THE INVESTMENT OF INSURANCE FUND IN NIGERIA A CASE STUDY OF HALLMARK ASSURANCE NIGERIAN PLC


THE INVESTMENT OF INSURANCE FUND IN NIGERIA

A CASE STUDY OF HALLMARK ASSURANCE NIGERIAN PLC

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INSURANCE FUND


 ABSTRACT

The aim of the project is to evaluate or appraise the investment of insurance funds in the Nigerian economy.

In order to carryout this project, some statement of problems were evolved, the purpose of study as the sample size and various instrument used for the collection of data.

These helped to direct the course of this project work. The hypothesis were also tested and accepted with the responses received through administering of personal interview questions.

On the whole, the purpose of the study were achieved and the problem statement answered. The researcher also received relevant literatures that relate to the topic of the research.

The review of literature gave detailed information of the development and importance of the insurance industry in Nigeria, as well as the various classes of funds which they invest. There was a view of the legal requirement binding the investment of insurance funds in the Nigerian economy. Some of the reviews were explained in details.

In the cause of the study, the researcher was able to note the problems that face the investment of insurance funds in nigera. Recommendations were also made on how these problems will be solved.

Furthermore, in the course of the study, the data collected from respondents and the hypothesis were analysed and it was discovered that investment of insurance funds enhances the economy.

Finally, in chapter five, the researcher concluded his finding, made suggestions for further research, in the area of enlightemnet, provision of a developed capital market and recommended that the insurance companies should transact on cash basis, creation of insurance businesses and many other things.

TABLE OF CONTENT

CHAPTER ONE

INTRODUCTION

1.0              BACKGROUND OF THE STUDY

1.1              STATEMENT OF THE PROBLEM

1.2              PURPOSE OF STUDY

1.3              IMPLICATION OF THE STUDY

1.4              LIMITATION OF THE STUDY

1.5              RESEARCH QUESTION

1.6              HYPOTHESIS

1.7              SIGNIFICANCE OF THE STUDY

1.8              DEFINITION OF THE TERMS

1.9              ASSUMPTION OF STUDY

CHAPTER TWO

REVIEW OF RELATE LITERATURE

2.0              INTRODUCTION STATEMENTS

2.1              DEVELOPMENT AND IMPORTANCE OF INSURANCE IN Nigeria

2.2              NATURE OF INVESTMENT

2.3              LEGAL REQUIREMENT GUIDING THE INVESTMENT OF INSURANCE FUND IN Nigeria

2.4              SOURCES AND INVESTMENT OF INSURANCE FUNDS IN Nigeria

CHAPTER THREE

DESIGN AND METHODOLOGY

3.0              RESEARCH DESIGN

3.1              AREA OF STUDY

3.2              POPULATION OF THE STUDY

3.3              INSTRUMENT FOR DATA COLLECTION

3.4              VALIDATION OF THE INSTRUMENTS

3.5              RELIABILITY OF THE INSTRUMENTS

3.6              METHODS OF DATA COLLECTION

3.7              METHODS OF DATA INVESTIGATION.

CHAPTER FOUR

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

4.0              ANALYSIS AND RESEARCH QUESTION

RQ1

RQ2

RQ3

4.1              TESTING OF HYPOTHESIS

4.2              FINDING OF THE STUDY

4.3              DISCUSSION OF THE FINDINGS

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0              SUMMARY OF THE FINDING

5.1              CONCLUSION

5.2              RECOMMENDATIONS

BIBLIOGRAPHY

APPENDIX II

APPENDIX I

 

CHAPTER ONE

INTRODUCTION

The image of insurance has become more sensitive than ever, because we are in are in a world full of uncertainties, all kinds of stresses, growing complexities of business in modern day. Nigeria, coupled with the increasing number of business concerns employing many hands, the importance of an insurance scheme can hardly be underestimate. We can also note that every aspect of human life in any dimension one can think of is subject to one risk or the other.

