An Assessment of Adequate Risk Recognition and Management in Nigerian Insurance Companies
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.
1.1 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.
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.
1.2 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.
1.3 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.
1.4 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.
1.5 HISTORICAL BACKGROUND OF THE CASE STUDY
Lead-way 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 enviable position in the Nigeria insurance industry. Lead-way is a private company with 28 share inventors and trust corporation. The statutory deposit of lead-way 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.
1.6 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 or 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.