ABSTRACT

The purpose at this research is concerned on the impact of the government policies in regulating the activities of insurance companies operating in Nigeria. The government responsibility to supervise, regulate and control the activities of insurance companies and intermediaries is to protect the interest of the insuring public and to save them from exploitation by unreliable insurers. Because of the intangible nature of insurance product, the government wants to make sure that those engaged in it must be competent person who will fulfil their promise a d pledges when the need arise. Also because of the complexity  of insurance business it is necessary that the government regulate the policy holders. Also because of violation of trust that occurs in insurance transistors, the government has found it necessary to regulate insurance industries so as to control such violations. The project attempts to appraise the effectiveness of government policies in regulating the insurance companies in  Nigeria. The insurance industry in Nigeria has acute shortage of high level of manpower for most classes of insurance, also many Nigerians suffer financial loss due to lack of knowledge in insurance. Due to this problem, government should introduce programs regarding to insurance to the public as to highlight them on the benefit accrued to insurance due to constant financial loss they encounter as a result of lack of insurance knowledge.

CHAPTER ONE

1.1            BACKGROUND OF THE STUDY

“Risk is a phenomenon which has been in existence since the beginning of the world. Risk exists whenever the future is unknown” (Lemon 1989: 17). This means that the word implies some element of doubt about future and the outcome may be worse than what it had been at the moment. This man in his daily operations could be viewed as a risk manager, in that man does his best possible to reduce, eliminate, avoid, retain or share risk where they are present.

Tough there were some forms of risk management before the advent of insurance companies in Nigeria such as the extended family system, age grade  association and others. insurance in its modern form was introduced into Nigeria by British.

In 1921, the Royal Exchange Assurance Company was established and it was the first insurance company to open full branch in Nigeria.  In 1949, three other companies emerged. In 1958, Africa insurance company. By 1965, the number of insurance companies rose to 70. in 1977, the Nigeria Re-insurance company was established as a federal government owned insurance company. Nigeria was however under the British colonial rule up to 1960 when she gained her political independence and as a developing country. From 1960 to date a lot of insurance companies came into operation. Insurance is a modern method of sharing loss or spreading risk lightly over a great number of people so that the few unfortunate ones o r persons who sustain or suffer loss do not heavy financial loss as a result of their misfortune to the community. the insured pay premium into a common pool outcome of which the unfortunate few who suffer loss are compensated.

The secondary function of insurance companies includes:

1.                 Provision of loans for building on the security of a life policy.

2.                  Encourage and promote commercial enterprise men and industrialist

The accumulated sum of money by insurer re invested to state approved securities and this helps to provide the state with a steady flow investment funds with which the state can provide development and promotions to the local industries which will be of benefit to the community.

Insurance is a contract whereby a person called the insurer or assurer agrees in consideration of money paid to him or her known as premium by another person called the insured or assured to indemnify him against loss resulting to him on the happening of certain events. However, it was known that risk exist whenever the future is unknown and therefore insurance exist primarily to combat the adverse effect of risk.

The purpose of insurance is to compensate or indemnify the victim for his financial loss. It should be noted here that the insurance neither eliminate the loss nor stops the disaster from  happening, what insurance does is to soften the blow in a purely financial sence by offering monetary compensation to the victim whereby placing him in the same financial position after loss as he was before though within the terms of the policy.

Re-insurance is the transfer of insurance business from one insurance company ot another. The original insurer who obtain the insurance contract form the insured or assured is called the direct insurer or the ceding company. Re-insurance arose from the need of the original insurer to spread the risk he has undertaken. Under re-insurance contract is between the ceding company policies. Therefore in the event of a loss, the insured cannot enforce the re-insurance contract.

However, the effect of re-insurance contract on the ceding company includes:

i         Re- insurance reduces the probability of the ceding

company’s ruin by assuming his catastrophe risk.

ii       Re- insurance stabilizes the ceding company’s balance sheet by taking on apart of his risk of random fluctuation risk of change and risk error.