Role of insurance middle-man in the growth and development of insurance business

Project Abstract

The role of insurance middle-men in the growth and development of the insurance business is a crucial aspect to consider in the insurance industry. Insurance middle-men, also known as intermediaries, play a significant role in facilitating the smooth operation of insurance transactions between insurance companies and policyholders. This research aims to explore the impact of insurance middle-men on the growth and development of the insurance business. Insurance middle-men act as the link between insurance companies and potential customers, providing valuable services such as risk assessment, policy selection, and claims assistance. They help in educating customers about various insurance products and guiding them in choosing the most suitable coverage based on their needs and preferences. By providing personalized services and expert advice, insurance middle-men enhance the overall customer experience and satisfaction, thus increasing the likelihood of customers purchasing insurance policies. Furthermore, insurance middle-men contribute to the growth of the insurance business by expanding the market reach of insurance companies. Through their extensive networks and relationships with diverse customer segments, insurance middle-men help insurance companies tap into new markets and attract a broader customer base. This increased market penetration not only drives business growth but also fosters competition and innovation within the insurance industry. Moreover, insurance middle-men play a vital role in risk management and underwriting processes. They assist insurance companies in assessing risks associated with potential policyholders, thereby helping insurers make informed underwriting decisions. By leveraging their industry expertise and knowledge, insurance middle-men enable insurance companies to mitigate risks effectively and optimize their underwriting strategies. Additionally, insurance middle-men serve as a valuable source of feedback and market insights for insurance companies. They provide valuable data and feedback on customer preferences, market trends, and competitive dynamics, which insurance companies can leverage to enhance their product offerings and marketing strategies. By acting as a bridge between insurance companies and the market, insurance middle-men help insurers stay responsive to changing market dynamics and customer needs. In conclusion, the role of insurance middle-men in the growth and development of the insurance business is multifaceted and essential. By providing critical services such as customer education, market expansion, risk management, and market insights, insurance middle-men contribute significantly to the overall success and sustainability of the insurance industry.Understanding and leveraging the unique capabilities of insurance middle-men can help insurance companies drive business growth, enhance customer value, and stay competitive in the dynamic insurance marketplace.

Project Overview

<p> </p><p><b>INTRODUCTION<br></b></p><p><b>1.1 &nbsp; &nbsp; <br></b><b>Background<br>of the study</b></p><p>The<br>insurance industry is a highly specialized industry that gives greater security<br>to the fortunes of common people and among the whole society. It is one of the<br>financial institutions in Nigeria today that aid economic development and<br>growth. Egeria (1996:5) describes insurance as handmade of commerce which plays<br>a vital role in the going concern of humans as an economic animal. Chikeleze<br>and Echekoba (2008:186), defined insurance as a contract whereby one party,<br>called the insurer, in return for a consideration, called the premium,<br>undertakes to pay the other party, called the insured a sum of money or its<br>equivalent in kind upon the happening of specified event that is contrary to<br>the interest of the insured. The modern insurance business was introduced into<br>Nigeria in the late 20th century by the British merchant, who established<br>trading posts on the west coast of Africa. Before the Advent of the European to<br>Nigeria, organizations similar in purpose to insurance company were in<br>existence known as traditional social insurance scheme. They include the Isusu,<br>Social clubs, Age grade, etc, According to Okonkwo (1998:6), the first<br>insurance company to register its presence in Nigeria was Royal Exchange<br>Assurance with its office in Lagos in 1921. The enactment of workman<br>compensation ordinance in 1942 and the Road traffic Act of 1945 both<br>contributed to the meaningful takeoff of insurance industry in Nigeria. The<br>need for control and timely intervention of government led to the formation of<br>the National Insurance Corporation of Nigeria (NICON). In 1986, because of the<br>Structural Adjustment Program (SAP) brought about the emergence and<br>proliferation of financial institution especially Deposit taking institution<br>and insurance companies. Insurance capital base was raised from N1-N2million<br>then. Fallout