pensioners‟ pension and gratuity, no delay, non stoppage of pension and no under payment of pensioners‟ retirement benefits to the extent that the pensioners and their families can be able to: 

i.    eat three square meal of  balanced diet a day and drink clean water

ii.   afford and access health facilities

iii. afford to pay children‟s school fees

iv. Wear good and functional clothes and be able to change it over time.

v.  afford housing or shelter for themselves 

vi. be looking healthier, happy and prosperous 

IMPACT OF PENSION AND GRAVITY ON THE LIFE OF RETIREES (CASE STUDY OF ADAMAWA STATE PENSION COMMISSION BOARD)

ANALYSIS OF THE CONTRIBUTION OF INSURANCE COMPANIES TO THE GROWTH OF SMEs: A CASE OF NIGER INSURANCE CORPORATION

CHAPTER ONE

INTRODUCTION

1.0 Background

The substantial growth of small and medium enterprises (SMEs) activity clearly marks SME as one of the most remarkable economic phenomena. SME is a business that is privately owned and operated with a small number of employees and relatively moderate volume of sales. The definition of SMEs varies from country to country depending on the level of development and the strength of the economy. The lower limit for small scale enterprises is set at between five and ten workers and the upper limit is set at between fifty and one hundred workers. The upper limit for medium scale enterprises is set between one hundred and two hundred and fifty workers (Hallberg, 2000).

In Nigeria there are approximately 1,069,848 SMEs currently in operation and they comprise over 90% of the private sector. They contribute to employment, provision of basic goods and services, and generation of export and tax revenues for national socio-economic development. Their Gross Domestic Product (GDP) contribution to the economy is 75% and they employ about 2,500,000 nationals. The location of these SMEs is mostly in urban areas with 80% located therein. They operate business like restaurants, accountants, hairdressers, conveniences stores and guesthouses (Hatega, 2007).

On the other hand insurance is a contract by which one party undertakes in consideration of a payment called premium to secure the other against pecuniary loss by payment of a sum of money in the event of destruction or damage to property, fire, accidents or death of a person. Economy, investment and finance reports (2010) defines insurance as a policy from a large financial institution that offers a person, company, or other entity reimbursement or financial protection against possible future losses or damages. An insurance contract is an agreement by which the insurer promises, from a premium or assessment, to make a payment to a policy holder or a third person if an event that is the object of a risk occurs. SMEs often face a variety of problems related to their size. Frequent causes are bankruptcy, theft, fire, death, automobile accidents and workers injuries.

1.1 Statement of the problem

Despite the contribution of insurance corporations to the growth of SMEs in economic development, failure and slow growth still exists and the public doubts its management (Ocici, 2007). Research suggest that 80% of the businesses affected by major incident close down within 18 month, and 90% of those who lose data close down within 2 years. This is due to the failure of small businesses to have adequate insurance cover and proper business continuity plans (cover sure, 2007). However literature has shown that insurance companies are not willing to insure SMEs and it was the aim of this research to establish whether a relationship between these two variables exists.

1.2 Objective of the study

The main objective of the study was to investigate the contribution of insurance companies in the growth of SMEs in Nigeria.

The study also sought:

  1. To examine major factors that affects the growth of SMEs.
  2. To assess the contribution of insurance companies to the growth of SMEs.
  3. To investigate the factors inhibiting the purchase of insurance cover by SME operators.
  4. To determine the strength of the relationship between insurance companies and growth of SMEs.

1.3. Research question

  1. What are the major factors affecting the growth of SMEs?
  2. What contributions do insurance companies responsible for the growth of SMEs?
  3. what factors inhibit SME operators from purchasing insurance cover?
  4. How strong is the relationship between insurance companies and growth of SMEs?

1.4. Purpose of the study

The study established the contribution of insurance companies and the performance of SMEs in Nigeria.

1.5 Scope of the study

Geographical scope

The study focused on Insurance companies in Nigeria- NIGER INSURANCE CORPORATION Limited (NIC) which is an insurance company in Nigeria. The company is a leading provider of insurance and risk management services with 19 branches spread throughout the country (Robinson, 2009).

Content scope

The study focused on the efforts that are made by National insurance company to raise the growth of SMEs. Contribution that insurance companies play in the growth and development of SMEs and the relationship between insurance companies and SMEs was also studied. The study targeted the employers and employees of NIC.

1.6 Significance of the study.

It‟sthroughonlyresearch that ideas and approaches will be developed and tested. This research will generate information to be used as basis for further research in to the contribution of insurance in other business segments.

