ABSTRACT

  The study focused the impact of insurance market activities on the growth of Nigeria insurance industry insurance industry. The objectives of the study examined the effect of insurance penetration and awareness on the growth of Nigeria insurance industry, the research methodology adopted was secondary data which was gotten from central bank of Nigeria(CBN) statistical bulletin, Journals and Newspapers, The study adopted the ex-post factor research design and annualized cross sectional data for 14 period of 2003-2016 were collated from the central Bank of Nigeria statistical Bulletin, National insurance commission and Nigerian insurers Association. Two Hypotheses were formulated to determine the accurate impact of insurance market activities on Nigeria insurance industry and the analysis was done using simple linear regression. The results emanating from this study indicate that insurance penetration and awareness have positive and significant impact on the growth on Nigeria insurance industry, therefore the regulatory body NAICOM should come up with new ideas and policies that will encourage the performance and activities of Nigerian insurance Industry.

CHAPTER ONE

                                                                                                                                     INTRODUCTION

1.1 BACKGROUND OF THE STUDY  

Insurance is one of the cornerstones of modern-day financial services sector. In addition to its traditional role of managing risk, insurance market activity both as intermediary and as provider of risk transfer and indemnification, may promote growth by allowing different risks to be managed more efficiently, promoting long term savings and encouraging the accumulation of capital, serving as a conduit pipe to channeling funds from policy holders to investment opportunities, thereby mobilizing domestic savings into productive investment.

    Insurance is often defined as the act of pooling funds from many insured entities in order to pay for relatively uncommon but severely devastating losses, which can occur to these entities. The insured entities are therefore protected from risk for a fee, with the fee being dependent upon the frequency and severity of the event occurring   hence, it is a commercial enterprise and a major part of the financial services industry. It is social in nature because it represents the cooperation of various individuals for mutual benefits by combining together to reduce the consequence of similar risks. Insurance is defined as the business of pooling resources together to pay compensation to the insured or assured on the happening of a specified event in return for a periodic consideration known as premium. Therefore, an insurance contract is usually evidenced by a document called the insurance policy, which is usually signed at the foot by the insurer or assurer or his agent. Insurance involved the transfer of risk from an individual to a group, sharing losses on an equitable basis by all members of the group.

Insurance is designed to protect the financial wellbeing of an individual, company or other entity in case of unexpected loss. According to him, law mandates some forms of insurance; while others are optional, agreeing to the terms of an insurance policy creates a contract between the insurer and the insured. Thus, insurance acts as a promise of reimbursement in the case of loss, paid to people or company so concerned about hazards they have prepayments to an insurance the insurance industry is vital to the wellbeing and smooth functioning of a modern economy and as such for developing country like Nigeria; it can act as a catalyst of economic growth by helping to accelerate the process of qualitative structural transformation, mechanism for reducing the adverse financial impact of random events that prevent fulfillment of reasonable expectations the insurance business is vital to the financial system due to its role in helping people and businesses to manage their resources and mitigate risk efficient. With the advent of British trading companies in the region and the subsequent increased inter-regional trade. Increased trade and commerce led to increased activities in shipping and banking, and it soon became necessary for some of the foreign firms to handle some of their risks locally. This origin was influenced by two factors; first, the expansion of cash crop production for exports, and the upward surge in economic activities in the 1890s; second, the British desire to protect its interest and properties in the protectorate of West Coast of Africa. This view of origin of the Nigerian Insurance industry  in its modern form was introduced  into Nigeria by the British in the closing years of the 19th century with the establishment of trading posts in what is now known as Nigeria towards the end of the 19th century by European trading companies mostly British. These foreign companies started affecting their insurance with established insurers in the London insurance market. However, as time went on, some British insurers appointed Nigerian agents to represent their interest in the country. These agents later grew into full branch offices of their parent companies in Britain. the first branch office in Nigeria was the Royal Exchange Assurance in 1921, later followed by other British companies. Historically, only one insurance company operated in the country between 1914 and 1948. This was the overseas branch office of the Royal Exchange Assurance Company operating from its head office in the United Kingdom. The first indigenous company to be established in Nigeria was African Insurance Company in 1950, this was to be followed by the Nigerian General Insurance Company in 1951 and the Lion of Africa Insurance Company in 1952. Since then, the Nigerian insurance industry has continued to grow, both in number as well as in business.

Today, insurance is an indispensable aspect of a nation’s financial system. Theoretical conceptions explain that financial systems influence savings and investment decisions and hence long-run growth rates through the following functions; lowering the costs of researching potential investments; exerting corporate governance; trading, diversification, and management of risk; mobilization and pooling of savings; conducting exchanges of goods and services, and mitigating the negative consequences that random shocks can have on capital investment. Financial intermediaries support development through the improvement of these functions (i.e., the amelioration of market frictions such as the costs of acquiring information, making transactions, and enforcing contracts and allowing economies to more efficiently allocate resources (savings) across investments). However, the positive effects of financial development are tailored by the macro policies, laws, regulations, financial infrastructures and enforcement norms applied across countries and time. The importance of the insurance industry as an aspect of the financial system has been neglected over the years as most studies on the interaction between the financial sector and economic growth has focused mainly on the banks and the stock market. Recently, growing attention has shifted to the interaction between the non-bank financial intermediaries such as the insurance companies because of the work of King and Levine, where it was revealed that non-bank financial intermediaries such as the insurance companies have over the years played   important roles in enhancing the efficient functioning of the financial system through its intermediation function

From the foregoing, it could be observed that the number of empirical studies is relatively small, especially in relation to those on banking contribution to economic growth. In order to contribute to filling the gap, the study focused on examining the insurance-growth nexus using Nigerian data from Nigerian Insurance Industry.

