Nigeria is a West African state holding an country of 923,768 square kilometres. The geographical place of Nigeria is 3o and 15o E between longitudinal sphere and 4o and 14o latitude in north. It has a population count near to 150 million. The growing of population is moderate and it is turning by around 2.7. The internationally state is bounded by on the West by the Republic of Benin ; on the East by the Cameroon Republic ; on the North by Niger and Chad Republics and on the South by a huge coastline of the Atlantic Ocean ( John Harris, 1959 ) .
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The physical landscape of Nigeria is can be loosely classified as fields, Lowlandss, Highlandss and tableland. The Coastal and Niger Delta country autumn under low lands. Rippling fields which covered most portion of the western part and the sokoto plains which are by features fields are fall under field land. The Chad basin can besides be categorized under this forum these are located on the utmost nor’-east of Nigeria. The Highlandss are dwelling of the Jos tableland, Mandara Mountains, Adamawa highlands and Obudu tableland.
Niger and its feeder is the largest river in Nigeria. It flows from the North to west and joined by its major feeder. Another river named Benue flows from nor’-east which makes a meeting at Lokoja. The river Niger meet into the Atlantic Ocean in the terminal while before that it forms a web of feeders which are known as Niger Delta. Other major rivers include the Ogun, Benin, Imo, Cross River, Kaduna, Shansha, Yobe, Komadugu, Hadijia, Shari and Sokoto. Nigeria is really rich in natural resources it has diversified climatic conditions and diversified natural resources excessively. Its agribusiness, industries and mineral resources are really rich and diverse which besides include oil and gas ( William Arnett, 1979 ) .
The climatic status of Nigeria is varied in two major seasons. It has the moisture season or rainy season after that the dry season autumn. The south Nigeria is hot in comparing to the Northern portion. The temperature varies from 35 0C in summers to 230C in Southern portion of Nigeria while in Northern part the temperature assorted from 310C to 180C in the North. Though due to Global warming the mean temperature has gone up in the last decennary. The entire one-year rain autumn varies from 3800 millimeter at Facades to below 650 millimeter at Maiduguri which is located in the north E of the state.
Nigeria is a democratic state which follows the federal construction of the authorities. It has three weaponries theoretical account with the executive, legislative and judicial systems are in topographic point. In 1999 the Federal authorities decentralize and distributed the power in 36 little provinces and 774 local authoritiess so that the development activities and their executing can be farther enhanced.
ICT Impact: Its Advancement & A ; Development
In the past few decennary information engineering has attained a great trade of attending from all over the universe across all the watercourse. It is most sought field of survey non merely from academe but besides from concern prospective because of its application in day-to-day everyday work into many corporations.
In present Scenario the concern environment is really dynamic and altering really quickly. Customers are more knowing, cognizant and of all time demanding due the promotion in information engineering. They can entree any information about any merchandise, service, and question, anything within a 2nd or with a chink of mouse. Business organisation particularly Insurance industry in the twenty-first century operates in such a ferocious competitory and dynamic universe. The word moral force is used to explicate the present clime of economic uncertainness and the promotion in information and communicating engineering. The direction can non disregard the information system and its promotion as they are working in modern-day environment. It has been found in their survey that all the fortune 500 companies ‘ hard currency flow is linked to the information and communicating system ( Laudan & A ; Laudan, 1991 ) .
It has become imperative for insurance industry to critically analyze the cardinal importance of pertinence of information and communicating technological construct. It has become a regular pattern for insurance companies to be local and internationally competitory. ICT straight affect the determination doing ability of direction and their offering. It plays a critical function in planning and offering to a peculiar merchandise and services. It is continuously altering the manner how insurance organisation maintains their corporate and client relationship. ICT has besides enhanced the quality and velocity of services offered by the insurance service supplier.
Literature Review of ICT in Insurance Industry
Insurance service suppliers are necessitating modifying and bettering their traditional operational patterns to do their concern viable in the twenty-first century ( Harlod and Jeff, 1995 ) . They found that the one of the most important defect of insurance industry is negligence of information and communicating engineering promotion. The senior direction demand to understand the appreciation of importance of ICT engineerings in preparation of strategic determination consequently. Woherem ( 2000 ) claimed that the fiscal organisations which will overhaul their payment and other bringing operational activities and use new ICT engineerings are likely to last and thrive in the new millenary. He advice the Bankss and other fiscal establishments to re-examine their service offering and bringing systems in order to re-frame them as per latest model of information and communicating engineering.