The study will increase public awareness on the operations of NIGER INSURANCE CORPORATION hence making it convenient for the public when dealing with the corporation.

This research will provide data to policy makers that will assist towards formulating for appropriate policy for policy makers operation. This will permit specific plans and policies geared towards promoting SMEs.

ANALYSIS OF THE CONTRIBUTION OF INSURANCE COMPANIES TO THE GROWTH OF SMEs: A CASE OF NIGER INSURANCE CORPORATION

EQUIPMENT LEAASING AS A SOURCE OF FINANCE IN CONSTRUCTION INDUSTRY

ABSTRACT

The aim of this study is to find out how the establishment of Equipment Leasing in the Federation has helped in financing investment. To carry out this study, four research questions were formulated.

In this study, a questionnaire was used to collected relevant data from the staff of Marlum Construction Company, Emene, Enugu.

The findings revealed that Marlum has a positive perception that the established of Equipment Leasing in the federation helped in improvement of investments while lessens also have positive perception, better perception in all the issues raised in the research work.

The relative recent development of leasing in Nigeria as compared to other forms of finance have been said to be the reason for the stunning lack of information about it and the options it offers to the business concern in Nigeria. This lack of information is pitiful in that most members of the public are not even aware of its presence in Nigeria. The need for organized and comprehensive information could not be over emphasized.

Furthermore, being new most investors are not really well informed as to the profitability or otherwise of leasing as a finance option, hence the low level of firms that engaged in leasing which goes to compound the problem of the Nigerian investors not having much choice as to the best alternative available to him.

Subsequently, this study will go a long way in projecting the profitability and future prospects of leasing business in Nigeria and also contributing to the development of leasing in Nigeria which under the present economic condition its impatience cannot be over emphasized.

CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Equipment leasing started in Nigeria in early 60’s through off-shore United Kingdom leasing companies. Awelewa (1989, pp.20) with the outbreak of civil war in 1967, these leasing transaction became impossible due to difficulties in exchange control measures introduced by the military Government.

The Marlum Civil Engineering and construction Company, Enugu is not an exception in the equipment leasing. The Marlum have been in existence from 2002 to date in this leasing process.

Equipment leasing was their main source of finance. The leasing increased their paid up capital. At a time it started to dwindle due to the lessor could not meet up to the expectations of demand by the construction company. Sometimes, the lessor may not use the equipment as a result of depreciation occurance.

Delay in the payment caused the dwindle. The lessor may not finish the payment until he died.

Before leasing the equipment, the lessor has to write the designated place where the equipment has to be used. The person has to be registered in a well-know company. The purpose of which the equipment you want will be indicated in the form.

Most problems are encountered by Marlum Construction company is over used and breakdown of equipment.

The lessor does not give adequate information about the equipment after used. When another lessor comes to use the same equipment

, the damages which have been caused by the former, will be noticed.

The company has been suffering from this because of insecurity in the use of equipment.

1.2     STATEMENT OF THE PROBLEM

Marlum had been suffering financial problems as a result of the delay in payment by the lessor and it had equally denied them cash for working capital.

Some of the lessor could not meet up with the company demand in leasing out the equipment as a result of restricted guideline.

The Marlum security officers were not always at their duty post and this negligence of duty created a lot of problems to the extent that they were present even when equipment is returned.

Marlum spends so much time and money in the courts because of the litigation of all types particularly with respect to recovery of bad debts or doubtful debts.

1.3     PURPOSE OF THE STUDY

The past development of leasing in financing organization and options it offered to marlum construction company Emene, Enugu.

However, in the purpose of the study, the researcher intends to identify the mistakes and possible solutions to such.

To find out how the marlum had suffered financial constraints

To find out why the lessor could not meet up with the guidelines

To investigate why security officers are not on their duty post when at work.

To find out how marlum had been able recover their debts.

1.4     SCOPE OF THE STUDY

The researcher encountered numerous difficulties ranging from finance, time consuming and personal comfort.

In as much as the researcher is student and carries out the research work with a limited amount of money, he is bound to have financial problems hence the researcher work required much money for producing questionnaire or interview guides and transportation. The financial problem prevented the researcher from traveling to other parts of the country for effective data collection, hence only Enugu Metropolis was used.

1.5     RESEARCH QUESTIONS

Does Marlum suffer financial problems as a result of delay in the payment by the lessor?

Do the lessor meet up with the company demand in leasing out the equipment as a result of restricted guideline?

Do marlum personnel spend so much time and money in the cause of recovering bad and doubtful debts?

