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1.1      Background of the study

The insurance industry is a highly specialized industry that gives greater security to the fortunes of common people and among the whole society. It is one of the financial institutions in Nigeria today that aid economic development and growth. Egeria (1996:5) describes insurance as handmade of commerce which plays a vital role in the going concern of humans as an economic animal. Chikeleze and Echekoba (2008:186), defined insurance as a contract whereby one party, called the insurer, in return for a consideration, called the premium, undertakes to pay the other party, called the insured a sum of money or its equivalent in kind upon the happening of specified event that is contrary to the interest of the insured. The modern insurance business was introduced into Nigeria in the late 20th century by the British merchant, who established trading posts on the west coast of Africa. Before the Advent of the European to Nigeria, organizations similar in purpose to insurance company were in existence known as traditional social insurance scheme. They include the Isusu, Social clubs, Age grade, etc, According to Okonkwo (1998:6), the first insurance company to register its presence in Nigeria was Royal Exchange Assurance with its office in Lagos in 1921. The enactment of workman compensation ordinance in 1942 and the Road traffic Act of 1945 both contributed to the meaningful takeoff of insurance industry in Nigeria. The need for control and timely intervention of government led to the formation of the National Insurance Corporation of Nigeria (NICON). In 1986, because of the Structural Adjustment Program (SAP) brought about the emergence and proliferation of financial institution especially Deposit taking institution and insurance companies. Insurance capital base was raised from N1-N2million then. Fallout from this event was that only 57 out of 152 insurance companies qualified for registration. This was coupled with tighter control over the industry.The importance of insurance in modern economies is unquestioned and has been recognized for centuries. Insurance “is practically a necessity to business activity and enterprise.” But insurance also serves a broad public interest far beyond its role in business affairs and its protection of a large part of the country’s wealth. It is the essential means by which the “disaster to an individual is shared by many, the disaster to a community shared by other communities; great catastrophes are thereby lessened, and, it may be, repaired.” Insurance is an essential element in the operation of sophisticated national economies throughout the world today. Without insurance coverage, the private commercial sector would be unable to function. Insurance enables businesses to operate in a cost-effective manner by providing risk transfer mechanisms whereby risks associated with business activities are assumed by third parties. It allows businesses to take on credit that otherwise would be unavailable from banks and other credit-providers fearful of losing their capital without such protection, and it provides protection against the business risks of expanding into unfamiliar territory – new locations, products or services – which is critical for encouraging risk taking and creating and ensuring economic growth. Beyond the commercial world, insurance is vital to individuals. Lack of insurance coverage would leave individuals and families without protection from the uncertainties of everyday life. Life, health, property and other insurance coverage’s are essential to the financial stability, well-being and peace of mind of the average person. Insurance is a financial product that legally binds the insurance company to pay losses of the policyholder when a specific event occurs. The insurer accepts the risk that the event will occur in exchange for a fee, the premium. The insurer, in turn, may pass on some of that risk to other insurers or reinsurers. Insurance makes possible ventures that would otherwise be prohibitively expensive if one party had to absorb all the risk. Advancements in medicine, product development, space exploration and technology all have become a reality because of insurance.Insurance intermediaries facilitate the placement and purchase of insurance, and provide services to insurance companies and consumers that complement the insurance placement process. Traditionally, insurance intermediaries have been categorized as either insurance agents, insurance middle man or insurance brokers. The distinction between the two relates to the manner in which they function in the marketplace.Insurance agents are, in general, licensed to conduct business on behalf of insurance companies. Agents represent the insurer in the insurance process and usually operate under the terms of an agency agreement with the insurer. The insurer-agent relationship can take a number of different forms. In some markets, agents are “independent” and work with more than one insurance company (usually a small number of companies); in others, agents operate exclusively – either representing a single insurance company in one geographic area or selling a single line of business for each of several companies. Agents can operate in many different forms – independent, exclusive, insurer-employed and self-employed.


Insurance industry is generally seen as the backbone of any country‘s risk management system, since it ensures financial security, serves as an important component in the financial intermediation chain, and offers a ready source of long term capital for infrastructural projects. Omar (2005) argues that the insurance industry mitigates the impacts of risks and positively correlates to growth as entrepreneurs cover their exposures, otherwise risk-taking abilities are hampered. Insurance also promotes the growth of small-scale and large-scale firms as it provides stability by allowing large and small businesses operate with a lesser risk of volatility or failure. Insurance is also very important to the financial system. In collecting relatively small premium from the insured in the economy, insurers are able to pull together large funds that could be invested for short and long term periods (Obasi, 2010). Such long-term funding of the economy is very critical for economic growth, and the deepening and broadening of the domestic financial system. Amidst the tremendous benefit of insurance policy, most firm or individuals would not have been able to tap into the stream of services offered by these insurance company without the services of the insurance middle man. It is on this backdrop that the researcher intends to investigate the role of insurance middle man in the growth and development of insurance business in Nigeria. 


The main objective of this study is to investigate the role of insurance middle-man in the growth and development of insurance business; specific objective are:

i)             To investigate the role of insurance middle-man in the growth of insurance business

ii)           To ascertain the relationship between insurance middle-man and the growth of insurance company

iii)          To ascertain the relationship between insurance middle-man and the policy holder/insured

iv)         To proffer suggested solution to the identified problem


To aid the completion of this study, the following hypotheses were formulated by the researcher:

H0:insurance middle-man does not play any significant role in the growth of insurance business

H1:insurance middle-man does play a significant role in the growth of insurance business

H02:there is no significant relationship between insurance middle-man and the growth of insurance business

H2:there is a significant relationship between insurance middle-man and the growth of insurance business


It is believed that at the completion of the study, the findings will be of great importance to the management of insurance company as the study seek to enumerate the importance of insurance middle-man in the growth of insurance business in Nigeria, the study will also be of benefit to the insurance middle-men as the study seek to enumerate their role in risk management and their importance to the policy holders. The study will also be of great importance to researchers who intend to embark on a study in a similar topic as the findings and literature in the study will serve as a reference point. Finally the study will be useful to teachers, students, academia’s researcher and the general public.


The scope of the study covers the role of insurance middle-man in the growth and development of insurance business, but in the cause of the study, there were some factors which limited the scope of the study;

AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study       

TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

FINANCE: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover


Insurance agent

Insurance agents are, in general, licensed to conduct business on behalf of insurance companies. Agents represent the insurer in the insurance process and usually operate under the terms of an agency agreement with the insurer.

Insurance Brokers

Insurance brokers typically work for the policyholder in the insurance process and act independently in relation to insurers. Brokers assist clients in the choice of their insurance by presenting them with alternatives in terms of insurers and products


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, uncertain loss


An intermediary or agent between two parties; especiallya dealer, agent, or company intermediate between the producer of goods and the retailer or consumer.


This research work is organized in five chapters, for easy understanding, as follows Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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