The insurance industry in Nigeria has been passed through assorted promotion in ICT in through the past few old ages. In the pursuit of endurance, planetary relevancy, care of bing market portion and to prolong development many organisation had already exploited the advantages ICT by using some automated devices which imperative for industry. The survey evaluates the impact of ICT on insurance sector in Nigeria, how they have impacted the insurance market in Nigeria and their way of future.
Information and Communication Technology Advancement
As per Khalifa ( 2000 ) “ Information Technology ( IT ) is the mechanization of procedures, controls, and information production utilizing computing machines, telecommunications, package and accessory equipment such as machine-controlled Teller machine and debit card ” . It is a term which is normally covers the use of electronic engineering for communicating, aggregation, storage, airing and presentation of information. Some of the fiscal services are revolutionized by the usage of ICT engineerings for illustration to buy a insurance now client can avail all the related information online, they do non necessitate to confer with an agent and to stand in a waiting line to run into the insurance personal, and waste a significant sum of clip, money and energy. They can easy open their policies online submit on-line papers, transacts on-line and other questions can be solved easy ( Irechukwu, 2000 ) . Now the consumer get premium watchful via electronic mail, phone, messages etc which reduces the opportunities of any error. Communication engineering besides dealt with the physical devices such every bit hardware every bit good as package devices which connect or work as a interface between hardware devices. Software nexus besides connect some of the hardware devices to reassign informations from one location to another location ( Laudon and Laudon ; 2001 ) .
ICT merchandise used in insurance industry includes smart card, Telephonic services, Online services, MICR, Electronic Data interchange, Electronic fund transportation, electronic entree to the history and policies paperss.
Several researches has been done to place the impact of ICT in insurance sector within the Nigeria state. Agboola et Al ( 2002 ) discussed the basic properties in which the ICT has played a important function within the economic system of Nigeria. They include the usage of Magnetic ink character reader ( MICR ) for assorted document confirmation processes. It makes the process of encoding, reading and sorting of papers more convenient. Plastic card and electronic fund transportation system is the 2nd property which make the money colony at the same clip and more safe and convenient to utilize. The machine-controlled bringing channel which makes it easier for service supplier to convey their message to the consumer. Use of synergistic Television channels and cyberspace made revolution in insurance industry.
Agboola ( 2001 ) studied the encroachment of ICT on the fiscal services in Lagos and found that with the promotion in information and communicating engineering the fiscal services offered by the establishments have been significantly improved in Lagos. The survey was limited to the fiscal nervus of the Nigeria, Lagos and concentrated on merely six major fiscal establishments.
Woherem ( 1997 ) discovered that Nigerian fiscal establishments have significantly performed better since 1980 in the prospective investing in information and communicating engineering than the other industrial sector of Nigeria. An analysis of the survey carried out by African Development Consulting Group Ltd. ( ADCG ) on IT diffusion in Nigeria shows that fiscal establishments have invested more on IT, have more IT forces, more installed base for Personal computers, LANs, and WANs and 6 a better linkage to the Internet than other sectors of the Nigerian economic system. The survey, nevertheless pointed out that whilst most of the fiscal establishments in the West and other parts of the universe have at least one Personal computer per staff, Nigerian Bankss are dawdling earnestly behind, with merely a Personal computer per capital ratio of 0.18 ( Woherem, 2000 )
More or less the offering from insurance organisation is standardised. They are offering same set of merchandise and services. The banking and insurance industry progressively utilises computing machines and telecommunication equipment connected via the Internet as the ordinary distribution channel of their services. Ranging from Online securities firm and Home banking to Electronic insurance contracts by companies like Cosmos Direct, information and communications engineerings ( ICTs ) have changed the fiscal service industry significantly over the past decennary. By looking at the outgo in fiscal industry on information and engineering investing is relatively high than any other industry after 1995 ( for the US see e.g. Council of Economic Advisors, 2001, for the EU see EITO, assorted yearbooks 1996 until 2001 )
The key to success for fiscal industry is to turn by uninterrupted investing in engineering and promotion in fiscal services. The on-line premium payment installations, Account statement, Access their portfolio from any location in any subdivision are some of the small promotion which has taken topographic point in the insurance industry in Nigeria. With the handiness of cyberspace it has given the power to user to entree their investing in insurance from any corner of the universe. While the revolution in nomadic engineering has besides changed the manner people do minutess. While it is non the terminal of invention still a batch of transforming procedure has yet to be completed. Still a batch of new inventions and labour-saving procedure has to be implemented in close hereafter.
