INSURANCE BUSINESS IN RURAL COMMUNITIES AS A MEANS OF GROWTH FOR THE NIGERIAN INSURANCE INDUSTRY (A CASE STUDY OF ENUGU EAST L.G.A. IN ENUGU STATE)
The adverse economic condition currently affecting the Nigeria economy particularly the insurance industry calls for foresight and dynamism. Out dated conventions and tradition have to be forfeited in favor of profit maximizing ideas. Every available business opportunity therefore has to be harnessed also, the major of the Nigeria 88.5 million (1991 census) inhabitation depend on the economy of the rural areas of the country, mainly for good and also for other varying need. This is because the food baskets of the Nation a located in places that are considered rural by Nigeria standard
It is against the back ground that the need arises to examine and utilize the hitters dormant resources of the rural area of Nigeria. The Nigeria rural area offer prospect for market development and explanation for the Nigeria Insurance industry. The resources in there areas are: largely under utilized and therefore the challenge of insurance business then and converting them to business opportunity is open to any dynamic insurance, and such a move will be profitable for the insurers, operating in a highly competitive market.
Moreover, this research work deal with the introduction to the study, bringing out in detail from the background of the study and go on to the definitions of terms, the review of the related literature, the research design and methodology that brings out the sources of data used for the research, analysis the both the questionnaire and the oral interview used for this work, and also the summary of findings, recommendations and conclusion drawn from the research work conducted.
CHAPTER ONE (INTRODUCTION)
- BACKGROUND OF THE STUDY
- STATEMENT OF THE PROBLEMS
- OBJECTIVE OF THE STUDY
- SIGNIFICANCE OF THE STUDY
- RESEARCH QUESTION/HYPOTHESIS
- SCOPE AND LIMITATION OF THE STUDY
- DEFINITION OF TERMS
CHAPTER TWO (LITERATURE REVIEW)
2.1 INSURING RURAL
2.2 WHY INSURERS NED TO INVEST IN THE RURAL AREAS IF NIGERIA
2.3 RISK INVOLVED IN RURAL COMMUNITIES
2.4 PROBLEMS ASSOCIATED WITH RURAL (CROP) INSURANCE IN THE DEVELOPING COUNTRIES
2.5 NATURE OF CROPS INSURANCE SUITABLE FOR DEVELOPING COUNTRIES
2.6 OTHER PROBLEMS
2.7 HISTORICAL DEVELOPMENT OF INSURANCE BUSINESS IN RURAL COMMUNITY OF NIGERIA
2.8 EARLIER TYPES OF INSURANCE BUSINESS
2.9 TYPES OF MODERN INSURANCE THAT HAS TO TAKE UP RURAL INSURANCE.
2.10 TYPES OF RISK THAT FACE RURAL DWELLERS
CHAPTER THREE (RESEARCH DESIGN AND METHODOLOGY)
- RESEARCH METHOD
- RESEARCH DESIGN
- RESEARCH POPULATION/SAMPLE
- MEASURING INSTRUMENT
- DATA COLLECTIONS
- DATA ANALYSIS
- EXPECTED RESULTS
CHAPTER FOUR (DATA ANALYSIS AND PRESENTATION OF RESULTS)
- AN OVERVIEW
- DATA DISTRIBUTION AND ANALYSIS
- DATA OBTAINED FROM INTERVIEWS
- DATA TESTING THE HYPOTHESIS
CHAPTER FIVE (SUMMARY/CONCLUSION AND RECOMMENDATION)
- SUMMARY/CONCLUSIONS AND FINDINGS
- SUGGESTED FOR FURTHER STUDIES
1.1 BACKGROUND OF THE STUDY
This work stands to be a protection into the future of Nigerian Insurance industry financing through economy since insurance business is yet to be take off in rural communities in Nigeria. Particularly Enugu east (Nike). It also serve as a survey on the whole rural communities will react towards the operation of insurance business. It is our view that since many researchers have made numerous proposals on how the scheme should be operated.
For an efficient start, it will be proper to Examine the market the market reactions, acceptability and effect on the Economy and activities of rural community before such scheme comes into operation. Moreover, since the slogan of Nigeria insurance industry for all the years is within the realm of reality, it is felt that for such to be achieved, insurance business should be one of the quickest answer towards the actualization of this programme. Although, it has been noted that insurance business is more advanced and modern alternative to tax financed, but poorly founded public insurance service presently obtainable in rural communities particularly Enugu East (Nike).it will therefore be advisable to Examine the way insurance are operated in other states and the market effect that do result from its operations.
