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THE INVESTMENT OF INSURANCE FUND IN Nigeria
A
CASE STUDY OF HALLMARK ASSURANCE NIGERIAN PLC
ABSTRACT
The
aim of the project is to evaluate or appraise the investment of insurance funds
in the Nigerian economy.
In
order to carryout this project, some statement of problems were evolved, the
purpose of study as the sample size and various instrument used for the
collection of data.
These
helped to direct the course of this project work. The hypothesis were also
tested and accepted with the responses received through administering of
personal interview questions.
On
the whole, the purpose of the study were achieved and the problem statement
answered. The researcher also received relevant literatures that relate to the
topic of the research.
The
review of literature gave detailed information of the development and
importance of the insurance industry in Nigeria, as well as the various classes
of funds which they invest. There was a view of the legal requirement binding
the investment of insurance funds in the Nigerian economy. Some of the reviews
were explained in details.
In
the cause of the study, the researcher was able to note the problems that face
the investment of insurance funds in nigera. Recommendations were also made on
how these problems will be solved.
Furthermore,
in the course of the study, the data collected from respondents and the
hypothesis were analysed and it was discovered that investment of insurance
funds enhances the economy.
Finally,
in chapter five, the researcher concluded his finding, made suggestions for
further research, in the area of enlightemnet, provision of a developed capital
market and recommended that the insurance companies should transact on cash
basis, creation of insurance businesses and many other things.
TABLE
OF CONTENT
CHAPTER
ONE
INTRODUCTION
1.0
BACKGROUND OF THE STUDY
1.1
STATEMENT OF THE PROBLEM
1.2
PURPOSE OF STUDY
1.3
IMPLICATION OF THE STUDY
1.4
LIMITATION OF THE STUDY
1.5
RESEARCH QUESTION
1.6
HYPOTHESIS
1.7
SIGNIFICANCE OF THE STUDY
1.8
DEFINITION OF THE TERMS
1.9
ASSUMPTION OF STUDY
CHAPTER
TWO
REVIEW
OF RELATE LITERATURE
2.0
INTRODUCTION STATEMENTS
2.1
DEVELOPMENT AND IMPORTANCE OF INSURANCE IN Nigeria
2.2
NATURE OF INVESTMENT
2.3
LEGAL REQUIREMENT GUIDING THE INVESTMENT OF INSURANCE FUND IN Nigeria
2.4
SOURCES AND INVESTMENT OF INSURANCE FUNDS IN Nigeria
CHAPTER
THREE
DESIGN
AND METHODOLOGY
3.0
RESEARCH DESIGN
3.1
AREA OF STUDY
3.2
POPULATION OF THE STUDY
3.3
INSTRUMENT FOR DATA COLLECTION
3.4
VALIDATION OF THE INSTRUMENTS
3.5
RELIABILITY OF THE INSTRUMENTS
3.6
METHODS OF DATA COLLECTION
3.7
METHODS OF DATA INVESTIGATION.
CHAPTER FOUR
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
4.0
ANALYSIS AND RESEARCH QUESTION
RQ1
RQ2
RQ3
4.1
TESTING OF HYPOTHESIS
4.2
FINDING OF THE STUDY
4.3
DISCUSSION OF THE FINDINGS
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0
SUMMARY OF THE FINDING
5.1
CONCLUSION
5.2
RECOMMENDATIONS
BIBLIOGRAPHY
|
APPENDIX I
CHAPTER ONE
INTRODUCTION
The image of insurance has become more
sensitive than ever, because we are in are in a world full of uncertainties,
all kinds of stresses, growing complexities of business in modern day. Nigeria,
coupled with the increasing number of business concerns employing many hands,
the importance of an insurance scheme can hardly be underestimate. We can also
note that every aspect of human life in any dimension one can think of is
subject to one risk or the other.