The Structure of the Nigerian Financial System
The fiscal system of Nigeria which are comprmised of banking and non-banking activities.. The regulative organic structure of fiscal system in Nigeria are ) , Central Bank of Nigeria ( CBN ) , Nigeria Deposit Insurance Corporation ( NDIC ) , Federal Ministry of Finance ( FMF Federal Mortgage Bank of Nigeria ( FMBN ) , National Insurance Commission ( NAICOM ) , National Bank of Communities Board ( NBCB ) and Securities and Exchange Commission ( SEC ) .
Federal Ministry of Finance ( FMF )
It play a critical function in the finance related strategic determination taken by the authorities it helps and propose the authorities of Nigeria on its fiscal operation and other pecuniary counts.
The Central Bank of Nigeria ( CBN )
The cardinal bank of Nigeria act 1959 lead to the constitution of the Central bank of Nigeria and it started its operation shortly early in July, 1959. It is the vertex organic structure in Nigerian fiscal system. It ‘s same like federal bank in United State America and Reserve Bank in India. Their primary maps are to do certain the pecuniary stableness in the province and to keep a sound fiscal system. It besides acts as a bank and fiscal advisor to the federal authorities. It is the bank of bank, it besides provide model and platform for other fiscal establishment to run efficaciously ( Yanusa, 1998 ) .
The Nigerian Deposit Insurance Corporation ( NDIC )
NDIC is independent organic structure and straight answerable to Federal Ministry of Finance. it complement the supervisory and controlling, and regulative function of CBN in fiscal activities. NDIC is formed in 1989 to lodge insurance and other related services for Bankss so that the assurance in banking industry will beef up. It has power to look into the books and accouts of the insured bank and other sedimentation taking fiscal establishments. It ask merely one per centum of the sedimentation liabilities from Bankss as insurance premium. The maximal cap of claim exercised is limited to N50, 000 in the instance of bank failure. It has planned to boost the exercised bound from N50, 000 to N200, 000.
The Securities and Exchange Commission ‘s ( SEC )
Under the Sec act, 1979 Securities & A ; Commission Exchange was established. Once it was known as Capital Issues Commission. As the name suggest it play a dynamic function in capital market and the vertex organic structure capital market ordinance. Any amalgamation and acquisition require to be get approve from SCE prior to their exercising. It establishes the unit trust. It maintain the surveillance on the capital market to heighten it efficiency and effectual use of resources. It issues and designs the guideline for the constitution of the stock exchanges and after that the deregulating of the Nigerian capital market. It besides releases the guideline related to the foreign direct investing in Nigerian capital market.
Debt Management Office ( DMO )
Debt related personal businesss are left as there is was no independent organic structure to modulate and direct it. Hence the Federal Government of Nigeria has taken a major measure and formulated an independent debt direction office ( DMO ) . By the creative activity of DMO all the debt related personal businesss has been handled by it, therefore a amalgamate image and proper coordination has been developed between assorted bureaus as these are handled by a individual bureau. The DMO centralize and coordinates the full debt recording and direction related activities of Nigeria. It includes debt service prognosis, reding of debt dialogue, debt service payment and new adoptions ( Yasuna, 1998 ) .
National Insurance Commission ( NAICOM )
The National Insurance Commission ( NAICOM ) is new signifier of the Nigerian Insurance Supervisory Board ( NISB ) . It is powered by more efficient and effectual disposal, supervising, ordinance and control over the insurance concern in Nigeria. It is policy doing organic structure sing insurance activities. The specific map of the organic structure consist of the constitution of the processs for the behavior of insurance concern, protection of insurance policy holders and the constitution of a council to which any issue, ailment can be submitted related to any insurance company and their mediators by the client. NAICOM manage the equal degree of hard currency and modesty, direction patterns, the degree of proficient expertness and battle of ICT.
