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THE IMPACT OF INSURANCE COMPANIES ON ECONOMIC DEVELOPMENT OF NIGERIA

ABSTRACT

This research work is poised to look into the Impact of Insurance Company on Economic Development of Nigeria with emphasis on National Insurance Corporation of Nigeria (NICON) Lokoja branch. The study is aimed at examine the Impact of insurance company in the struggle for development in the country, the contributions of insurance companies to the economic development of the country as well as reviewing relevant literatures on insurance as to how risk can be reduced in insurance. The researcher used both primary and secondary sources of data. In analyzing the data, the use of simple percentage method was adopted for easy understanding. It was revealed after the investigation that effective insurance policies and implementation are is very necessary for the rapid economic development of the country. In view of this, the researcher recommends that the National Assembly needs to enforce the law concerning insurance policy by passing bills which enable both private and public organizations to have insurance cover especially production sector of the economy, it was also recommended that since risk is inevitable to minimize loss, insurance policy should be employed by the people.

CHAPTER ONE

1.1  BACKGROUND TO THE STUDY

Life is full of risks, there is risk in driving business, sports and other endeavours. Since risks are inevitable in both private and public enterprises, the need for insurance policy is so paramount to business growth and national development. Insurance is on of the commercial institutions that boost the economic prosperity of the nation in many ways. Without insurance, there cannot be meaningful growth because it would not be easy to invest and where there is no investment, there would not be development. For instance, the men man who insured his car against either theft or fire will be indemnified when there is any eventuality. This man could have been unable to purchase or acquire another car if insurance company had not come to his aid. In the same vein, if a company is insured against many risks and the event which the policy covers occurred, the insurance company will definitely indemnify the company based on the magnitude of the damage, but if the company had not taken such insurance policies, then the activities of the company will come to an end. Again, a man who has a life insurance policy and left a will for his family may not have any problem. Even after his death, the insurance company will pay compensation to sustain the entire family, when the ‘’bread winner’’ of family died. Based on this importance of insurance to our socio-political and economic development of the nation, the researcher would love that anybody who comes across this research work should have a thought on how to have insurance policies to cover business companies, houses and life etc. Insurance is advantageous to growth since it safeguards against numerous risks to which capital is exposed in businesses.

1.2  STATEMENT OF THE PROBLEM

It is most unfortunate and disheartening that most Nigerians do not know the real meaning and the economic impact of insurance. Due to this ignorance, there are series of baseless criticisms that taint insurance business in Nigeria. Until Nigeria realizes the potentials of insurance as a ‘’ shock absorber’’ in the time of risk, the present level of poverty may continue to increase. The major problem is the negative attitude towards insurance, because some people claimed that, premium is priced by chance and believe that the proportion of claim is so small in relation to the proportions of the total premium paid. And that insurance companies succeed in grabbing from the insuring public much more than they pay back to the public. These erroneous belief has continued to discourage many Nigerians from taking insurance policy and that is why it is very common for any business or company to paralyze when there is loss from fire outbreak or accident.

1.3  PURPOSE OF THE STUDY

The main purpose of embarking on this research work titled ‘’the Impact of Insurance Companies in the Development of Nigerian Economy’’ is to change the negative attitude of Nigerians towards insurance and more importantly to achieve these goals and objectives on insurance policies, I look into: To safeguard the numerous business enterprises against risks. To promote industrialization by reducing the losses of entrepreneur. To build confidence and provide security needed to invest in the face of uncertainties. To promote bilateral and multilateral trades. To also encourage Nigerians to embrace insurance acceptable as collateral by banks for loans and other financial transactions. More importantly, this research work is a part of requirement for the award of Higher National Diploma certificate in Nigeria by the School of Management studies of Kogi State Polytechnic, Lokoja.

1.4  SIGNIFICANCE OF THE STUDY

The Significance of this investigation cannot be over- emphasized, because insurance plays a vital role in business and national development. When the research work is finally conducted and approved, it will be of immense benefit to some categories of people like:

Academicians: The research is of inestimable value to academician and students in the field of study like insurance, banking and finance, accountancy and other related course.

Insurance brokers: Insurance practitioners who wish to update their knowledge can use this project work as a source of information.

Business people: Any business person who does not want his business to collapse after an unforeseen circumstance, would appreciate the need to take an insurance policy after reading this project work.

Policy makers: The research work would also inform our people at this top (policy makers) of all levels of government, on the need to evolve a national policy on insurance for Nigerians, which should be back up by the constitution of Federal Republic of Nigeria.

1.5  RESEARCH QUESTIONS

To what extent does the impact of insurance companies affect/boost the economic development of Nigeria?

To what extent can insurance company be of benefit to the economy of Nigeria?

1.6  SCOPE AND LIMITATIONS OF THE STUDY

SCOPE OF THE STUDY:

This aspect of the investigation explains the coverage of the research work. There are so many insurance companies in Nigeria playing active role in economic survival of the nation. This job is not meant to cover all the activities of the existing insurance companies but it is limited to NICON Insurance Company, Lokoja branch, Kogi State. The period viewed by the researcher of the NICON insurance company Lokoja Kogi State branch is between the year of 2006 to 2012 for effective operation.

LIMITATIONS OF THE STUDY

This aspect of the research deals with certain problems encountered by the researcher in the course of doing this research. The major constraints to this research is lack of enough textbooks on insurance to get recent data. For the purpose of the investigation, the researcher used few books on commerce and other textbooks from the school library. Due to time constraints and inadequate finance, the research questionnaire was very few in copies. A research of this nature demands random sampling of views of many people in different parts of the country to know the impact of insurance on people’s life, but lack of finance limited the researcher to Lokoja metropolis.

1.7  DEFINITION OF KEY CONCEPTS

In the course of this investigation, certain terms were used. The researcher wishes to explain such terms in the contest of this research, they are:

Insurance: Insurance is a contract which one party undertakes to indemnify another against loss, damages or inabilities arising from unknown or contingent event.

Indemnity: This refers to security against hurt, loss or damage.

Under-writing: This means to set one’s name to an insurance policy of becoming answerable for a designated loss or damage on consideration of receiving a premium percent.

Insurance broker: An insurance broker is an independent insurance operator.

1.8 ORGANIZATION OF THE STUDY

This research project is divided into five chapters. Chapter one is the introduction of the work that is followed by the area covered; background to the study, statement of the problem, purpose of the study, significance of the study, research questions, scope/imitations of the study, definition of key concepts. Chapter two; is the literature review, and includes; Historical development of insurance, meaning of insurance, class of insurance, basic principles of insurance, roles and contributions of insurance companies to economic development of Nigeria, problems faced by insurance companies, risks and insurance. Chapter three is the research methodology and includes research design, area of study, population of the study, sample of the study, description of instrument, administration and retrieval of instruments, administration of research questionnaires and method of data analysis. Chapter four; is the data presentation and analysis and includes data presentation, analysis of data, testing of hypotheses discussion of findings. Chapter five is summary, recommendations and conclusion.

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