AN ASSESSMENT OF ADEQUATE RISK RECOGNITION AND MANAGEMENT IN NIGERIAN INSURANCE COMPANIES (A case study of Leadway Assurance Company. Plc. Kaduna)
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AN ASSESSMENT OF ADEQUATE
RISK RECOGNITION AND MANAGEMENT IN NIGERIAN INSURANCE COMPANIES
(A case
study of Leadway Assurance Company. Plc. Kaduna)
ABSTRACT
The assessment
of adequate risk recognition and management in Nigerian insurance industry is
aim at determining the effectiveness of how the insurance industry handle risk
that is being transferred to them and also to assess how insurance companies
render their services. The statement of problem include lack of adequate claims
settlement procedures which are characterized with bureaucracy and lack of
proper fixed or computed premiums which endangers the solvency and
profitability of the insurance companies. The researcher finds including,
prompt settlement of claims by the insurer encourages high level of patronage
from it client and also premium is charged by the insurer according to the type
of risk undertaking. Finally, insurers should not just issue policies, they
should engage in careful diagnosis of what insurance products their clients
deserve. By adequately monitoring the risk covered through professional advice
and risk survey.
TABLE OF CONTENTS
Title
page - - - - - - - - - - i
Declaration - - - - - - - - - - ii
Approval
page - - - - - - - - - iii
Dedication - - - - - - - - - - iv
Acknowledgement - - - - - - - - - vi
Abstract
- - - - - - - - - - viii
Table
of contents - - - - - - - - - ix
Chapter one: Introduction
1.0
Background of the study - - - - - - - 1
1.1
Statement of the problem - - -- - - - 4
1.2
Formulation of hypothesis - - - - - - 5
1.3
Scope of the study - - - - - - - - 5
1.4
Significance of the study - - - - - - - 6
1.5
Historical background of the case study - - - - 6
1.6
Definition of terms - - - - - - - - 8
CHAPTER TWO:LITERATURE REVIEW
2.0 Overview - - - - - - - - - 10
2.1 Concepts of Risk - - - - - - - 10
2.2 Types of risk - - - - - - - - 11
2.3 Source of risk - - - - - - - - 13
2.4 Risk Identification - - - - - - - - 14
2.5 Risk Evaluation - - - - - - - - 15
2.6 Risk Treatment - - - - - - - - 16
2.7 Management of risk - - - - - - - 17
2.8 The Value of risk Management - - - - - - 18
2.9 Insurance and risk management techniques - - - 19
2.10 The Nigerian insurance industry - - - - - 20
2.11 Insurance regulation - - - - - - - 21
CHAPTER THREE: RESEARCH METHOLOGY
3.0 Overview -
- - - - - - - - 25
3.1 Population - - - - - - - - - 25
3.2 Sampling technique - - - - - - 25
3.3 Method of data collection - - - - - - 26
3.4 Research techniques and analytical tools
for testing of hypothesis 27
CHAPTER FOUR: Data presentation and
analysis
4.0 Overview - - - - - - - - - 28
4.1 Presentation of data base on questionnaire - - - - 28
4.2 Data analysis - - - - - - - - 30
4.3 Testing of hypothesis - - - - - - - 38
4.4 Research findings - - - - - - - - 39
CHAPTER FIVE: Summary of findings,
conclusion and recommendations
5.0 Overview - - - - - - - - - 40
5.1 Summary - - - - - - - - - 40
5.2 Conclusion - - - - - - - - - 41
5.3 Recommendations - - - - - - - - 42
References
- - - - - - - - - 44
Appendix - - - - - - - - - 46
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 INSURANCWE 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
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.
1.6 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 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.
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