THE SIGNIFICANCE OF THE STUDY

There is a strong need to study the equipment leasing as a source of finance in Nigeria. It is necessary that this study be done so that this practice, prospectus and problems will then be examined and tackled by the authority in-charge for smooth running of the company. This study will also give an idea into ways of under taking smooth leasing system.

This study will also be very useful in the school system to  enrich the academics in the library.

It will also serve as a useful guide for any person intending to go into  leasing practices. It will also be very useful to the policy makers of marlum Construction Company in tackling management issue on leasing.

DEFINITION OF TERMS

There are some words considered technical which if not defined might be in impediment to an ordinary man’s understanding and appreciation of the research work.

They are:

LEASING:- Any reference to leasing in this study is deemed to mean alternative source of finance.

LESSOR:- For the purpose of this study, this refers to some one who grants a lease.

LESSEE:-This refers to someone who is granted a lease or whom the property is been leased.

LEASE:- Legal agreement under which the owner of property allows another party to use the property for a specified period and previously arranged payments.

EQUIPMENT LEAASING AS A SOURCE OF FINANCE IN CONSTRUCTION INDUSTRY

IMPACT OF THE NIGERIAN CAPITAL MARKET ON THE GROWTH OF INSURANCE SECTOR IN NIGERIA

ABSTRACT

The aim of this study is to analyze he impact and benefit of the capital market in the realization of the insurance industry contribute to the economy. Despite the low number of insurance companies listed in the stock exchange, there are positive prospects of improvement after the recent capitalization. The problems encountered during the research would be addressed through the implementation of the suggested solution. It was finally conclude that capital market contributes to the growth of insurance sector in Nigeria.

CHAPTER ONE

1.1   INTRODUCTION

For any country to be economically sound, she must experience a growing economic sector. It is of interest to Nigeria and other third world countries to attain a steady economic growth rate, as this would enhance National development. Economic growth and development involves an increase overtime of per capita real gross National product (G.N.P) and the welfare of the population.

For economic growth to be achieved, a certain issues that act as constraints ought to be tacked. These issues include technological development, human resources development, low productivity, capital formation, price stability etc. (Iniodu 1996). And as Nwankwo (1991) observes, capital formation which is the function of an efficient financial system is very vital” capital formation involves the mobilization and channeling or resources form the surplus spending units (ssu) to the deficit spending unit (Osu). The Nigeria capital market is a critical part of the financial system which performs this allocative role.

The market is the long term end for financial market. It is made up of the market and institutions, which facilitate the issuance and secondary trading of long term financial instruments. Unlike the money market which function basically to provide short-term funds, the capital market provides funds to industries and government to meet their long-term requirements.

The capital market has it’s mission statement that is “promoting the Nigeria capital market to respond to the socio-economic development need of the nation”. The objective of the capital market is to mobilize long-term funds for investment. The capital market is performing various functions. The capital market provides an additional channel for engaging and mobilizing domestic savings for productive investment and represents alternative to bank deposit, real estate investment and the financing of consumption loans. It also provides deposit with better protection against inflation and currency and depreciation. Another major function of Nigeria capital market is to improve the efficiency management changes as compared with the administrative or potential mechanism of public sector corporations. The capital market facilitates the transfer of enterprises from the public sector to the private sector and encourages privatization by increasing the marketability of new issues. The capital market employs some instruments used to raise funds, these instruments are equities-ordinary shares and preference shares. Debt government bonds (federal state and local government). Industrial loans / debenture stocks and bonds.

The players in the capital market are the funds providers who are individuals, unit trusts, pension funds, insurance companies, government intermediaries are the stock broking firms, issuing housing, registers, audit firms and regulators e.g. securities and exchange Commission. The Nigeria stock exchange central bank of Nigeria and the federal ministry of finance.

However, there is a growing concern about the efficiency or otherwise of the Nigeria capital market and to the role f the insurance sector. Ajayi (1984) sees it as “efficient in the sense that, the capital market has increased the nation’s output and equitable distribution of the output.

But, Williams (1988) see that capital market as “inefficient in pooling funds for investment” he observe further that by participation of only a few elites, it has helped to widen the gap between the rich and poor.

This project attempts to determine the influence of this market on the growth of the insurance companies in Nigeria. In particularly, its sees to clarify the role of the insurance companies as key players in the capital market and how role has strengthened insurance business in Nigeria.