The Federal Mortgage Bank of Nigeria ( FMBN )
The Care of assets and liabilities of Nigerian Building Society is taken by the Federal Mortgage Bank of Nigeria ( FMBN ) . It provides the consultative services to and executes the research related to lodging and development activities. The FMBN is empowered in 1990 with the acceptance the lodging policies to licence and modulating the establishment which trade in pimary mortgage in Nigeria and act as a vertex organic structure for modulating mortgage finance industry. The Federal Mortgage Finance dealt with the funding which was earlier comes under the legal power of Federal Mortgage Bank of Nigeria. While it is still holding its regulative function and it take the counsel from Central Bank of Nigeria. ( Bassey Enamatte, 2001 ) .
The Money Market and Its Institutions
The money markets are short-run debt instrument, it manipulate or ease the sector which are confronting a shortage jobs. It gets the financess diverted from the hard currency plus sector of the economic system to the other sectors of the economic system which are sing a ruin. The shortage unit can be public or private ; they can entree the money market to run into their short term demand. They can merchandise in Commercial Papers ( CP ) , name money, Certificate of Deposit ( Cadmium ) , Treasury Bills and Treasure Certificates. The skyline of the money market has been improved significantly with the aid of the Open Market Operation ( OMO ) commenced by the CBN. Discount houses worked as a accelerator and it helped in the elevation of participant member in the market. These establishments club the hub of a fiscal system. It consist of particular purpose bank, commercial, rural development, merchandiser bank, price reduction houses, like Nigerian agricultural co-operative bank and community bank etc.
The price reduction houses were established as an intermediary between CBN, fiscal establishment and with the other indignant Bankss. It straight controls the market based fiscal system. A price reduction house is a non-bank fiscal establishment. It helps the mobilizing in securities while maintaining the position of liquidness in the market ( Glaser, 1992 ) . It does by supplying some price reduction on the money market instrument of the authorities securities, which lead to the purchase of these by establishments and single. Hence in bend it creates money liquidness in the market. Some the operating major price reduction houses in Nigeria are Associate Discount House Limited, Consolidated Discount house Limited, First Securities Discount House Limited, Express Discount House Limited, and Kakawa Discount House Limited.
The Universal Banking in the Nigeria has been introduced by CBN. After the preparation of guidelines for cosmopolitan banking in Nigeria boulder clay now more than 10 Bankss are holding cosmopolitan banking position. Hence these Bankss can run as commercial and merchant maps.
Commercial and Merchant Banks
Banks and other fiscal establishments ( BOFI ) act works as legal and statutory model for commercial and merchant Bankss in Nigeria. Basically three chief maps are performed by commercial bank in Nigeria. These maps can be classified as granting of loans and operation of payment, credence of sedimentation and colony mechanism. A rapid growing in commercial banking sector has been observed since September 1986 as the authorities commenced the active deregulating on the same twelvemonth ( Rotberg, 2004 ) . The figure of commercial Bankss has been grown significantly and their offerings go excessively broad and complex.
Nigerian Acceptance Limited ( NAL ) is the first merchandiser bank in Nigeria which started its operation in 1960. These Bankss take sedimentation and cater the demand of corporate universe. These Bankss helps the corporate and institutional client by supplying them loan syndication funding and prosecuting in activities such as equipment leasing, medium and long term loans project advice, debt factorization to their client. In bend they get better return on their loan and charge for their services. Now the tendencies have been changed and merchant Bankss are besides executing the general banking operations. It helps them to diversify their hazard and portfolio and besides leads to creative activity of financess.
Today more than 1366 licensed community Bankss exist in the Nigerian market. First community bank started its operation in 1990. The National Board for Community Banks ( NBCB ) is the vertex organic structure which decides the suitableness and feasibleness for the constitution of the community Bankss. Basically the intent of a community bank is to supply fiscal aid to a peculiar community. These are self-sufficient fiscal establishments owned and managed by a peculiar and within the community members ( Patike Communication, 2002 ) .