The risk involved many be against human life or material possession. Insurance is one of the social science which essentially is designed for risk taking. This process of risk taking entails the pooling together of the resources of many individuals in order word, insurance is the management of a pool of risk whereby, the fortunate members of a group assist the unfortunate few who suffer losses.INSURANCE FUND

Adeyemo (1999:12) defined insurance as a social and economic device which provides financial compensation against the effects of any misfortune. This compensation is made from the accumulated contributions of all parties taking part in the insurance scheme. Apart from covering industrials insurance also protects corporate bodies and other business organization from varieties of hazards like burglary, workman compensation ideminity, goods – in – transit, public liability  etc.

Investment refers to that part of a person’s income or firm’s income that is immediately put to use for a certain return of additional income.INSURANCE FUND

The investment of insurance funds in Nigeria is regulated by the insurance decree of 1976 under section 18. the substantial funds held by insures are invested as a funds held by insueres are invested as to earn interest on capital gains. Insurance companies provide funds for investment through the premium they collect from their numerous policy holder. Life insurance companies for instance, invest funds that flow to them from many policy holders thus, becoming important sourc of capital funds for the Nigerian economy. Insurance companies help to provide the state with a steady flow of investment funds which are essential to the community.INSURANCE FUND

The investment of insurance funds helps to contribute profits to the national purse and also provide labour for the working population in a given area. In the investment of insurance funds, the overall aim is to be able to meet liabilities when they fall due, while earning to the highest possible yield without incurring great risk too. In non-life insurance, the major problem for an insurer is the unexpectedly large claims which might force him to sell its investment at long notice, possibly at a loss. As a result of this, insurers therefore, concentrate on investment which can be sold at short notice, such include shares and stocks and avoid those that cannot be sold at short notice.INSURANCE FUND

In life assurance, the safety of the funds as well as very high yields, are of paramount importance because of long-term nature of their liabilities. Long-term investment are useful to life assures.

1.0              BACKGROUND OF THE STUDY

Hallmark Assurance Nigeria company started business as one of the insurance companies on 15th July 1969.The company has since been rendering excellent services to the nation and to the world a large.

During their Annual general meeting which was held in 1993, Hallmark was merged with a sister company, it now become a composite company and transacts both classes of insurance namely: life and non-life.

The company had earlier become a public liability company following its admission into the Nigeria stock exchange. This was as a result of completion of the privation exercie carries out in the company by the east while Technical committee on privatization and commercialization (TCPC) now Bureau for public Enterprises (BPE).INSURANCE FUND

The authorized share cap-ital is N400 million while the issued and fully paid up capital is N337 million, making Hallmark as one of the highest capitalized companies in Nigeria.INSURANCE FUND

With a total base of N1.5 billion, gross premium income of N1.02 billion, claims settled N346.2 milion for the past four years. It is by all account a leading company in Nigeria.

1.1 STATEMENT OF PROBLEMS

 Before proceeding in this study, there is the need to have already focused statement of the problem. In specific terms, the statement of the problem is the key to the design of the research.

 Some of the problems of insurance industry include:

1.      There is the problem of bad debt regarding the non-payment of premium.

2.      In most cases, there is lack of funds to invest due to poor business.

3.      Most instruments which insurance companies requires for an investment are not available to them.

4.      Most insurance companies desire to invest in readily marketable securities but are not easy come by.

1.2 PURPOSE OF STUDY

This research paper is aimed amongst others to identifying the various to which these funds are invested as well as the effects of such investments in the Nigerian economiy: thus, a comprehensive appraisal of the investment of insurance funds in nigeri. To achieve this aims, two insrance companies – Hallmark Assurance Nig. Plc. And Jubilee insurance company Ltd. Have been chosen for an indebth study.

1.3 IMPLICATION OF THE STUDY

This implication of the study is , that investing. Insurance funds boost the economy of any nation. This implies that peoples’ standard of living will be increased as a result of loss prevention activities of insurance company.