1.2   STATEMENT OF THE PROBLEM

To understand the subject matter we will look at the capital market on the growth of insurance in Nigeria. We want to, also believe that the insurance company is a member of the capital market which function among others involves in the channeling of long-term funds from the surplus to the deficit for investment, but after the finding of William (1988) was sees the capital market as being inefficient, implying that insurance company is inefficient in pooling funds fro investment. He also added that only a few elites get such funds thereby creating a gap between the rich and the poor.

At this point I will like to identify those factors that have render the insurance sector the efficient and that must be done to correct those capital of both life and general insurance to #20 million and #50 million, where the general business includes oil and gas insurance, among another activities. Reinsurance has a minimum paid-up capital of #150 million (Akpan 1999). One of the major sources of capital insurance companies is the capital market that has being fully descried in the introduction.

Examining the performance of the five companies quoted on the stock exchange, prestige assurance, Nigeria insurance and Allco insurance company’s profit before taxation and also an increase in the profit after taxation. Dividends were also recommended a dividend payout of NGN, 55,440, 625, while Allco recommended NGN 70 million to share holders. This was made possible by the allotment of right issues in the year 2003 per all three insurance companies which was as a result of the company’s recapitalization plan.

The same cannot be said for crusade and unic insurance, which recorded a slight decrease in 2002 and 2001 despite the impact of the capital market. This can be as a result of the general impact of variable knowing fully well that the main function of an insurance company is indemnity which is taking an individual to where he or she was before he or she suffers loss and finally is want to know why only few insurance companies are quoted.

1.3   OBJECTIVE OF THE STUDY

The objective of this research are as following:

i) Examine the capital market in the development of the insurance sector..

  1. ii) Appraise the impact of the Nigeria capital market on the growth of the insurance business in Nigeria.

iii) Identity the problem confronting the insurance companies as beneficiaries of the services provided by the Nigeria capital market.

  1. iv) Make recommendations on the efficient management of the Nigeria capital market.

1.4   SIGNIFICANCE OF THE STUDY

At this time, the Nigeria government is intensifying efforts to boost the country’s economy, the need to research on the fact that led to economic growth in Nigeria cannot be understated. This study will aid our understanding of economic development via the insurance sub-sectors participation in the capital market.

Thus, this research work is considered to be important to:

  1. i) The government for policy formulation.
  2. ii) The business community for the purpose of investment and capital formulation.

iii)    The result of work will serve as a reference materials for researches.

  1. iv) This study will enhance the knowledge of the researcher more about the capital market and the insurance sector.

1.5   SCOPE AND LIMITATION OF THE STUDY

In the course of carrying out this research work the researcher was faced with some limitation. Such as:

1) Time constraint: The duration allowed for this study is limited and insufficient for wide traveling together materials.

IMPACT OF THE NIGERIAN CAPITAL MARKET ON THE GROWTH OF INSURANCE SECTOR IN NIGERIA

ASSESSING THE ROLE OF INSURANCE COMPANIES IN THE ECONOMY OF INSURANCE INDUSTRY

ABSTRACT

The main aim of this research is to determine the role of insurance companies on the Economy of Cameroon using the Cameroon insurance industry as case study. This purpose of the study is to know whether or not there exist a role played by insurance companies on Cameroon Economy. We had to split our main objective into two in order to analyze the role of both life and non-life insurance companies on the economy of Cameroon. This is done using secondary sources of data on the GDP of Cameroon and other indicators of insurance companies such as the total insurance coverage, adequacy of social insurance ,insurance and financial services. After the analysis, the main results showed that insurance companies play a role on the Economy of Cameroon as portrayed with the use of the Pearson correlation. At the end, we came up with some recommendations that the government should keep on motivating the insurance companies through their policies because of the determinant role they play in the economy and that insurance companies on their own part should try to increase the awareness of their products and services to the public.

CHAPTER ONE

INTRODUCTION

1.1: Background of the study

A lot of debate can be emphasized on the role played by insurance companies in the world but simplicity entitles us to concentrate on the economy of Cameroon. Whether insurance or assurance throughout the ages, there has always been a need for insurance. The need for insurance arises from fear of the unknown, fear of risk and fear of loss (Webster dictionary, 1997). People want to be insured against the unknown and factors for which they have little control. However, insurance as we know it did not spring up but has evolved over centuries based on changes in need, regulation, and technology( Buckham & etal , 2010).

The earliest known insurance instrument dates back to the Babylonian period of Circa 2250 BC (Buckham & etal, 2010).When the Babylonians developed a type of loan insurance for marine business. Upon receipt of loan to fund a shipment, a merchant would typically pay the lender an additional premium in exchange for the lenders guarantee to conceal the loan should the shipment be stolen or lost at sea. Here, the lender assumed the peril of the good in transit at a premium rate of interest. These marine loans persisted until the thirteenth century in the Italian city states of Genoa and Venice. (Buckham & Etal , 2010).

