EFFECTS OF PROMOTIONAL STRATEGIES ON THE DEVELOPMENT OF INSURANCE IN NIGERIA
ABSTRACT
The purpose of this study was to determine the effects of different Promotional Strategies on the Development of insurance companies in Nigeria. In order to operationalize the phenomena understudy the following variables were utilized to guide this research, i.e. sales promotion, market intelligence and product development and innovation. The data was collected from the marketing managers of all the insurance companies to gain wide representative of the sector. In all, 43 self administered questionnaires were distributed among the marketing managers. In addition, the products available are not designed to meet the needs of low income earners. According to the insurance industry report 2008 from ANI the penetration of insurance in Nigeria is very low at only 2.54 percent of Gross Domestic Product (GDP) compared to 2.57 percent in 2005. Long-Term (life) insurance recorded a penetration ratio of 0.76 percent while that of general insurance was 1.78 percent. The penetration ratio reveals existing coverage and growth challenges for insurance market in a given country.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
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:
Provision of loans for building on the security of a life policy.
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.
1.2 Statement of the problem
Majority of insurance companies in Nigeria have developed concrete strategic plans to increase their business, a strategy towards increasing the penetration levels within the Nigerian insurance industry. Some of the Promotional Strategies put forward are: – intensified marketing activities locally (through market penetration, market development and product development strategies), increased the level of customer service and focus in all departments of the company; intensified personal selling as a marketing communication strategy and pursue a competition oriented pricing strategy in all markets, (Osalo, 2007). In order to operationalize these market driven business objectives, it’s critical to have in place some silent strategies that fuel them such as sales promotion, market intelligence and product innovation. Mirie (1987) did a study on the marketing of Insurance services, however this study only gave us an overview of insurance marketing but failed to inform us on the effects.
Kyeva (2005) did a survey of the marketing mix used by life insurance companies in Nigeria in responding to the challenge of Hiv/Aids pandemic, however this study was limited only to the relation between life insurance companies and Hiv/Aids pandemic
Wamwati (2007) did a study on the critical success in the insurance industry in Nigeria, however this study was too broad and failed to look critically to the Promotional Strategies and their influence on performance
Karanja (2008) did a study on the innovation strategies adopted by insurance companies in Nigeria, however this study only served to inform us but failed to establish the relation between innovation and performance.The argument is that the major contributors to the sector performance are the Promotional Strategies adopted by insurance companies. It is important to emphasize that good marketing practices by insurance companies in Nigeria is imperative if the industry is to effectively play a key role in the overall development of the country.
From this study’s background information, performance and achievements of most insurance companies depends largely on the use of effective Promotional Strategies that are tailor-made to suit customer needs among other strategies. It is evident from this argument that the development and implementation of effective Promotional Strategy is a very important function for an organization. Forging from the statement of the problem the study aims at answering the following questions.
- What is the effect of sales promotion on the Development of insurance companies?
- What is the effect of marketing intelligence on the Development of insurance companies?
- What effect does insurance product innovation has on the company’s market growth and penetration?
1.3 Research Objective
The objective of this study was to determine the effects of Promotional Strategies on the Development of insurance companies in Nigeria. Specifically the study seeks to:
- Determine the effect of sales promotion on the Development of insurance companies
- determine the effect of marketing intelligence on the Development of insurance companies
- Investigate the effect does insurance product innovation has on the company’s market growth and penetration
1.4 significance of the Study.
The government and other institutions involved in the country’s policy formulation can not overlook the insurance sector as one of the major contributor to the country’s GDP. The findings from this study will therefore be of importance because they will have the capacity of being used to formulate positive fiscal policies which are relevant and sensitive to the forces influencing the insurance sector performance and penetration in Nigeria.
To insurance company management the realization that insurance business is one of the highly competitive business locally and globally calls for respective marketing department to adopt properly formulated Promotional Strategies for success of the company. To the insurance companies in the country, this study finding will be of great importance because through them, these institutions will be better positioned to gauge their performance and make improvements where necessary to boost their market performance and overall ranking in the industry.
To those who have scholarly interest in marketing of insurance companies and overall financial sector, this study will provide a source of reference; literature review and basis upon which further studies can be developed.
EFFECTS OF PROMOTIONAL STRATEGIES ON THE DEVELOPMENT OF INSURANCE IN NIGERIA