The Capital Market
It is used for bring forthing long term fund into the market. Securities and Exchange Commission ( SEC ) is the vertex organic structure which serve as a regulative authorization of the market ; besides it is the chief participant in the market. The Nigerian Stock Exchange ( NSE ) is the publishing house of securities and stock broking house. NSF is the chief exchange for big endeavor which encourages the big every bit good as little and average graduated table endeavor to hold the benefit of the public listing. Second-Securities Market ( SSM ) is the market for little and average graduated table endeavors where the listing demand regulations are less rigorous and complex.
Nigerian Capital Market has enjoyed a phenomenal growing rate in the first 20 old ages of its origin. It has maintained its operation in the primary and secondary markets. The market capitalisation has been grown from N 1.7 billion in 1980 to N 472.9 billion in old ages 2000. On the other manus the listed companies have grown by 92 in 1980 to 196 at the terminal of twelvemonth 2000. In the twelvemonth 2000, 21 new naming raised N 16.71 billion from the capital market to fund their enlargement and development undertakings ( Patike Communication, 2002 ) .
Keeping in the positions of fiscal resources of large and little participant Unit trust Schemes has been started in the market for the purpose mobilisation of the financess. The retail client can accomplish maximal return with minimal hazard on their investing. At present there are 14 Unit Trust Operation in the Nigerian market.
Major Participant in the Nigerian Capital Market ( Uka Eznewe, 2003 )
The Securities and Exchange Commission ( SEC ) , it is the vertex organic structure and responsible for the overall jurisprudence and ordinance of the full market.
The Nigerian Stock Exchange ( NSE ) , it is a self-regulatory organic structure in NCM that supervises and surveillances the operations of the formal quoted market.
Market Operators, these consist of the Issuing Houses ( Stock broking houses and Merchant Banks ) , Trustees, Registrars, and Stockbrokers etc.
Pension Fund, Insurance Companies, Investors, Unit Trusts ( Institutional Investors ) and Individuals.
The Central Bank of Nigeria ( CBN ) .
The Federal Ministry of Finance
Development FinanceAA?Institutions ( DFIS )
To lend the development of some specific sectors of the economic system some specialized Bankss or development finance establishments ( DFIs ) were established. For heightening the operation and effectivity of the DFI a batch of structural alterations have been made and most of the DFI has been merged and restructured. The Bank of Industry ( BOI ) and the Nigerian Agricultural Co- operative and Rural Development Bank ( NACRBD ) are consequence of amalgamation and restructuring of the assorted DFI ‘s. These two Bankss are engaged in agricultural development related activities and supply soft loans to industries related to agribusiness. Federal Mortgage bank ( FMB ) , Urban Development Bank ( UDB ) and Education Bank ( EB ) are some of the other bing DFI to provide the sector specific demand as specified by their name.
Other Financial Institutions and Fundss
Apart from banking establishments there are other non-banking establishments within the fiscal system. These establishments play an of import intermediating function. Some of these establishments are as follow:
Insurance companies are combination of life and non-life and of those which are engage in both types of activities. There are some reinsurance houses besides. The investings made by insurance companies are fundamentally in authorities organisation and Mortgage financess. They play a function of fiscal intermediary and mobilise the fund comparatively for a long term. In the past decennary a important growing in the insurance industry has been observed. The sourced fund are chiefly from decrease in surpassing and other assets, if cipher their part base for 80.8 % of the entire fund value. The insurance screen for insurance companies is provided by the National Insurance Commission. Other map of National Insurance Commission includes assisting the authorities in achieving its economical and societal end in the areana of insurance and re-insurance. It is compulsory for all the registered insurance companies in Nigeria to park 20 % of their one-year premium collected with the National Insurance Commission.
Finance companies are private or publically owned establishments that focus in short-run, non-banking intermediation. They collect the fund from public and mobilise it by puting it in public. They channelize it through adoption, ease Local Purchase Order ( LPO ) , debt factorization, undertaking funding and equipment renting etc. These finance companies are controlled and supervise by CBN. BOFI act has given the power to CBN to undertake any issue related to finance companies ( Odoko, 2004 ) .
Bureaux de Change
Authorised since 1989 the Bureaux de alteration has been in stead of to spread out the foreign exchange market and to better the procedure and map to entree the foreign exchange particularly for little endeavor and users. Today there are more than 240 accredited Bureau de alterations are runing in the Nigerian economic system.