Ships and cargo were constantly in danger of being seized by pirates while both financial and non-financial risk diversification where developed in the form of joint stock ventures, pooling of goods of a number of merchant to be sold jointly. (Buckham & etal, 2010). The merchant did not formalize the concept of probabilities in the statistical sense; they relied on intuition, subjective experience and objective record to guide the estimation rather than on the former probabilistic reasoning based on actuarial evidence. Pascal triangle led to the first actuary tables that are still used in calculating insurance rates (Beattie, 2016).

Life and health insurance had it importance in 1840 when the industrial revolution created need for security that had traditionally given to a nation of farmers. Health insurance started as accident insurance in 1950 with the first auto insurance in 1898(Dictionary of America, 2003) .In terms of practice, insurance companies are divided into two namely life and non-life insurance companies. Life insurance include whole life (death), term and endowment, health while non-life insurance include liability loss, workers compensation and property loss (Messomo,2015).Today, Cameroon counts about 25 insurance companies (Minepat,2012). Insurance companies have been described as the business that exists in order to ensure the survival of other business (Muhammed, 1998). Insurance companies are of vital importance in an economy.

An economy is what people produce and the relationship that make that production possible (Ian welsh, 2013). Others define an economy as the process or system by which goods and service are produced, sold and bought in a country or region(Merriam Webster,1828).The economy of Cameroon like any other economy in the world suffered some economic crisis in 1986 as a result of changing international economic and domestic policy environment (Derrick, 1992) which once boomed in the mid 1970 with a 7% growth rate and a per capita income of $800(Wilfred &Mufor, 2011).Which saw the collapse of some banks in Cameroon such as the Cameroon bank, Meridian BIAO and BICIC.

(Molua, 2010) noted that Cameroon experienced a boom in its renewable and exhaustive natural resources exploitation from the mid 1970 to the end of the 1980. The economy of Cameroon has gone through three decades.

This comprises the period of real economic growth particularly in the year 1960 to 1986.The period of economic crisis that stem up in the period of 1986 to 1994 and the period of economic recovery that started from 1995 to date which is a period referred to as globalization. Cameroon responded to this crisis by reducing public expenditure (Baye et al, 2002).

1.2: Statement of the problem

Insurance companies in an economy serve as financial intermediaries. By their nature, they bear risk and these risks partly depend on the insurer’s ability to anticipate the frequency magnitude of the risk they promise to cover. They transfer resources from those who would save to those who will invest (Richard et al, 1990). In fact, without an insurance industry, the economy would practically come to a standstill (McGrath, 1990).From this assertion of (McGrath, 1990), then this main question: What is the role played by insurance companies in an economy?

From the above, we can generate the following specific questions as follows:

• What is the role of life insurance companies in Cameroon economy?

• What is the role of non-life insurance companies in Cameroon economy?

1.3: Research Objectives

The main objective of this study is to examine the role played by insurance companies in Cameroon economy. With specific objectives as;

• Identifying the role of life insurance companies in Cameroon economy.

• Analyzing the role of non-life insurance companies in Cameroon economy.

• Making Recommendations.

1.4 Working Hypotheses

We are going to use the following working hypotheses:

H1: Life insurance companies play a role in Cameroon economy.

H2: Non-life insurance companies play a role in Cameroon economy.

1.5 Significance of the Study

This study is of primordial importance to the various parties which include; the student, organizations and the government. With respect to the student, it is important because it will aid them to identify loopholes in an organization or an economy. Next, it will equally serve as a benchmark for future researchers who will envisage tackling this problematic. Lastly, it is a university requirement as partial fulfillment in order to enroll for a bachelor’s degree.

As far as an organization is concerned, it will help the organization to identify its key position in an economy or the role it plays in economic development. If well understood it entitles companies to revisit their policies or the services they offer so that it suits the need of the economy because it is worth noting its services directly affects the public or its customers and the economy as a globe. Again, it equally helps the organization to understand the changing environment.

Last but not the least, the study is equally important to the government as it will guide them on their policy implementation by identifying the key roles of insurance companies will generate useful information which will be used to predict the future. It will equally be helpful for them to compare the business with other businesses in the same sector.

1.6 Scope and Delimitation

This study attempts to demonstrate the role played by life and non-life insurance companies in an economy and covers a one year academic that is academic year 2015-2016. The case study in visage to explain this phenomenon is the Cameroon insurance industry. The major difficulty in this study is to get reliable information concerning the subject matter under investigation.

