THE ROLE OF INSURANCE IN THE NIGERIA PETROLEUM INDUSTRY

THE ROLE OF INSURANCE IN THE NIGERIA PETROLEUM INDUSTRY

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

In many developing countries, Insurance has not been viewed as having a strategic impact in the management of public resources.  It was largely treated as a processoriented, ―back- office‖ support function often implemented by non-professional staff of

the buying agencies (Hunja, 2003, Balimwezo, 2009, Ariweriokuma, 2008).  Consequently, little effort was expended to ensure that the policies and rules and the institutional framework governing the Insurance system were maintained in a manner that ensured that public funds were used in the most efficient and economical way and that the system delivered the best value for money (Brammer and Walker, 2011, Edler and Georghiou, 2007). In the face of shrinking budgets and the need to fight corruption, governments are realizing that significant savings can be gained by a well-organized Insurance system.  Many developing countries have also realized that a well-organized Insurance system contributes to good governance by increasing confidence that public funds are well spent.  Many developing countries have therefore instituted reforms aimed at making the Insurance system more transparent and efficient and increasing the accountability of public officials (Shaw, 2010).

In recent years, academics and practitioners have become increasingly interested in how organizations and their suppliers impact on the environment, society and the economy.  Insurance has been identified as key to stimulate demand for innovation and innovative goods and services. It has also been included as a key instrument to support market initiatives (Csaba, 2006, Walker and Phillips, 2009). The strategic role of purchasing and supply as a lever for sustainable development is much more manifested now than before. Contemporary commercial practices show that business organizations and business partners are focusing their Insurance strategies on reducing the environmental ‗foot prints‘ of their Insurance and supply chain activities. The need to improve organizational efficiency, reduce waste, overcome supply chain risk, and achieve competitive position has made companies to start considering lots of issues from a competitive view point (Humphreys et al., 2003, Handfield et al., 2005).

Insurance is a process of identifying and obtaining goods and services. It includes sourcing, purchasing and covers all activities from identifying potential suppliers through to delivery from supplier to the users or beneficiary. It is favourable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location (Mangan et al., 2008, Bowersox et al., 2002).

Procuring organizations and other supply chain partners are more seriously involved in designing and implementing sustainable Insurance policies focusing on how social and economic issues and issues relating to other aspects of the sustainable development pillars (Society and Economy) can be integrated in the Insurance process activities.

THE ROLE OF INSURANCE IN THE NIGERIA PETROLEUM INDUSTRY