from this event was that only 57 out of 152 insurance companies<br>qualified for registration. This was coupled with tighter control over the<br>industry.The importance of insurance in modern economies is unquestioned and has<br>been recognized for centuries. Insurance “is practically a necessity to<br>business activity and enterprise.” But insurance also serves a broad public<br>interest far beyond its role in business affairs and its protection of a large<br>part of the country’s wealth. It is the essential means by which the “disaster<br>to an individual is shared by many, the disaster to a community shared by other<br>communities; great catastrophes are thereby lessened, and, it may be,<br>repaired.” Insurance is an essential element in the operation of sophisticated<br>national economies throughout the world today. Without insurance coverage, the<br>private commercial sector would be unable to function. Insurance enables<br>businesses to operate in a cost-effective manner by providing risk transfer mechanisms<br>whereby risks associated with business activities are assumed by third parties.<br>It allows businesses to take on credit that otherwise would be unavailable from<br>banks and other credit-providers fearful of losing their capital without such<br>protection, and it provides protection against the business risks of expanding<br>into unfamiliar territory – new locations, products or services – which is<br>critical for encouraging risk taking and creating and ensuring economic growth.<br>Beyond the commercial world, insurance is vital to individuals. Lack of<br>insurance coverage would leave individuals and families without protection from<br>the uncertainties of everyday life. Life, health, property and other insurance<br>coverage’s are essential to the financial stability, well-being and peace of<br>mind of the average person. Insurance is a financial product that legally binds<br>the insurance company to pay losses of the policyholder when a specific event<br>occurs. The insurer accepts the risk that the event will occur in exchange for<br>a fee, the premium. The insurer, in turn, may pass on some of that risk to<br>other insurers or reinsurers. Insurance makes possible ventures that would<br>otherwise be prohibitively expensive if one party had to absorb all the risk.<br>Advancements in medicine, product development, space exploration and technology<br>all have become a reality because of insurance.Insurance intermediaries<br>facilitate the placement and purchase of insurance, and provide services to<br>insurance companies and consumers that complement the insurance placement<br>process. Traditionally, insurance intermediaries have been categorized as<br>either insurance agents, insurance middle man or insurance brokers. The<br>distinction between the two relates to the manner in which they function in the<br>marketplace.Insurance agents are, in general, licensed to conduct business on<br>behalf of insurance companies. Agents represent the insurer in the insurance<br>process and usually operate under the terms of an agency agreement with the<br>insurer. The insurer-agent relationship can take a number of different forms.<br>In some markets, agents are “independent” and work with more than one insurance<br>company (usually a small number of companies); in others, agents operate<br>exclusively – either representing a single insurance company in one geographic<br>area or selling a single line of business for each of several companies. Agents<br>can operate in many different forms – independent, exclusive, insurer-employed<br>and self-employed.</p><p><b>1.2 &nbsp; &nbsp; <br></b><b>STATEMENT<br>OF THE PROBLEM</b></p><p>Insurance<br>industry is generally seen as the backbone of any country‘s risk management<br>system, since it ensures financial security, serves as an important component<br>in the financial intermediation chain, and offers a ready source of long term<br>capital for infrastructural projects. Omar (2005) argues that the insurance<br>industry mitigates the impacts of risks and positively correlates to growth as<br>entrepreneurs cover their exposures, otherwise risk-taking abilities are<br>hampered. Insurance also promotes the growth of small-scale and large-scale<br>firms as it provides stability by allowing large and small businesses operate<br>with a lesser risk of volatility or failure. Insurance is also very important<br>to the financial system. In collecting relatively small premium from the<br>insured in the economy, insurers are able to pull together large funds that<br>could be invested for short and long term periods (Obasi, 2010). Such long-term<br>funding of the economy is very critical for economic growth, and the deepening<br>and broadening of the domestic financial system. Amidst the tremendous benefit<br>of insurance policy, most firm or individuals would not have been able to tap<br>into the stream of services offered by these insurance company without the<br>services of the insurance middle man. It is on this backdrop that the researcher<br>intends to