1.7 Plan of the Study

This study is segmented into five chapters as organized below;

Chapter one is the introductory chapter which is divided into seven and where we have the background information, the problem statement, the research objectives, and research hypotheses, significance of the study, scope and limitation and lastly the plan of the study. Chapter two is literature review which contains segments such as conceptual issues, related theories, empirical literature and theoretical framework while chapter three is the methodology.

In chapter four, we present the results of the data analyzed and interpret the results which is conversely to chapter five where we make a summary of the study, draw conclusions and provide our recommendations.

ASSESSING THE ROLE OF INSURANCE COMPANIES IN THE ECONOMY OF INSURANCE INDUSTRY

CLAIMS MANAGEMENT AND PROFITABILITY OF INSURANCE COMPANIES IN NIGERIA

ABSTRACT

The main objective of this study is to analyse the effects of claims settlement on the profitability of Nigeria Insurance industry. The study adopts descriptive and analytical method of historical and time series data. The study was conducted to cover the period from 1986 to 2011 (twenty-five years).

The secondary data used for the study was obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin, 2014. The secondary data were presented in tables and multiple regression method was adopted to assess the relationship between the variables employed.

T-statistics and F-statistics were used to test the hypotheses formulated in the study. The result from the analysis revealed that there is a significant relationship between claims settlement and profitability of the Nigerian insurance industry.

Also, there is a significant relationship between claims settlement and premium received by insurance industry in Nigeria. It is therefore, recommended that insurance firms need to emphasize prompt payment of adequate claims for increased patronage, which is always reflected in payment of premium and profitability.

CLAIMS MANAGEMENT AND PROFITABILITY OF INSURANCE COMPANIES IN NIGERIA

IMPACT OF THE NIGERIA CAPITAL MARKET ON THE GROWTH OF INSURANCE SECTOR IN NIGERIA

CHAPTER ONE

1.1   INTRODUCTION

For any country to be economically sound, she must experience a growing economic sector. It is of interest to Nigeria and other third world countries to attain a steady economic growth rate, as this would enhance National development. Economic growth and development involves an increase overtime of per capital real gross National product (G.N.P) and the welfare of the population.

For economic growth to be achieved, a certain issue that act as constraints ought to be tacked. These issues include technological development, human resources development, low productivity, capital formation, price stability etc. (Iniodu 1996). And as Nwankwo (1991) observes, capital formation which is the function of an efficient financial system is very vital” capital formation involves the mobilization and channeling or resources form the surplus spending units (ssu) to the deficit spending unit (Osu). The Nigeria capital market is a critical part of the financial system which performs this allocative role.

The market is the long term end for financial market. It is made up of the market and institutions, which facilitate the issuance and secondary trading of long term financial instruments. Unlike the money market which function basically to provide short-term funds, the capital market provides funds to industries and government to meet their long-term requirements.

The capital market has its mission statement that is “promoting the Nigeria capital market to respond to the socio-economic development need of the nation”. The objective of the capital market is to mobilize long-term funds for investment. The capital market is performing various functions. The capital market provides an additional channel for engaging and mobilizing domestic savings for productive investment and represents alternative to bank deposit, real estate investment and the financing of consumption loans. It also provides deposit with better protection against inflation and currency and depreciation. Another major function of Nigeria capital market is to improve the efficiency management changes as compared with the administrative or potential mechanism of public sector corporations. The capital market facilitates the transfer of enterprises from the public sector to the private sector and encourages privatization by increasing the marketability of new issues. The capital market employs some instruments used to raise funds, these instruments are equities-ordinary shares  and preference shares. Debt government bonds (federal state and local government). Industrial loans / debenture stocks and bonds.

The players in the capital market are the funds providers who are individuals, unit trusts, pension funds, insurance companies, government intermediaries are the stock broking firms, issuing housing, registers, audit firms and regulators e.g. securities and exchange Commission. The Nigeria stock exchange central bank of Nigeria and the federal ministry of finance.
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IMPACT OF THE NIGERIA CAPITAL MARKET ON THE GROWTH OF INSURANCE SECTOR IN NIGERIA

EVALUATION OF THE IMPACT OF THE NIGERIAN DEPOSIT INSURANCE CORPORATION (NDIC)

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

The federal government of Nigeria ride decree No 22 established the Nigeria deposit insurance corporation in July 1988, This regulatory institution is set up to insure all deposit liabilities of licensed banks and other financial institutions the NDIC act Capt 301 L.F.N 1998 further stress on the establishment of the NDIC by the federal government to incuse bank deposit protect depositors interest and also help in promoting page and sound banking system and further inculcating banking habit among our people.  The Nigeria deposit insurance corporation is an antonymous regulatory body and has the authority to examine the books and affairs of insured banks and other deposit taking financial institution every licensed bank and other deposit taking financial institution operating in Nigeria are man dated to insure its total deposits. A depositor in a Nigerian deposit insurance corporation insured bank will not pay for the cost of this deposit insurance. It is the insured bank that pays through annual assessment on its volume of such deposits.