Notwithstanding, the work gave a view of what insurance business is, its forms and other important aspects that would put a lame man through on what insurance business is. A modern definition from a CII text (1973) insurance business is a contract where one party (the insurer) agrees in consideration of money paid him called the premium by another party (the insured) to indemnify the later against loss: from this definition of insurance business can be inferred to mean insurance operation in the rural communities. It is almost impossible to imagine an atmosphere of dynamic investment in a non-insurance environment. Insurance in performing its function of providing financial security has made possible the development and sustenance to today’s modern economy. However, with the introduction of the structural adjustment programme (SAP) Nigerian insurers have had reason to be upset; the resultant hyper inflation has made it difficult for various classes of policyholder to maintain their policies. Thus their policies have lapsed which means a loss for cheaper forms of the polices have lapses which means a loss of premium to the insurers. Many others have opted for cheaper forms of the policy types they had while other individuals have either surrendered there policies or had them paid up. The recent imposition of VAT-value Added Tax policies has not helped maters either (1996). The list of problems mentioned above is not exhaustive. Good managers can however surmount those problems through innovation and diversification. Insurance business in Nigeria offer these opportunities.
Insurance business is a multifaceted programme, one of which in agricultural insurance. It has already been introduced in Nigeria. Presently, the cover’s provided under the Nigeria Agricultural insurance scheme are limited and not to beneficial to the small farmer in the village. Another major component of the rural economy is processing it consist of food and industrial processing insurance opportunities abound in these area, as there are a lot of small scale and cottage industries engaged in the processing of agricultural products. Examples are Garri processing plants, palm oil processing plants, palm kernel cracking and processing industry, fish smoking and preserving communities pot making industry, craft industry, Basket and care wearing industry and a lost of others.
Apart from the risks inherent in agriculture, manufacturing and processing, and rural dwellers are also exposed to personal risks and other property risk. It is common knowledge that wine tapers fall from tree injuring themselves. Death could even result from such accidents. Also many people whole live on the urban areas have property on the rural areas instead of leaving such risks uncovered. Therefore, while risks peculiar to rural area in Nigeria are available for cover, a lot of risks that also apply to the urban areas are found in the rural areas too. With time, it is hoped that intensive insurance operations will have the way for marine insurance to be introduced in these areas. It is expected that growth will result in the rural economy as insurance business grows.
It is worthy to note that the industries mentioned above are not really constituted as forms or industries. The people involved do not see themselves as industrialist either they develop form families as cottage industries with reasonable output.
1.2 STATEMENT OF PROBLEM
There are problems affecting the Nigeria insurance industry that have led to this study.
- Large commercial buyers of insurance are increasingly self-insuring by bearing the cost if smaller risk themselves.
- There has been a fall in the demand for life assurance and other related forms of insurance. This is evidence by statement made by Chief Executive (name) Mr. Adebayo of African prudential insurance business in the country, the subsection may not be able to contribute meaning fully to the nations economy growth (1996) in such circumstances, as insurance manager with marketing experience would seek out new opportunities where there is irretrievable fall in the demand for the products on his portfolio.
- The country Nigerian has been seriously buffeted by inflation in this kind of economy, money depreciated in value while property of all kinds appreciates in value. Therefore any resource there should not be allowed to rot. Introducing insurance business will encourage investment in the rural communities that will led to the harnessing of the untapped resource in the rural communities.
- There is a death of insurance resources on the rural area of Nigeria.
1.3 OBJECTIVE OF THE STUDY
The main objective of this research study is to discover potentials for insurance business lying dormant in the rural communities of Nigeria. By highlighting these opportunities, it is hoped that Nigerian insurance will take the challenge.
Harnessing these resources in the rural communities is essential for the benefit of the insurance industry and for the Nigeria economy.
1.4 SIGNIFICANCE OF THE STUDY
For a company to survive on today’s highly competitive insurance market, the management will have to look to product development and diversification. With the decline on the demand for some kinds of cover for example (life assurance comprehensive motor insurance). A need has arisen to explore and diversify into new areas. Rural communities potentials constitute an opportunity for the dynamic manager to grab.