1.2     STATEMENT OF THE PROBLEM

The level of growth and development which should be commensurate with Nigeria’s huge potentials has not been attained and may never be attained since independence. Thus, several factors have been advocated for this lack of growth of the Nigerian Insurance industry and among such notable factors is inadequate funding for investment purposes which have limited insurance penetration in the economy. The Nigeria insurance faces number of challenges among them; poor governance, inadequate legislative and regulatory framework, public perception and lack of awareness of insurance, high cost of insurance, corruption and fraud among the stakeholders and overdependence on traditional products and distribution channels. Despite the uptake of insurance products having registered growth over the years, the penetration level is still low; the low penetration rate is attributed directly to above mentioned factors.

1.3     OBJECTIVES OF THE STUDY

The general objective of this study is to examine the impact of insurance market activities bon the growth Nigeria insurance industry. However, to achieve this, the specific objectives are:

1. To assess the impact of insurance penetration on the growth of Nigeria insurance industry.

2. To assess the impact of   insurance awareness on the growth of Nigeria insurance industry.

3. To evaluate the impact of insurance brokers on the growth of Nigeria   insurance industry.

4. To evaluate the impact of loss Adjusters on the growth of Nigeria insurance industry.

5.  To examine the impact of Nigeria Insurance Association and chattered insurance institute of Nigeria on the growth of Nigeria Insurance Industry.

1.4     RESEARCH QUESTIONS

As a follow-up to the specific objectives of this study, the following research questions emanated. These are:

1. To what extent does insurance penetration have positive and     significant impact on the growth of Nigeria Insurance Industry?

2. To what extent does insurance awareness have positive and significant impact on the growth of Nigeria Insurance Industry

1.5     RESEARCH HYPOTHESES

Based on the research questions raised above, the following hypotheses   were formulated. These are:

1. Ho: Insurance penetration does not exert positive and significant impact on growth Nigeria insurance industry.

Hi: Insurance penetration exerts positive and significant impact on growth of Nigeria insurance industry.

2. Ho: Insurance awareness does not have positive and                                          significant impact on the growth of Nigeria insurance industry.

Hi: Insurance awareness has positive and significant impact on the growth of Nigeria insurance industry.

1.6     SCOPE OF THE STUDY

The scope of this study is to emphasize   the insurance market activities on the growth of Nigeria insurance industry. But this researcher focuses and limits his research work on the insurance industry in Akwa ibom state due to difficulties involved in visiting all insurance companies in Nigeria. However, much effort will be put in place to get much information needed as possible.

These are some limitations encountered by the researcher in the process of this research work.

1. Time; there was no adequate time for the research work as the researcher was occupied with other school activities.

2. Financial constraints: there was no sufficient fund for the researcher as he struggled so hard to get information needed.

1.7     SIGNIFICANCE OF STUDY

This study is very significant first because of its expected usefulness to formulators of insurance policy in Nigeria. Since the enactment of the first insurance legislation in 1961, several insurance policies and guidelines have been formulated, and new insurance regulations enacted to encourage the development and sustenance of insurance consciousness and awareness and ensure the penetration of insurance in Nigeria. Most of these policies and laws have failed to achieve the desired objectives. This study will serve as an eye opener to policy makers by revealing the current level of insurance awareness and factors influencing or militating against the cultivation of insurance awareness/habit in Nigeria. It will also guide them in the formulation and implementation of appropriate insurance policies and enactment of insurance laws that will bring insurance services nearer to the people at the grassroots and inculcate good insurance consciousness and habit into the Nigeria populace. Thus, this study will assist policy makers in formulating policies that conforms to the objectives of enhanced growth and productivity of the Nigerian insurance industry.

This study will also be of much use to students and lecturers of insurance, actuarial science, banking, finance and economics, and other researchers who may wish to carry out further studies on impact of insurance or investment of insurance funds or other related topics. The study will serve as a ready-made database for them to begin with.

The study is also very significant because of the effect the findings will have on the Nigerian populace in general. By encouraging the development of good insurance culture, awareness and penetration of insurance in the rural and urban sectors, the study will help to increase the level of patronage of insurance products, understanding of the benefits of insurance as a financial solution to risks

1.8     ORGANIZATION OF THE STUDY

This research work is organized into five chapters. In chapter one the researcher examines the introduction, which comprises the background to the study, statement of the problem, objectives of the study, research questions, research hypotheses, scope and limitations of the study, significance of the study and organization of the study. In chapter two, the review of related literature will be considered. This will be done under three sections: the conceptual framework, theoretical framework, and empirical framework. While in chapter three, the researcher discusses the research methodology including the research design, sources and methods of data collection, methods of data analysis, model specification, and decision criteria, among others.  Chapter four includes data presentation, analysis, and interpretation of data. Lastly, chapter five will be concerned with summary, conclusion and recommendation.

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