The authorized capital of the corporation is N100 million out of which N50million had already been called and paid up by the federal government and central bank of Nigeria banks of Nigeria (CBN) in the ratio of 2.3 the decision by the federal government of Nigeria to establish the NDIC are.

1. To encourage saving by increasing the safely of deposit and ensuring development of banking practice.

2. To refund every insured bank depositor to the maximum tune of N50,000 if this bank is liquidated.

3. To protect the deposit of customers.

In Nigeria today hardly can any year pass by without one hearing of one kind of distress or the other in the banking sector. The problem of distress in the financial sector including outright bank failure was observed in Nigeria as far back as 1930, when the first bank failure was reported. Between 1930 and 1958 when the CBN was established over 21-bank failure was reported the number of banks today classified as problem banks as on the increase and have continued to be of serious concern to depositor government and regulatory authorities.
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EVALUATION OF THE IMPACT OF THE NIGERIAN DEPOSIT INSURANCE CORPORATION (NDIC)

CONTRIBUTIONS OF INSURANCE IN THE MANAGEMENT OF RISK IN NIGERIA OIL INDUSTRIES (A STUDY OF SHELL PETROLEUM PLC)

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Nigeria’s economy before independence and shortly afterward largely depended on agriculture. This is because a good number of its citizens are farmers. Intact about 70% of the Nigerian populace then were basically farmers and this goes a long way to show that Nigerians are poor people. Agriculture then was her only source of foreign exchange through the sale of cash corps.

Shortly after independence and the civil war, Nigeria economy changed as a result of oil boom in the early 705. This caused the total neglect of is agricultural sectors and other mineral resources which are blessed with, the boom attracted foreign investor in so many sectors, they includes, bank, insurance companies and oil producing companies etc. Among the early oil producing companies to exploit its shores of Nigeria include British Petroleum Company, Uni Petrol etc. Petroleum is a product of crude oil which is found a black substance naturally underground.

The oil industry is an important aspect in the monetization process and industrial growth of all nations which serves as source of energy to most of the modern power generators and machineries.

Petroleum is also serves as sources of revenue and also contributing to the national output. But due to the fact that our country’s economy depends largely on oil and it’s by product based on chemicals derived from oil sectors and natural gas. It is invariably pertinent that one should consider the risk involved and the types that the petroleum industry as a whole are exposed.

One should be thinking of the ways to reduce the risk involved both in the offshore and onshore operations. Insurance cover is an appropriate way of handling and reducing those risk exposures that the oil companies experience. The insurance companies have now the capacity to cover most of the risks being envisaged by the petroleum industry.
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CONTRIBUTIONS OF INSURANCE IN THE MANAGEMENT OF RISK IN NIGERIA OIL INDUSTRIES (A STUDY OF SHELL PETROLEUM PLC)

A CRITICAL ANALYSIS OF THE IMPACT OF INSURANCE INDUSTRY TOWARDS ECONOMIC DEVELOPMENT OF NIGERIA. A RESEARCH PROJECT MATERIAL ON INSURANCE

A CRITICAL ANALYSIS OF THE IMPACT OF INSURANCE INDUSTRY TOWARDS ECONOMIC DEVELOPMENT OF NIGERIA. A RESEARCH PROJECT MATERIAL ON INSURANCE

ABSTRACT

Evaluation of the impact risk survey in the manufacturing firm in Nigeria. The research was aimed at evaluation the impact of risk survey in manufacturing firms in Nigeria with a case study of Emenite Limited which is the researchers’ topic, objective of this study is to determine how risk managers survey their risk and how it is being control in manufacturing firm, and also these underwriting consideration in risk survey. The research method used was design in a manner to ensure adequate representation of Emenite Limited in Enugu Research findings established that reduction in the volume of loss and increase in profit maximization are the important of risk survey in the manufacturing firms. Apart form the existing risk control in manufacturing firms, other various new risk controls should be adopted.