The risk involved many be against human
life or material possession. Insurance is one of the social science which
essentially is designed for risk taking. This process of risk taking entails
the pooling together of the resources of many individuals in order word,
insurance is the management of a pool of risk whereby, the fortunate members of
a group assist the unfortunate few who suffer losses.
Adeyemo (1999:12) defined insurance as
a social and economic device which provides financial compensation against the
effects of any misfortune. This compensation is made from the accumulated
contributions of all parties taking part in the insurance scheme. Apart from
covering industrials insurance also protects corporate bodies and other
business organization from varieties of hazards like burglary, workman compensation
ideminity, goods – in – transit, public liability etc.
Investment refers to that part of a
person’s income or firm’s income that is immediately put to use for a certain
return of additional income.
The investment of insurance funds in
Nigeria is regulated by the insurance decree of 1976 under section 18. the
substantial funds held by insures are invested as a funds held by insueres are
invested as to earn interest on capital gains. Insurance companies provide
funds for investment through the premium they collect from their numerous
policy holder. Life insurance companies for instance, invest funds that flow to
them from many policy holders thus, becoming important sourc of capital funds
for the Nigerian economy. Insurance companies help to provide the state with a
steady flow of investment funds which are essential to the community.
The investment of insurance funds helps
to contribute profits to the national purse and also provide labour for the
working population in a given area. In the investment of insurance funds, the
overall aim is to be able to meet liabilities when they fall due, while earning
to the highest possible yield without incurring great risk too. In non-life
insurance, the major problem for an insurer is the unexpectedly large claims
which might force him to sell its investment at long notice, possibly at a
loss. As a result of this, insurers therefore, concentrate on investment which
can be sold at short notice, such include shares and stocks and avoid those
that cannot be sold at short notice.
In life assurance, the safety of the
funds as well as very high yields, are of paramount importance because of
long-term nature of their liabilities. Long-term investment are useful to life
assures.
1.0
BACKGROUND OF THE STUDY
Hallmark Assurance Nigeria company
started business as one of the insurance companies on 15th July
1969.The company has since been rendering excellent services to the nation and
to the world a large.
During their Annual general meeting which was held in
1993, Hallmark was merged with a sister company, it now become a composite
company and transacts both classes of insurance namely: life and non-life.
The company had earlier become a public liability
company following its admission into the Nigeria stock exchange. This was as a
result of completion of the privation exercie carries out in the company by the
east while Technical committee on privatization and commercialization (TCPC)
now Bureau for public Enterprises (BPE).
The authorized share cap-ital is N400 million while
the issued and fully paid up capital is N337 million, making Hallmark as one of
the highest capitalized companies in Nigeria.
With a total base of N1.5 billion, gross premium
income of N1.02 billion, claims settled N346.2 milion for the past four years.
It is by all account a leading company in Nigeria.
1.1 STATEMENT OF PROBLEMS
Before proceeding in this study, there is the
need to have already focused statement of the problem. In specific terms, the
statement of the problem is the key to the design of the research.
Some of the problems of insurance industry include:
1.
There is the problem of bad debt regarding the non-payment of premium.
2.
In most cases, there is lack of funds to invest due to poor business.
3.
Most instruments which insurance companies requires for an investment are not
available to them.
4.
Most insurance companies desire to invest in readily marketable securities but
are not easy come by.
1.2 PURPOSE OF STUDY
This research paper is aimed amongst others to
identifying the various to which these funds are invested as well as the
effects of such investments in the Nigerian economiy: thus, a comprehensive
appraisal of the investment of insurance funds in nigeri. To achieve this aims,
two insrance companies – Hallmark Assurance Nig. Plc. And Jubilee insurance
company Ltd. Have been chosen for an indebth study.
1.3 IMPLICATION OF THE STUDY
This implication of the study is , that investing.
Insurance funds boost the economy of any nation. This implies that peoples’
standard of living will be increased as a result of loss prevention activities
of insurance company.
1.4 LIMITATION OF STUDY
Due to large number of organization and nature of
information involved, the will be limited to only the head offices of insurance
companies in Abia state.