Exchange Control Regulations
In Nigeria foreign exchange dealing are taken topographic point at the independent foreign exchange market. The royalties and proficient fees are collectible on imported proficient services while on the same clip net income, unconditioned repatriation of capital and dividends are allowed. The disposal of assets from a repatriation of returns is allowed ( Issac Dada, 2003 ) .
Primary Mortgage Institutions ( PMIS )
All the primary mortgage establishments are necessitating runing within the set guideline of act no 53 of 1989. The economy are mobilize towards the development of lodging societies by PMI. The entire asset/liabilities outstanding were increased to the degree of N 7248.2 million in 1999. To look into it and do rectification and to rectify it the Federal Mortgage bank of Nigeria tightened its surveillance of PMI ‘s by issue “ Clean Bill of Health ” to 116 establishments which deal in mortgage. As a consequence the new standards for primary mortgage establishments to hold a portion capital of at least non less than N 20 Million.
Nigerian Social Insurance Trust Fund ( NSITF )
Nigerian Social Insurance Trust fund ( NSITF ) s designed to replace the defunct National Provident Fund ( NPF ) . NPF was a mandatory pension strategy to the non-governmental employee or non-pensionable public retainers who works in private sectors. The chief aim of this fund to follow a more comprehensive societal security ‘s of the employee who work in the private sectors organisations. The basic intent behind the creative activity of this fund is to maintain the involvement of private employees. Organizations which holding at least a staff of 25 people or more than that it is mandatory for them to register under NSTIF. Employee part in NSTIF is about 2.5 % of their basic wage while the employer part is about 5 % . When the employee gets retired they got pension and other benefit from this principal and they got a fine-looking return on the same besides.
The fiscal System of Nigeria has undergone some singular alterations in the past few clip. Assorted developmental action has been taken topographic point some of these developments include the announcement of the Failed Banks ( Recovery of Debt ) and Financial Malpractice in Banks Decree No. 18 of 1994. Creation of Financial Services Regulatory Coordinating Committee ( FSRCC ) by the CBN in 1994 is another major measure. The docket behind these alterations is to organize and standardise the regulative patterns of all fiscal establishments in the system with a position to germinating coherency and fullness. The patience is granted by CBN to finance companies runing in Nigeria whereby they were given a upper limit of four old ages to amortise their classified assets portfolio against their current net incomes ( Charles R Ghiest, 1988 ) .
The fiscal system of Nigeria has observed some important alterations in recent times. It consist the proclamation of the failed Bankss ( recovery of debt ) and the malpractices which are taking topographic point in the fiscal markets. The most important development was the constitution of the Financial Services Regulatory coordination Committee ( FSRCC ) by the CBN in 1994. The basic purpose behind this to organize and reconstitute the all fiscal establishments which are available in the systems. A comprehensive image of the fiscal system can be anticipation could go possible with the aid of FSRCC. The fiscal companies which are runing in Nigeria patience has been granted by the CBN. Their plus portfolio should merely be against their current net incomes.
Pull offing Insurance Business – A Peep into The Future
The present clip stage is so both interesting and on the same clip is disputing for Nigeria ‘s insurance industry. Till few twelvemonth back it ‘s was like a “ Beautiful Bride ” and enticing to both local and foreign investors. It was booming really high and the hazard base was low. In 2008 a hike 24 % has been observed in the insurance index of FSDH. Now the sector is acquiring more complex and competitory as new participants are coming into that and they are contending for the same portion pie. The regulative model became more rigorous and complex. The insurance service suppliers are obliged to work under the given guidelines. There is no free tiffin in this universe ( J. Onoho, 1980 ) .
The direction made by Central Bank of Nigeria In 2004, to the Bankss to re-capitalize by the terminal of 2005 to a lower limit of N25billion ( about USD20million ) . It leads to the outgrowth of 25 Bankss which was a tough demand at that clip. Today no less than six bank out of these bank are holding paid-up capital more than N 500 Billion. It can be easy inferred from this higher degree of capitalisation which paced the economic activities in Nigeria. Banks have besides shown their active engagement in insurance sector.
In 2006, new capitalization regulations were besides introduced in the insurance industry – N2billion for Life and N3billion for Non-Life concern, this was from a base of N150million and N250million severally. 49 companies met this demand through concern consolidations and a much wider equity ownership.