 

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Risk is integral to everyday life. Once we have said that risk is always at the centre of insurance. We should also understand that risk is at the centre of our life. This means that for every human endeavor there is ‘risk’ as a result of our different economic pursuits. According to David (2001) risk exists where the future is unknown. It represents both desirable events and undesirable event. It is a desirable event when one internationally initiates certain things in order to better his socio-economic well being. Because of these desirable and undesirable events, an organization will want to transfer their risk to an instance company, which thereby brings about risk survey.

According to David (1989) the prime object of a risk survey is to provide the underwriter with as complete a picture of the risk being offered as possible; to enable him decide whether the risk was acceptable and how it compared with the same kind and as the basis for deciding premium and other terms.

In the present day the surveyor is still closely concerned with provision of underwriting information and in many situations the information disclosed by the completed proposal form, will need to be supplemented by a surveyors report before the picture is completed. However, the surveyor is now more closely concerned with accident preventions, surveying represents one aspect of the wider subject of risk control. Moreover, practice varies among individual answers and there are no established criteria for surveying manufacturing firms. However, it may safely be stated that risks of unusual character or with special features will normally be surveyed in that firm. A safety or risk audit will be conducted.

A safety audit is a critical examination of an individual operation in its entirely to identify potential hazard and level of risk Audits are often undertaken by multidisciplinary terms individual members should have a good knowledge of legal requirements, an understanding of reasonable practice in the industry and above all the ability to communicate with at levels of personnel or department within the organization. In many companies, this expertise is not readily available and so audits tend to be undertaken by external specialist such as consulting engineers acting independently or employed by insurance companies. In a manufacturing firm like Emenite Limited. Risks that presents a serious injury/hazard are those where there are substantial involvement machinery(s) Reports from the Health and safety executive in Emenite limited however, shows that some 80% of accidents are not caused by machinery but by such simple things as falls, lifting heavy weight or defective hand tools.

 

 

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A CRITICAL ANALYSIS OF THE IMPACT OF INSURANCE INDUSTRY TOWARDS ECONOMIC DEVELOPMENT OF NIGERIA. A RESEARCH PROJECT MATERIAL ON INSURANCE

PENSION REFORM ACT OF 2004 ANALYSIS OF IT’S IMPACT ON NIGERIAN WORKERS. A RESEARCH PROJECT MATERIAL ON INSURANCE

PENSION REFORM ACT OF 2004 ANALYSIS OF IT’S IMPACT ON NIGERIAN WORKERS. A RESEARCH PROJECT MATERIAL ON INSURANCE

ABSTRACT

The main purpose of this write-up was to determine the impact of pension reform Act 2004 on the Image of pension Workers in Nigeria. The pension Reform Act 2004 was characterized by some problems like non-compliance, ignorance of the benefit of the pension reform act 2004 which has hinder the smooth administration of the reform act. The major findings of this study were the fact that pension is a series of benefits provided by government or former employer to a person who has come to end of his working life and that the existing pension prior to the enactment of the pension reform act 2004 was characterized by indebtedness and so was seen effective. The conclusion of the study show that despite the problems faced by the reform act that if the reform act is given full time to manifest the reason beyond its enactment that it will boost the image of pension workers and pension business in Nigeria and will be of benefit to the citizenry of the state and also bring about economic growth and development of the nation.

 

CHAPTER ONE

1.1 BACKGROUND OF THE STUDY

Currently a number of studies have been carried out on the impacts of pension reform Act 2004 on both the image of pension business in Nigeria and the entire workers in Nigeria.

However, much have not been discourse about impact on the new pension reform act 2004 will bring on the image of pension workers in Nigeria.

Pension natural can be described as a sum of money paid regularly to a person who has come to the end of his normal working life or it can be defined as a series of regular payment provided by government or former employer for a person who has come to the end of his normal working life or who no longer works because of age, disablement etc or to his widow or defendant children by the state by his former employer as or from funds to which he and his employers have both contributed. Thus, the introduction of the pension reform act 2004 was due to inability of the previous pension system to meet the need of the people.

Thus this research is embark as a result of the quest to bring to the effect. The new pension reform act 2004 have created so far on the image of pension workers in Nigeria.

It is also hope that this write up will enlighten the readers especially business student and pension administrators on the analysis of the impact of pension reforms act 2004 on the image of pension on Nigeria worker.

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PENSION REFORM ACT OF 2004 ANALYSIS OF IT’S IMPACT ON NIGERIAN WORKERS. A RESEARCH PROJECT MATERIAL ON INSURANCE