investigate the role of insurance middle man in the growth and<br>development of insurance business in Nigeria. </p><p><b>1.3 &nbsp; &nbsp; <br></b><b>OBJECTIVE<br>OF THE STUDY</b></p><p>The<br>main objective of this study is to investigate the role of insurance middle-man<br>in the growth and development of insurance business; specific objective are:</p><p>i) &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<br>To investigate the role of insurance<br>middle-man in the growth of insurance business</p><p>ii) &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<br>To ascertain the relationship between<br>insurance middle-man and the growth of insurance company</p><p>iii) &nbsp; &nbsp; &nbsp; &nbsp; <br>To ascertain the relationship between<br>insurance middle-man and the policy holder/insured</p><p>iv) &nbsp; &nbsp; &nbsp; &nbsp;<br>To proffer suggested solution to the<br>identified problem</p><p><b>1.4 &nbsp; &nbsp; <br></b><b>RESEARCH<br>HYPOTHESES</b></p><p>To<br>aid the completion of this study, the following hypotheses were formulated by<br>the researcher:</p><p><b>H0:</b>insurance<br>middle-man does not play any significant role in the growth of insurance<br>business</p><p><b>H1:</b>insurance<br>middle-man does play a significant role in the growth of insurance business</p><p><b>H02:</b>there<br>is no significant relationship between insurance middle-man and the growth of<br>insurance business</p><p><b>H2:</b>there<br>is a significant relationship between insurance middle-man and the growth of<br>insurance business</p><p><b>1.5 &nbsp; &nbsp; <br></b><b>SIGNIFICANCE<br>OF THE STUDY</b></p><p>It<br>is believed that at the completion of the study, the findings will be of great<br>importance to the management of insurance company as the study seek to<br>enumerate the importance of insurance middle-man in the growth of insurance<br>business in Nigeria, the study will also be of benefit to the insurance<br>middle-men as the study seek to enumerate their role in risk management and<br>their importance to the policy holders. The study will also be of great<br>importance to researchers who intend to embark on a study in a similar topic as<br>the findings and literature in the study will serve as a reference point. Finally the study will be useful to teachers,<br>students, academia’s researcher and the general public.</p><p><b>1.6 &nbsp; &nbsp; <br></b><b>SCOPE<br>AND LIMITATION OF THE STUDY</b></p><p>The<br>scope of the study covers the role of insurance middle-man in the growth and<br>development of insurance business, but in the cause of the study, there were<br>some factors which limited the scope of the study;</p><p><b>AVAILABILITY OF RESEARCH MATERIAL:</b><br>The research material available to the researcher is insufficient, thereby<br>limiting the study &nbsp; &nbsp; &nbsp; </p><p><b>TIME:</b>&nbsp;The time frame<br>allocated to the study does not enhance wider coverage as the researcher has to<br>combine other academic activities and examinations with the study.</p><p><b>FINANCE:</b><br>The finance available for the research work does not allow for wider coverage<br>as resources are very limited as the researcher has other academic bills to<br>cover</p><p><b>1.7 &nbsp; &nbsp; <br></b><b>DEFINITION<br>OF TERMS</b></p><p><b>Insurance agent</b></p><p>Insurance<br>agents are, in general, licensed to conduct business on behalf of insurance<br>companies. Agents represent the insurer in the insurance process and usually<br>operate under the terms of an agency agreement with the insurer.</p><p><b>Insurance Brokers</b></p><p>Insurance<br>brokers typically work for the policyholder in the insurance process and act<br>independently in relation to insurers. Brokers assist clients in the choice of<br>their insurance by presenting them with alternatives in terms of insurers and<br>products</p><p><b>Insurance</b></p><p>Insurance is a means of<br>protection from financial loss. It is a form of risk management primarily<br>used to hedge against the risk of a contingent,<br>uncertain loss</p><p><b><br>Middle-man</b></p><p>An<br>intermediary or agent between two parties; especiallya dealer, agent, or company intermediate between the<br>producer of goods and the retailer or consumer.</p><p><b>1.8 &nbsp; &nbsp; <br></b><b>ORGANIZATION<br>OF THE STUDY</b></p><p>This<br>research work is organized in five chapters, for easy understanding, as follows<br>Chapter one is concern with the introduction, which consist of the (overview,<br>of the study), statement of problem, objectives of the study, research<br>question, significance or the study, research methodology, definition of terms<br>and historical background of the study. Chapter two highlight the theoretical<br>framework on which the study its based, thus the review of related literature.<br>Chapter three deals on the research design and methodology adopted in the<br>study. Chapter four concentrate on the data collection and analysis and<br>presentation of finding. Chapter five<br>gives summary, conclusion, and recommendations made of the study.</p> <br><p></p>