GDP per capital in Nigeria increased from USD 800 ( 2006 ) to USD1,300 ( 2007 ) . The addition in the All Share Index was 38 % in 2006 and 75 % in 2007.
However, Life, Health and Household insurance premiums accounted for less than 0.3 % of our GDP in 2006/7. It therefore seems that there are important chances to intensify insurance incursion if acceptable merchandises can be designed and appropriate selling programmes embarked upon – new capital will assist finance these development demands.
A cheep into the hereafter
Business growing and wider ownership constructions will probably take to ( direction ) coverage challenges in the hereafter. Quality people and equal information systems need to be acquired to administrate, manage and study on the increased concern volumes. Stockholders will necessitate more frequent and accurate information on the concern tendency and their worth. Hence runing ratios, the computation of proficient militias and declared underwriting net incomes will be under more examination than hitherto ( Cottarelli, 1997 ) .
We illustrate below issues we believe direction will in future, need to pass on in inside informations to stakeholders – stockholders, investing analysts, evaluation bureaus, and the regulator. We believe possible and current stockholders will wish to be appraised – as in other industries – of how the concern `adds up ‘ and what attempts are being put in topographic point to guarantee value/worth is non eroded. Put another manner, insurance companies will hold to show how they manage hazard!
In our position, hazard direction will be a major subscriber to the successful hereafter of the insurance sector. Management will necessitate to constantly reexamine the adequateness of the premium rates, underwriting policies and ( Know Your Client ) KYC questions, reassurance programmes, investing policy, runing systems, processes, people etc.
We believe stakeholders will necessitate companies to set up hazard direction rules – to place the beginnings of concern hazard and put in procedures that will extenuate the hazards endangering concern aims and Shareholders worth.
We give below some illustrations of hazard and extenuating actions ( Schroeck, 2002 ) .
Type of Hazard
Some Mitigating Actions
An inauspicious alteration in plus market values without a corresponding alteration in liability values.
Have a formal plus distribution policy, specify sartorial distribution, and stock choice standards. Match assets to liability profile.
A alteration in the price reduction rate adopted in ciphering liability values without fiting alterations in plus values.
Prudential Reserving Approaches
An addition in mortality experience ( e.g. group life ) .
An addition in life anticipation ( rente concern ) .
Increase/decrease policy lapses etc.
Anticipate possible alterations through prudential reserving
Failure to reassure
Document ICT processes, external backup sites, care etc
Review administrative procedures
Train staff, reappraisal recruiting and
Failure of reassure
Failure of debitors ( debt security/large broker/agent )
Have operational and fiscal standards for taking reassures and debt securities
Failure to run into duties due to hard currency flow strains or holding illiquid assets.
Asset liability fiting
Secure adequate banking agreements etc.
The alteration in end twelvemonth militias straight impacts the declared underwriting net incomes and by deduction the overall concern net incomes, dividends and stockholders worth.
We anticipate that reserve computation methods and their adequateness will in future demand to be justified to stakeholders. The computation methods will hold to be scientific, independent of direction and be in line with best planetary pattern ( Carey, 2006 ) .
As in other districts we perceive stakeholders will necessitate Stockholders Worth to be expressed as the Embedded Value ( EV ) , which basically is
The Adjusted Net Asset Value ( NAV ) – balance sheet NAV if assets and liabilities are expressed at their carnival values
The estimated hereafter net incomes to stockholders from the concern presently in force.
Typically, the EV will transcend the usually reported NAV.
Companies are get downing to in private cipher their EVs in Nigeria and we expect that as insurance market analysts and fiscal advisers get progressively involved in the insurance sector, demands for companies published EVs will increase – as is go oning in Asia, Australia, Europe and the Americas.
We foresee businesses/managers in the close hereafter enquiring of the sum of Capital really needed to be dedicated to insurance concern – to reflect the jutting concern mix and growing over a reappraisal period ( typically 1 twelvemonth ) . This capital, called the Economic Capital, will reflect the entity ‘s hazard appetency and will, for case, differ for indistinguishable companies with different reassurance plans ( Schztz, 1997 ) .
