CHAPTER ONE
INTRODUCTION
It is very obvious that the financial system in any economy is the bedrock within which capital is formulated, those take place and it made possible by the intermediation of bank and non bank financial institution.
1.1 BACK GROUND TO THE STUDY
The non banking financial institutions are the type of specialist intermediaries, through they are not bank whose financial resource are primary from deposit their participation is centered on the function of accumulation of longer term saving from either corporate bodies or from individual as well as channeling these saving to individual corporate bodies and government for the purpose of productive investment and economic growth. These financial intermediaries are not withdrawable on demand also they do not issue cheque like the bank, their function are limited to certain specific area these institution which have been of very good advantage to a developing economy like Nigeria contribute immensely to the development economic growth of the country.
The non banking financial institution are classify into difference categories namely:
i. Insurance companies
ii. Co-operative, tariff and credit societies
iii. Financial house
iv. Pension fund
v. State finance corporation
1.2 OBJECTIVE OF THE STUDY
The basic fact under these objective of the study is to encapsulate the contribution of insurance companies to the development of our country Nigeria. At this junction, the insurance companies (NICON) promote the business risk of both business and agricultural sector, financing the group between the rich and the poor, also safeguarding against numerous risk to which capital is exposed and take part in promoting bilateral and multilateral trade. For example international trade would be greatly impeded if insurance and export credit guarantee insurance schemes were not available.
Furthermore, the insurance companies show different policy which people can venture into i.e. whole life insurance policy and non life insurance policy and at the same time practice both policy, under the whole life insurance policy payment become due on the death of the life assumed, while in non life insurance policy payment became due at the state data it has been mentioned above that it is possible for people to take part in both polices this make it possible, according to the guide line produce by insurance companies degree and some immediate benefit in taking at a time.
1.3 PROBLEM OF THE STUDY
For the purpose of literacy we categorically state from the onset that non-banking financial institution constitute and indispensable organ in achieving economic growth and development of any nation like Nigeria. However there exist a paradoxical situation within context when in spite of the realization of this significant percentage of Nigeria population area yet to be incorporated into non-banking financial institution are the best word to describe the attribution on the other hand the lack of public awareness about the usefulness of non-banking financial institution like insurance companies (NICON) and other financial house, people do not know their usefulness and importance of their services rendered.
The poor development of non-banking financial institution as well as the whole economy, such as quality of insurance companies (NICON) service economic moral, social political and even religions factor the project therefore delves into these problem and offer constructive measure of suggestion that could of immense help in achieving better non-banking financial institution in Nigeria.
1.4 SCOPE OF THE STUDY
This study has it main focus of highlighting the effectiveness, regulation and economical important of non-banking financial institution on the growth of Nigeria economy.
It helps to highlighting the historical background and the nature of insurance companies. Moreover it also has the case study of the above mention named insurance company, which is National Insurance Corporation of Nigeria (NICON) the include the history, effectiveness and activities of the corporation (NICON).
1.5 LIMITATION OF THE STUDY
The major difficulties encountered during this study are just the administrative bottle neck and unwarranted bureaucratic redotarism of obtaining information from the public function.
Some other Problems Encountered During the Study are:
iInadequate data due to haphazard record keeping
ii the uncooperative attitude of the people most especially the literates one and even the learned people were reluctant to give adequate information.
In view of these alternative means were explored from the National Insurance Corporation of Nigeria (NICON), textbook and different journal book.
There is limitation in data collation for the purpose of inter company comparison. It would have been appropriate to collate various companies financial statement for the purpose of analysis them. This was not possible simply because some companies were not willing to release their financial statement.
1.6 DEFINITION OF TERMS
INSURER: This simply means the insurance companies that issued insurance policy
INSURED: This means the customer that is operating insurance policy with the insurance
companies
SUM ASSURED/INSURED: This simply means the amount to be paid as compensation
PROPOSAL FORM: This are the form that are pre-prepared questionnaire issued by the insurer to be completed by either the propose or his agent and which ask question about the subject matter of the insurance since the insurer will use the information to assess a premium, the prospective insured must disclose all material circumstance in utmost good faith, whether or not he is asked form them an form.
The solution to the questionnaire will assist the insurer to decide whether to accept the contract or not if the proposal is accepted by the insurer. The first premium is paid and the insurance of the cover note.
COVER NOTE: This is a note issued to the insured by the insurer after the insurer has accepted the risk in principle and insured has made part payment of the premium this will served as a temporary note before a certificate of insurance is issued after the proposal form has been processed and the insure is satisfied.
The cover note lasts for one mouth, within this period a certificate of insurance is expected to be issued.
CERTIFICATE OF INSURANCE: this is a certificate issued by the insurer, when the insured has made full payment of his premium after a month of the Cover Note. In circumstance, when insurance cover is compulsory by law it is used for a certificate of insurance to be required by the statue.
i. Employer’s liability insurance certificate
ii. Motor insurance certificate.
PREMIUM: This is a certain amount of money to be paid or paid by insured to the insurer for his insurance policy. The estimation of premium is based on the on the I formation supplied in the proposal form, it may be paid weekly, monthly or yearly.
POLICY AGREEMENT: This stand for an agreement between the insurer (insurance companies) and the insured, this is different from insurance policy because insurance refer to different class of insurance like marine policies and accident policies e.t.c.
SUBROGATION: This term refer to the right of the insure has against the insured after he has been fully indemnified and take over not only what is left of the property, but all the legal and right to sue the third part for damages, if an insurer pay for a total loss, he may take over the subject matter and right attaching to it in a partial loss, he may take over the right but not the subject matter.
ACTUARY: An expert in the calculation of risk and premium
EX-GRETA PAYMENT: This is payment made by the insurer to an insured out of sympathy and outside legal obligation.
SURRENDER VALUE: This is a proportion of the amount contributed payable to the assure who whishes to discontinue with his life endowment policy.
UNDERWRITERS: This is the person that perform the task of underwriting, that is some one on behalf of the insurer must assess the risk of loss being proposed and decide whether it is acceptable or not when risk is offered by a prospective insured if it is acceptable the under writer must decide on the rate of premium to be changed and the term and condition to be imposed on an insurance contract. The main business is cover or under writers a portion of the risks. This is more common in marine insurance where a ship may be insured for #150,000.00 and three (3) insurer can agree to insure the ship, that mean each insurers liability will be limited to #50,000 if there is an occurrence of the risk.
REINSURANCE: As it has been noted above the risk involved in a struggle venture can be too huge for insurance company to bear one way of spreading out such risk through insurance.
The transfer of risk from one insurance company to another insurer (the re-insurer) all or part of its liabilities in respect of claims arising under the contract of insurance that is writes. This is a risk insured by Mr. AB with company EF etc the purpose is to spread the risk so as to reduce the Wight of loss.
OVER INSURANCE: This happen when properly is over insured for more than its worth. There is no advantage in this, as an insurer will never pay more than the true VALUE of the properties.
