THE ROLE OF INSURANCE COMPANIES TOWARDS ECONOMIC DEVELOPMENT OF AKWA IBOM STATE

THE ROLE OF INSURANCE COMPANIES TOWARDS ECONOMIC DEVELOPMENT OF AKWA  IBOM STATE

CHAPTER ONE

1.0     INTRODUCTION 

The art of modern living including economic progress and development of any nation are associated, with various kinds of  risks. Men and women, children alike, are exposed to risks as well  as different kinds of hazards and every beings is faced with the  possibility that one day, one of these hazards which form part of  life will befall him or her to cause some financial loss. One way of  providing for the blow of these risks which individual are prone to is  insurance which could be better described as a risk transfer  mechanism. Insurance guarantees to person that their individual financial losses will be fairly and equitably distributed over the insured community as a whole. Insurance concept is new. A form of insurance existed in early Rome where Romans come together in burial societies, they all contributed to a fund and the members of the pool had their burial cost met by the society. This was an early forerunner of the common pool. The purpose of insurance is to compensate or indemnify the victim. However, insurance does   not set out to eliminate the loss and cannot stop the disaster from happening. What it does is to soften the blow in a purely financial way by offering monetary compensation to the victim thereby  placing him in the same financial position as much as possible and  within the terms of policy, after the loss as he was before.  Insurance offers financial security of businessman and industrialist  and by so doing, it is directly or indirectly promoting business  enterprises for it is well known that not only are businessmen  guaranteed against actual losses but also they are able to acquire  the necessary confidence and tranquility of mind that should  proceed fruitful adventure and risk taking in business. 

To such businessmen, the assurance that they could be indemnified in the event of losses is as valuable as the actual payment of money after a loss has taken place. Apart from giving  indemnity to victim for financial losses suffered, insurance industry  accumulate large sum of money which are invested in government  approved schemes, including the granting of loans on mortgage  investments in government and private securities. The role of insurance in economic development can be said to emanate from  risks to which people, industry and commerce are exposed to  some individual and even more exposed to greater risks than  others, by virtue of their occupation, physical condition,  geographical situation and other countless reasons, but each and  every one of us are subject to the “slings and arrows of outrageous  fortune. This basically is what insurance is all about transferring  the  risk which is upon the individual to the share holders of the  whole insuring community so that the loss lighten rather easily on  the many than upon the few.

Insurance, as it was sad earlier, does not cancel risk. What it does is to offer financial assistance to those who suffer the effect of risk. ‘For examples, a manufacturer with N500,000.00 factory  and N300,000.00 machinery damaged, say by fire he receive  some financial compensation. With the mind of' receiving  compensation, 'the manufacturer will be encouraged to continue  with his business and plans which for the interest of the community  creates jobs and also produce goods and raw materials for entire  people within and outside the community. The idea of being able to insure raises all kinds of issues, what sort of risk can be insured and what will be charged, how claims will be met, how will the lost insurance be calculated and if a contract is necessary, are questions to be answered. 

We can then say that a policy of insurance issued on the  insurance company to the person insured will state what risks are  covered by the policy, and how the insurance covered all cost, the  period over which the cover applies and all relevant matters. 

There is still lack of public awareness in Nigeria of the benefit to be obtained through effective insurance. The insurance industry is still widely regarded with suspicion and the majority of customers do not understand the concept of insurance completely.  This is surprising because of the infancy of the industry and by the  nature of services of insurance, and insured has the opportunity of  appreciating the teal work of his” buy" of appreciating when a claim  arises. Therefore, since it is impossible to satisfy the world at large, complaint genuine and ill motivate alike are bound to arise concerning the nature and working of insurance from time to time is statement of the problem. The insurance industry is still widely regarded with suspicion and the vast majority of our people do not  understand the concept of insurance completely. 

1.1     BACKGRONUD OF THE STUDY

Anchor Insurance was incorporated on 6th June. 1989 as an  insurer and was licensed on 17th October, 1989 to commence  general business. Anchor Insurance is wholly owned by Akwa  lbom State Government. The company's head office as at No. 57Wellington Bassey Way (Barracks Road), Uyo. 

It formally commenced operation on 15‘November, 1989 with general business. It has now added life business time to this operation. The company has branches in major cities in the  country e.g. Lagos, Port Harcourt, Calabar, Aba, lkot Ekpene, lkot  Abasi, Eket, lkono, ltu, Abak, Oron, Etinan, Ukanafun and Head  Office at Uyo.   

The company is headed by a Managing Director (MD). It has a Board, which make policies for the company. The Board has the Honorable Commissioner for Finance as Chairman. It has functional departments such as Finance/Accounting, Personnel Administrative, Marketing Department, General Business Underwriting Department, Life/Pension Department and also Public Relation Department. 

The General Business Department takes charge of fire and special rents, consequential law, burglary goods, transit marine insurance, money insurance, personal assistance/group, personal assistance workmen compensation and motors insurance. Life Assurance is in charge of group’s life policy pension scheme.  Whole life assurance, accidental death benefits, level term assurance, mortgage protection assurance with the bond, bid bond, customer bond and also credit bonds.      