- The development of insurance business will encourage investment in the rural communities. This is because insurance covers encourage investment by providing financial security. individuals and organizations that were already based in the rural communities will be encouraged to invest more of their profit if they have the assurance of cover. The provision of insurance cover in the rural communities are vary likely to draw other investors like firms and researches to such communities because of the financial security they can obtain where they insure their risk.
- The introduction and development of insurance business in rural communities will foster widespread development of the villages and small communities in Nigeria. This will benefit the rest of the country,
- With the development of the rural communities in Nigeria through insurance, there will be decentralization in the country. The urban areas will no longer remain the centers of commerce and industry. Also the problem of over population with its associate consequences will be greatly reduced.
- Excessive importation of all kinds of products with a corresponding low export has helped to gradually depress the Nigerian Economy. Encouraging the primary producers in the rural communities to invest more by way of insurance will definitely in more export with time.
Among the question to be answered in the research includes:
- Is the public Unaware of possible benefit that could be derived from buying insurance service.
- Does the insurance industry pay more attention in carrying out proper research at required intervals or consider customers needs and wants before formulation of product. (policy they sell to insuring public).
- What are some of problems inhabiting the implementation of insurance business in rural communities of Nigeria
- To what extent have the operations of Nigeria insurance industry played to impact and accelerate the rate of economic development, the can the development of our economy improve without other sectors like insurance business sector?.
1.5 RESEARCH HYPOTHESIS
Research studies of this kind are normally based on some hypothesis. This particular study is no exception. This is because the analysis of the hypothesis gives statistical backing to the study. H O her signifies Null hypothesis. Hi have signifies research hypothesis,
- H O – There is no opportunities for insurance business in the rural community of Nigeria, which are being utilized.
Hi – There are opportunities for insurance business in the rural communities of Nigeria, which are presently underutilized.
- H O – There has not being a decline in some forms of insurance business especially life assurance.
Hi – There has a steady decline in some form of insurance business especially life assurance.
- H O – Rural community does not offer prospects of market development and economic growth for Nigerian insurance industry.
Hi – Rural community offers prospect of market of market development and economic growth for the Nigerian insurance industry.
- H O – Insurance service are not needed in the rural community of Nigeria to boost investment and encourage economic growth.
Hi – Insurance services are essentially needed in the rural community of Nigeria to Nigeria to boost investment and encourage economic growth.
The questionnaire will contain questions related to their hypothesis.
1.6 SCOPE AND LIMITATIONS OF THE STUDY.
According to the topic of the research study insurance business are available in most (if not all) rural communities Nigeria. Therefore, the scope of the study in Nigeria as a whole. However, it will not be possible to study all the areas in the country. Thus the writer has decided to use a case study for the analysis. The place as Nike Community in Enugu East Local Government Area of Enugu state.
As the needs arises, other places is interest will be referred to in the course of the study. The limitations of the study are both actual and expected.
They include; special, time, money/financial and data constructs. They are listed below.
- The large size of the scope
- Dearth of secondary data.
The geographical area involved is too large for a declined study to be conducted on it in a short space of time. More so the financial resources of the student researcher are very limited. Therefore, primary data will be acquired only from the case study area. The writer would also draw in past knowledge and experience as well as secondary sources of data.
Also, literature on the subject is minimal. It will consist mainly of Newspapers, Magazine and other periodicals. Hence, the secondary data for analysis may not be exhaustive.
There are also problems envisaged in the actual implementation of insurance business. They include:
- Where withal i.e. the ability of the policyholder to pay their premiums. In other words, lack of effective demand.
Lack of amenities like electricity, pipe borne water etc which will be needed by insurance personal that will be posted there.
1.7 DEFINITION OF TERMS
INFLATION:- any rise in the price level. it is especially characterized by reduction in the purchasing power of money.
PRODUCT DEVELOPMENT:- Developing products to meet the needs of a target market.
FREE-MARKET ECONOMY:- An economy in which most productive activities are carried out in the market sector and there markets are relatively free from control by the central authorities
(V.A.T) Value Added Tax::- A comprehensive indirect tax levied on all transactions whether at retail, wholesale or manufacturing level. It is dependent on the value of what is made and sold and not on the wealth or income of the marker.
MARKET SHORE:- A firms proportion of the consumers for a product which it produces n competition with other firms.
MARKET;- An areas which buyers and sellers negotiate the exchange of well-defined commodity.
INNOVATION:- The act of marketing charges; introducing new things. Also, the introduction of invention into use.