Furthermore, the researcher will not make a better
choice of insurance companies due to long distance factor, because of he nature
of information required, the researcher will be limited to the use of personal
interview as a main method of data collection. The respondents may not give
prompt answers for security reasons, and they will demand elaborate explanation
before answering questions. These, to some extent will hinder the free flow of
research work.
1.5 RESEARCH QUESTION
1.
does non payment ineffective investment decision?
2.
Does lack of funds result to ineffective investment
decision by insurance firms?
3.
Are the instruments in which insurance companies
invest available?
4.
are the marketable securities in which insurance
companies invest their fund always available?
1.6 HYPOTHESIS
With respect to the statement of problem and research
question, the following hypothesis were stated to help further direct the
research study in order to achieve the required purpose.
1.
Ho: Lack of funds does not result to ineffective
investment
decision
HI: Lack of funds result to ineffective investment decision
2.
HO: The marketable securities in which insurance
companies invest on
has yielded benefit
3.
HO: Non payment of premium does not result to bad debt.
HI: Non payment of premium results
to bad debt.]
1.7 SIGNIFICANCE OF STUDY
The significance of study involves the objective which
the researcher intends to achieve, the following objectives make up the
significance of study:
a.
To identify the class(es) of funds invested by insurance companies in Nigeria.
b.
To ascertain the effects of the invested funds in Nigeria.
c.
To determine the likely instruments in which insurance companies invest on
d.
To determine how the efficient utilization of the invested funds are insured
e.
To identify the existing regulation / policy guiding the investment of insurance
funds.
1.8 DEFINITION OF TERMS
Appraisal: The act of evaluating the condition of
something.
Asset: A
property of financial claim which can be easily
converted into
cash
Assured: A person whose life has
been assured
Balance sheet: A financial statement prepared so as to
exhibit
the assets and liabilities of a company usually at the
end of financial year.
Capital gains:
Profit made by selling possessions
Cover:
Protection provided by the insurance company
Financial investment: This is an investment made in
financial
assets such as stocks, bond, shares, debentures, etc.
Fund:
A collection of premium from which losses can
be paid.
Indemnity:
The placing of an insured in the financial
position after the loss as he was enjoying before.
Insurance:
A contact
between two parties whereby the
Insurer agrees to indemnify the insured upon the
happening of an unfortunate event.
Insurance policy: A document issued by an insurance
company
containing the terms and conditions of all insurance
contract and which are legal evidence of the agreement to insure.
Insured:
Person purchasing insurance cover.
Insurer:
Person or somebody authorized to sell
insurance
Investment:
Involves the acquisition
durable, productive
facilities (either financial or physical) undertaken
in the expectation of future gains.
Lease:
A letting or hiring of tangible assets usually for
a specific
period of time.
Premium:
The
payment of an agreed sum whether in one
amount or by installment to an insurance company by
the company’s undertaking to indemnify the insured upon the happening of a
stipulated contingency.
Real investment: This is an investment
made in tangible assets
such as
building, machinery and plant etc.
Sum Insured: The
limit of liability of insurer to pay under a
policy
Underwritten classes: Any excess of
claims over payment.
Insurance Premium reserve: money set aside by
insurance to
cover potential liabilities of policies still in force
at the end of the accounting year.
Risk:
The uncertainty of loss on expected income.
1.9 ASSUMPTIONS OF STUDY
During the research work, the
researcher was able to make the following assumption
1.
The researcher assumed that insurance serves as a device for solving complex
social problem.
2.
It was also assumed that insurance companies have a great influence in the
investment and financial markets in the world.
3.
It was assumed that non payment of premium by policy holders will lead to the
malfunctioning of insurance companies.
4.
The researcher assumed that insurance will eliminate barriers to the
establishment of business. It removes the fear of total loss incase of any
unfortunate event.
5.
Lastly, it was assumed that greater chance of loss is minimized by insurance
companies due to their loss prevention activities.
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