ANALYSIS OF INSURANCE AWARENESS AND INSURANCE PERFORMANCE IN THE NIGERIAN ECONOMY

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Background Of The Study

The insurance business serves as the backbone of Nigeria's risk management system. Insurance companies are non-bank financial businesses that play an essential role in financial intermediation within the financial system of an economy. It provides financial certainty, acts as a risk management and capital development instrument, and enables quick access to long-term financing for infrastructure projects. The insurance market encourages long-term savings and capital accumulation by serving as a conduit pipe for money to be routed from policyholders to investment opportunities, so mobilizing domestic savings into productive investment (Skipper, 2017; Arena, 2016).

Insurance, according to Omoke (2019), is the act of pooling assets from multiple insured organizations in order to compensate for relatively unusual but profoundly catastrophic losses that can occur to these companies. As a result, the insured entities are protected from risk for a cost, with the fee determined by the frequency and severity of the incident that happened. As a result, it is a commercial venture and a significant component of the financial services sector. According to Adebisi (2016), insurance is a complex economic and social system for dealing with hazards to life and property.

Omoke (2019) defines insurance as "the process of pooling cash from several insured businesses in order to pay for relatively uncommon but profoundly catastrophic losses that can occur to these companies." As a consequence, the insured entities are shielded from risk in exchange for a cost, with the fee determined by the frequency and severity of the incident. As a result, it is a for-profit venture and an important part of the financial services sector. Insurance, according to Adebisi (2016), is a complicated economic and social system for coping with risks to life and property.

As a result, insurance firms receive policyholder premiums, and people who suffer losses are paid from the pool of cash collected. These operations generate a significant amount of revenue for insurance firms, which they subsequently invest in both the money and capital markets. According to Ajayi (2015), insurance is a guarantee of recovery in the case of a loss paid to individuals or businesses that are so concerned about risks that they have made a prepayment to an insurance provider. Insurance, according to Dickson (2015), is designed to safeguard an individual's, company's, or other entity's financial well-being in the case of an unforeseen loss.

It is impossible to overestimate the importance of insurance operations in economic growth and development. Insurance, to some extent, mitigates the impact of risks and positively correlates with growth by covering the exposures of entrepreneurs and other entities and instilling higher risk-taking skills. In this context, a robust and cooperative insurance business is an urgent prerequisite for economic development and progress. Insurance is essential in both the domestic and global economy (Davies, & Richard,2017). According to studies, insurance has made a substantial contribution to the global economy.

 

In addition, the insurance business helps to accomplish what is known as sustainable development. In this context, development is considered to be sustainable when people can earn a livelihood, be healthy, and happy without negatively hurting the environment or other people in the long run (Fink, Haiss, & Sirma 2015). Insurance helps to economic growth in both developed and developing countries, both in terms of industry and geography. Since the insurance business has been linked to sectors such as industrial, transportation, agricultural, mining, petroleum, and commerce on a local and global level, as general human activities for all ages have expanded, so have all forms of risks (Fink, Haiss, & Sirma 2015).

Several studies have shown considerable evidence linking the expansion of the insurance business to economic growth (Ward and Zubruegg, 2018, Webb 2015, Soon 2017). Insurance has increased in popularity as a way for people and organizations to manage their economic risks. The insurance business, according to Ujunwa and Modebe (2017), is the backbone of every country's risk management system since it offers financial stability, is a vital component in the financial intermediation chain, and provides a rapid source of long-term finance for infrastructures. The success of any insurance sector (businesses) is, however, significantly dependant on the extent/level of publicity, which acts as a true way of raising public understanding of its products and services. According to (Levine, 2015), a variety of factors impact the public's acceptance of insurance services, one of which is the level of awareness. As a result, an insurance industry that does not receive appropriate advertising for awareness suffers from low patronage, which leads to bad performance. As a result, the above serves as the foundation for our investigation.

1.2 Statement Of  The Problem

Based on Nigeria's experience with stunted growth, the insurance sector's engagement in mobilizing money for productive investment that may help to growth has not had a significant impact. Ideally, an economy's financial sector should help channel resources from surplus to deficit units for investment, resource allocation, mobilizing savings, and providing risk management and liquidity, all of which the insurance industry plays a significant role in, thereby supporting economic growth. However, the neglect of insurance services in Nigeria has hampered both the performance of this industry and the simplicity with which business may be done in the country. The Nigerian corporate environment has been challenged with a variety of company-threatening challenges, such as a high frequency of insecurity and political instability, prompting the need for insurance services. However, the public's inexperience and unawareness of insurance products has resulted in a low level of growth and development, which should reflect the country's enormous potential. Many factors influence insurance awareness, according to Ajemunigbohun (2016), including trust, publicity, risk aversion, and insurance product selection. Notably, the effective and efficient functioning of the insurance industry is reliant on the amount of patronage, which is determined by publicity or awareness. In Nigeria, the rate of insurance publicity and awareness has not grown, affecting individuals and companies throughout society, including the insurance sector. As a result, an analysis of insurance awareness and insurance performance in the Nigerian economy is required.