1.2     STATEMENT OF THE STUDY 

Lack of knowledge about insurance on the part of the citizens and by virtue does not understand the concept of insurance as well as its benefits to both the individuals and business concerns in the economy.   

1.4     OBJECTIVES OF THE STUDY 

The objectives of the study is to examine the effect of Insurance Company on the Economic Development of Akwa lbom State in the long term, major potential must tie in developing a strategy to improve public consciousness of insurance so that many companies in Akwa Ibom State (excluding those with foreign  participation) and individual insured only when they are legally  bound to do so.  With the above view in mind, therefore the objectives of the study are:

(a)     To intimate the Akwa lbomites with benefits to be derived from the effective insurance in the state’s economy.

(b)     To bring to the knowledge of the people the current trends and development in global insurance market. 

(c)      To provide further research materials for researcher who wish to conduct a study on insurance. 

1.5     RESEARCH QUESTIONS 

  1. Will the staff and management of Anchor Insurance Company not be able to give the needed information when approached?       
  2. Will the staff and management of Anchor Insurance Company not be able to say what the benefit of the company is?
  3. Will the staff and management of Anchor Insurance Company not be able to say the type of insurance policies they have? 
  4. Will the staff and management of Anchor Insurance Company not be able to make profit after claim disbursement? 

1.6     SIGNIFICANCE OF THE STUDY

  1. It will enable researchers to discover the effect of Insurance and its importance to individual’s businessmen in the economy of the state. 
  2. The study will enable other researcher to know the services which insurance render in the economy of  Akwa lbom State.
  3. It will provide any researcher of this topic data for his investigation. It will attract enough revenue from it to shareholders, customers, government of Akwa lbom State and other investors all over the country. 

 

1.7     DELIMITATION OR SCOPE OF THE STUDY 

The researcher examined the effect of insurance and its importance to individual businessmen in the state and the use of its operation in the course of national and economic development. 

 

1.8     LIMITATION OF THE STUDY 

This project is limited to a focal company in Akwa lbom State, The Anchor Insurance (Nigeria) Limited, Uyo . The case study is limited to the effect of Anchor Insurance Company toward economic development of Akwa lbom State.       

1.7     DELIMITATION OR SCOPE OF THE STUDY 

The researcher examined the effect of insurance and its importance to individual businessmen in the state and the use of its operation in the course of national and economic development. 

1.8     LIMITATION OF THE STUDY 

This project is limited to a focal company in Akwa lbom State, The Anchor Insurance (Nigeria) Limited, Uyo . The case study is limited to the effect of Anchor Insurance Company toward economic development of Akwa lbom State.       

1.9     DEFINITION OF TERMS 

Meaning of Insurance: Insurance may be defined as a provision made for the protection of a person or object against risks.

The Lawyers defines insurance as a contract whereby  a person called the insurer or assure agrees in consideration  of money paid to him called the premium, by another person  called insured or assured to indemnify the latter against loss  resulting to him on the happening of certain event. The policy is the document which contain the term of the contract.  The loss resulting to him on the happening of certain term of the contract.

A sociologist defines insurance as a device whereby the participant provides financial compensation to those among them encountering the many misfortunes that befall humanity. Each one of these definitions does throw light on the nature and scope of insurance. 

Policy: A contract of insurance, this term includes every writing whereby contract of insurance is made or is agreed to be made, or is evident.

Premium: the amount somebody pays for insurance. It is the periodic payment made by the insured. Written premiums refers to the premium for policies sold within a given time periods, usually a calendar year. Direct written premium are the amount representing premium income retained by insurance company directly or through re- insurance after payment made for re-insurance.

Insurer: The one who insured the insured. 

Claim: This is the value of an insurance policy after maturity or a demand to recover for loss covered by and insurance policy. Claim to a company are “first party claims”. Claim made by one person against another person company are known as "their party claims”.   

Indemnity: This means restoring the insured to the same financial position after a loss as he enjoyed immediately prior to the loss.

Agent: This is an insurance salesman. An independent agent is an independent business person who usually represents two or more insurance companies in a sales and service capacity and is paid on a commission basis. The exclusive agent represents only one company, usually on a commission basis. 

Broker: An insurance sales person who deals with a company to find insurance for customer.  Policy Holder: A person who pays a premium to an insurance company in exchange for the insurance protection provided by a policy of insurance. 

Policy Period: The amount of time insurance contract (policy) lasts?

Loss: The basis on which insurance claims are submitted.     

Peril: The cause of a loss insured against in a policy e.g. fire and theft.

 Liability: Any legally enforceable financial obligation. 

Risk: The change of a loss also used to refer to the insured property covered by a policy 

Reinsurance: Assumption by one company or all part of a risk undertaken by another insurance company. 

Pool: An organization of insurers or reinsures through which   particular types of risks are underwritten and premium losses and expenses are shown in agreed amounts. 

Insurance Companies: An insurance company is a financial institution whose primary functions is to receive premiums and enter into contract with individuals and organization (the insured) with the purpose of indemnifying (pay compensation to) the insured if he suffer certain losses in future or anticipate.

Underwriter: A person who selects risk for insurance and determining in that amount and in what terms the insurance company will accept the risk.         

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