1.4 LIMITATION OF STUDY

Due to large number of organization and nature of information involved, the will be limited to only the head offices of insurance companies in Abia state.

Furthermore, the researcher will not make a better choice of insurance companies due to long distance factor, because of he nature of information required, the researcher will be limited to the use of personal interview as a main method of data collection. The respondents may not give prompt answers for security reasons, and they will demand elaborate explanation before answering questions. These, to some extent will hinder the free flow of research work.INSURANCE FUND

1.5 RESEARCH QUESTION

1.      does non payment ineffective investment decision?

2.      Does lack of funds result to ineffective investment decision by insurance firms?

3.      Are the instruments in which insurance companies invest available?

4.      are the marketable securities in which insurance companies invest their fund always available?

1.6 HYPOTHESIS

With respect to the statement of problem and research question, the following hypothesis were stated to help further direct the research study in order to achieve the required purpose.

1.      Ho:      Lack of funds does not result to ineffective

investment decision

            HI:    Lack of funds result to ineffective investment decision

2.      HO:     The marketable securities in which insurance

companies invest on has yielded benefit

            HO:     Non payment of premium does not result to bad debt.

HI:       Non payment of premium results to bad debt.]

1.7 SIGNIFICANCE OF STUDY

The significance of study involves the objective which the researcher intends to achieve, the following objectives make up the significance of study:

a.       To identify the class(es) of funds invested by insurance companies in Nigeria.

b.      To ascertain the effects of the invested funds in Nigeria.

c.       To determine the likely instruments in which insurance companies invest on

d.      To determine how the efficient utilization of the invested funds are insured

e.       To identify the existing regulation / policy guiding the investment of insurance funds.

1.8 DEFINITION OF TERMS

Appraisal:        The act of evaluating the condition of something.

Asset: A property of financial claim which can be easily

converted into cash

Assured:          A person whose life has been assured

Balance sheet: A financial statement prepared so as to exhibit

the assets and liabilities of a company usually at the end of financial year.

Capital gains:  Profit made by selling possessions

Cover:                         Protection provided by the insurance company

Financial investment: This is an investment made in financial

assets such as stocks, bond, shares, debentures, etc.

Fund:               A collection of premium from which losses can

be paid.

Indemnity:                  The placing of an insured in the financial

position after the loss as he was enjoying before.

Insurance:                    A contact between two parties whereby the

Insurer agrees to indemnify the insured upon the happening of an unfortunate event.

Insurance policy: A document issued by an insurance company

containing the terms and conditions of all insurance contract and which are legal evidence of the agreement to insure.

Insured:                       Person purchasing insurance cover.

Insurer:                        Person or somebody authorized to sell

insurance

Investment:     Involves the acquisition durable, productive

facilities (either financial or physical) undertaken in the expectation of future gains.

Lease:              A letting or hiring of tangible assets usually for

a specific period of time.

Premium:                     The payment of an agreed sum whether in one

amount or by installment to an insurance company by the company’s undertaking to indemnify the insured upon the happening of a stipulated contingency.

Real investment:         This is an investment made in tangible assets

such as building, machinery and plant etc.

Sum Insured:   The limit of liability of insurer to pay under a

policy

Underwritten classes: Any excess of claims over payment.

Insurance Premium reserve: money set aside by insurance to

cover potential liabilities of policies still in force at the end of the accounting year.

Risk:                            The uncertainty of loss on expected income.

PTIONS OF STUDY

During the research work, the researcher was able to make the following assumption

The researcher assumed that insurance serves as a device for solving complex social problem.

1.      It was also assumed that insurance companies have a great influence in the investment and financial markets in the world.

2.      It was assumed that non payment of premium by policy holders will lead to the malfunctioning of insurance companies.

3.      The researcher assumed that insurance will eliminate barriers to the establishment of business. It removes the fear of total loss incase of any unfortunate event.

4.      Lastly, it was assumed that greater chance of loss is minimized by insurance companies due to their loss prevention activities.