In Nigeria, where capital demands are soon high in comparing to proficient liabilities the construct of economic capital will instantly be utile for the investing direction of the Shareholders Funds. A comparatively risk free attack could be adopted for the investing of the economic capital whilst a more hazardous attack may be adopted for the balance of financess, reflecting the grade of the endeavor ‘s hazard adverseness.
We anticipate the latter half of 2008 and, peculiarly 2009 to announce important alterations in the insurance sector ( Onosode, 1993 ) .
Management devising important investings in runing systems and people
Active new Product development attempts
More educative and aggressive selling attempts
Significant concern enlargements happening in 2009
A comparative inflow of foreign possible nucleus investors
Improved fiscal coverage, particularly a displacement to EV coverage
Increased regulative alertness/requirements. The current “ regulations based attack ” to capitalization and militias may give to a “ rules based ” attack.
It has been estimation that 2010 will be the twelvemonth of the `big knock ‘ with Life, wellness and family insurance premium incomes transcending 1 % GDP and at least three ( 3 ) insurance companies recognised as being leaders in Nigeria ‘s fiscal services sector.
Reforms in the Insurance Industry
The Government of Nigeria in position of maintaining the assurance of common adult male and organisation in the market and to heighten the insurance industry has taken some reformatory action. it include the procedure of recapitalisation and consolidation. As to stay competitory in the planetary universe these are urgently required. After the reform new bigger and stronger participant come into the being which can contend in a planetary environment with the other foreign companies. Post reform the Nigeria insurance industry works on a little fringy graduated table. Which restricted the growing of the market and the organisation as the profitableness is low and premiums are high. It can specially be referred in the context of oil and energy concern. The authorities feel at that place is huge potency in the field of insurance industry if some disciplinary step to be taken. The absence of private and public developmental substructure besides hindered the growing of insurance industry in Nigeria.
There is a vision 2020 determined by the Nigerian authorities for insurance sector which shows the hereafter of the market and some anticipation has been made about the industry. The vision was focused towards the picks available among the emerging market. To be count in the top 20 insurance market in the universe Nigerian insurance market is require to be attain more efficiency and safety step, more crystalline and a higher market incursion and capacity. Keeping the position of vision 2020 the reforms in the insurance industry being developed so that the bigger and stronger participant can emerge which can in turn fight with the planetary competition and tendencies. While there graduated table of operation will be big and can bear the any uncertainness in more professional manner ( Mehta, 1990 ) .
Okechukwu Chukwulozie, talked on the reforms in insurance industry that One of the major undertaking faced by the NAICOM is to the addition the market charming of the portion of insurance companies. So that the single and corporate house can experience the insurance companies portion more attractive than others. Harmonizing to him it is prerequisite for NAICOM to increase the consciousness in the populace about the insurance companies, to print the great fiscal public presentation attained by the insurance companies. It will take to the assurance edifice in the public hence will take to the purchase of insurance and their companies portions. Subsequently on it will hold ripple consequence. He emphasized on the reformatory active action has to settled every bit shortly every bit possible as companies have to accept the world and expression for a bigger image by compromising on their personal aims for short term. Harmonizing to him Oil and Gas insurance concern is the most of import for Nigerian Insurance Industry. Though the industry has made a singular advancement in this respect but it still necessitate the co-operation from the NNPC.
Harmonizing to Okechukwu Chukwulozie the hereafter of insurance industry in Nigeria is really bright and it looks more promising as the authorities enforce 45 % local content policy in Oil and Gas industry. Besides the insurance companies are holding their ain commission which are run by the representative of the relevant stakeholders which look after the involvement of all on the job undertakings.
With the authorities enforcement of 45 % local content policy the insurance industry is expected to hike up by over USD 400 million in the coming two twelvemonth. This phenomenon wills non merely merely the net income for the coming old ages but besides throw up new challenges and chances. Some more researched and calculating action has to be taken in stead of strengthening of insurance industry of Nigeria. ( Edwin, 2005 ) .
The undertaking in forepart of insurance industry is to construct up a Sovereign Trust franchise at local and international degree. A more strategic partnership is necessitating with the West African Sub-region. The denationalization or partial denationalization is welcomed for ailment unites and non-performing former public companies. Nigeria is a quickly developing economic system is sing the entry of foreign companies in the domestic market in telecommunication, banking, energy and crude oil which will further fuel the competition.