MANAGEMENT OF INSURANCE COMPANIES IN NIGERIA

MANAGEMENT OF INSURANCE COMPANIES IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

The management of an insurance company, like any other business outfit, has an aim or purpose to pay claim in return for payment of premium. The insurance company undertake numerous activities in their operation usually assessing the extent to which the risk presented in any respect departs from normal and if so, to what extent additional hazard can be mitigated at what rating consideration.  A process known as premium rating is used to decide vohat price you should change to. The premium price should reflect the claims list and expenses associated with the contract but also include an allowance for the insurer profit margin, this allowance depends on the level of competition in the relevant insurance market.

Like every other business if the insurance companies want to increase the amount of business they undertake (at the right price) and attempt to do this involves different system since company differ in their degree of reliance on a direct sales force rather than using brokers and also in the amount they spend on advertising.  Also insurance company cannot pay all claims out of revenuer received for premium and investment income, because the timing of these payments and receipts cannot be co-coordinated, they must therefore maintain a fund that can be used to pay claims, such funds are also necessary in the case claims are unexpectedly large.  In many classes of insurance fund are accumulated carefully investment of these funds will allow insurers to earn interest income and make capital again.

More so, the insurers may be aware that certain potential claims payment may exceed his financial resources.He will therefore wish to pass on some of the liabilities for the claims to another insurer by buying insurance like other enterprise, insurers make payment to creditors (claims to insure commission agents) and receive money from debtor (such as premiums) They ought then compile accounts for internal management, shareholders and the taxation and supervisory authorities. A major problem with these is that insurers liabilities that the potential claims payments may not be know and must therefore be estimated.Insurance companies must pay co-corporate with tax value added tax and capital gain tax.