1.3 Research Objectives

The study's overall purpose is to carry out an analysis of insurance awareness and insurance performance in the Nigerian economy. The study, on the other hand, was focused on achieving these precise goals:

1. investigate the relationship between insurance awareness and insurance companies’ performance in the Nigerian economy.
2. Access the scope and role of insurance companies as they may influence the country's economic growth and development.
3. Examine the activities of insurance companies to the general public in Nigeria.
4. Proffer solutions that could be useful in solving the identified problems.

1.4 Research Questions

The following research questions were posed in accordance with the study's objectives:

1. What is the role of insurance companies?
2. What are the types of insurance services?
3. What are the factors affecting insurance awareness in Nigeria?
4. What are the factors affecting insurance companies' performance in Nigeria?

1.5 Research Hypotheses

The study will test the validity of the following null hypotheses:

H01: There is no significant positive relationship between insurance awareness and insurance companies’ performance in the Nigerian economy.

H02: There is no significant positive relationship between insurance companies and Nigerian economic growth.

1.6 Significance of the study

This study will be relevant to policy makers, researcher, students and even teacher/lecturers.

This study is noteworthy for several reasons. The first is that it is expected to be valuable to insurance policymakers in Nigeria. Since the first insurance legislation was enacted in 1961, several insurance policies and guidelines have been developed, and new insurance regulations have been enacted to encourage the development and maintenance of insurance consciousness and awareness, as well as to ensure the penetration of insurance in Nigeria. The majority of these programs and regulations have failed to fulfill their intended goals. This study will serve as a wake-up call to policymakers by showing the current level of insurance knowledge in Nigeria, as well as the variables influencing or working against the cultivation of insurance awareness/habit. It will also guide them in the development and execution of proper insurance policies, as well as the enactment of insurance legislation that would bring insurance services closer to the people at the grassroots and instill good insurance consciousness and habits in the Nigerian people. 

This research will also be useful to students and instructors in insurance, actuarial science, banking, finance, and economics, as well as other academics who may like to conduct additional research on relevant themes. The study will provide them with a ready-made database to begin with. The research will also contribute to knowledge in the fields of insurance, banking, finance, and national economic development. It will be especially valuable for foreigners who may need to research the development of the insurance industry in Nigeria as one of Africa's major developing countries, as well as the available investment opportunities. 

The study is also important because of the impact the findings will have on the Nigerian population as a whole. The study will help to increase the level of patronage of insurance products, understanding of the benefits of insurance as a financial solution to risks, and the density of insurance as an efficient savings, credit, and investment mechanism by encouraging the development of a good insurance culture, awareness, and penetration of insurance in the rural and urban sectors. This will result in a rise in the number of insurance policyholders, an increase in the volume of insurance business, gross premium income, an increase in the contribution to the Gross Domestic Product, and an improvement in the population's economic growth and well-being.

1.7. Scope Of The Study

This study covers the analysis of the relationship between insurance awareness and insurance companies’ performance in the Nigerian economy, the scope and role of insurance companies as they may influence the country's economic growth and development, and bringing to knowledge the activities of insurance companies to the general public in Nigeria, as well as making suggestions and recommendations that could be useful in solving the identified problems. Therefore, the study is limited to NICON Insurance Limited, Abuja.

1.8 Limitation Of The Study

During the process and course of this research, a number of problems were encountered, which included the following:

1. Time, finance, and access to books records of the organization and journals, but as much as possible, objectivity was observed.
2. Due to the uniqueness and the controversial nature of the research, we have had to be very subtle in eliciting information so as to avoid prejudicing or giving our blessing to any claim or opinion as they stand publicly. Even then, total cooperation in obtaining information was not possible.
3. Relevant books and literature were not readily available in the school library and the organization was consulted.
4. Where some journals, papers, articles were seen, they were so much of foreign nature that the domestic environment of Nigeria was not depicted.
5. The tense academic environment was a bi-constraint to the research because we had to execute the project and yet contend with the continuous assessment of the policy of the school.

1.9 Operational Definition Of Terms

Insurance: Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.

An Insurance Company: This is a financial institution which UNDERWRITES the risk of loss of, or damage to, personal and business assets (general insurance) and life and limb (life and accident insurance).

Insurance Awareness: This refers to insurance knowledge among the populace.

Economic Growth: This is the process by which a nation's wealth increases over time.

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