THE REFORMS IN THE NIGERIAN INSURANCE INDUSTRY, THE CHALLENGES, PROSPECT AND IMPLICATION


THE REFORMS IN THE NIGERIAN INSURANCE INDUSTRY, THE CHALLENGES, PROSPECT AND IMPLICATION

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CHAPTER ONE
INTRODUCTION

1.1 BACKGROUND OF THE STUDY

As a key aspect of the financial service sector, the insurance sector plays an invaluable role in any modern economy. As an effective mechanism for risk management, the efficiency and vibrancy of the insurance industry in any society is a good indication of the state of the economy.

Up till independence in 1960, the industry in Nigeria was dominated by overseas operators with only three indigenous companies out of the 25 operating in the country then, and the insurance industry boomed until the mid 80’s after the indigenization decree that forced foreign firms to cede controlling equity share in all insurance firms operating in Nigeria , (Akingbola 2006). The industry soon fell into turbulent time as a result of the challenges it faced, these were; under capitalization of existing industry payers, poor business infrastructural facilities especially in the area of ICT, dearth of appropriate human capital and professional skill, lack of innovation in product development, repudiation of genuine claims, existence of too many fringe player, low insurance awareness among the populace etc. as examined in this study. These challenges were mostly responsible for the sectors inability to attract sufficient business both locally and internationally, they also affected the ability of the industry players to retain significant proportion of risk emanating from assets domiciled in Nigeria. Ever sine then, till date different measure are being taken to restore the activities of the industry, this includes the regulations that have been propagated by the government in recent times, the reforms program through the current process of recapitalization and consolidation.

1.2 STATEMENT OF THE PROBLEM
The significance of the insurance sector in any modern economy is the role she plays in the financial intermediation, effective mechanism for risk management, safeguarding the financial health of small and medium size enterprise and creating an enabling environment for overall economic activity that may not have taken place otherwise.

1.3 OBJECTIVE OF THE STUDY
With reference to the statement of problems for this research, the following objectives were draw to guide the research activities.
i. To examine the state of insurance industry before reforms.
ii. To highlight the problem and challenge faced by he insurance industry before and after reforms.
iii. To analyze the prospects of the reform programmers.
iv. To examine the reform program and their implications for industry.

1.4 RESEARCH QUESTIONS
This research work intends to answer the following question:
1. What role doses the insurance industry play in our economy?
2. What the shortcomings of the insurance industry?
3. Does the poor performance of the industry affect the economy of Nigeria?
4. Is there any need for the current reform in the insurance sector?
5. What are benefits of these reforms to the insurance sector?

1.5 RESEARCH HYPOTHESES
Ho: There is no significant increase in premium income after recapitalization.
H1: There is a significant increase in premium income after recapitalization.

1.7 SCOPE/LIMITATION OF THE STUDY
The research study would include a brief overview of the Nigerian insurance industry. This stuffy is designed to examine the problems faced by the insurance sector, the need for a change and to identify the prospects and result of the reforms in the insurance industry in Nigeria with particular reference to Anchor insurance Plc. Uyo, lead way insurance plc, Uyo and Niger insurance plc Uyo.

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