CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Insurance is a course of productive that enhances the quality of life and ensures the development and survival of all other businesses in general. The main purpose of insurance apart from its basic function is to enhance National development through effective wealth creation, protection and conservation.
In the view of this, Oshinloye et al (2009), shows that the important of insurance to any Nations economy cannot be undermined. He said that no country can experience a meaningful development without the presence of formidable insurance industry, thereby making insurance business in any nation indispensable irrespective of its quota to the gross domestic product (GDP) or its level of awareness among the populace. According to Ezirim and Muoghahu (2002), in a typical market economy of the globe the insurance industry is perceived as an indispensable tool of economic progress, growth and development. It is seen as vital to the well-being of and smooth functioning of a modern economy. Like most financial institutions, is seems as a conduct for mobilizing monetary from the surplus economy agents and channelizing them to more efficient uses.
Oba (2003) wrote that, the performance of the insurance sub- sector is a function of a social economic and political environment in which it operates. In fact, the state of the insurance industry of a country is a reflection of its economy. Insurance remains one of the major indices for the level of development of a nation’s wealth and plays very significant roles in the mobilization of investable resources of an economy.
In developing economics of the world, were financial systems are not highly sophistically insurance provides the necessary bridge between commerce and industry thereby making it possible for continued economic activities. Unfortunately, the Nigeria situation is different. It is no longer news at all to observe that the economy appears to have defiled economy prescriptions which are intended to a positive impact on the well- being of the people.
According to Szablick (2009), Nigerian insurance is now the most developed among Africa. The industry has underperformed its role in the financial sub- sector of the economy, when compared with other parts of the world. The total insurance shared of the world market is only 0.01% compared to South Africa with 0.86% several factor account for the under performance of the insurance industry, such as low capitalization, high receivable and poor public perception of the importance of the insurance for business.
Insurance companies are established to provide financial security to their policy holders, through the pooling and investment of premiums, out of which those who suffer unexpected losses are indemnified.
In Nigeria, the returns on investment insurance funds lay behind the rate of inflation in the economy, there is market instability due to inadequate information in the market, which made it difficult for insurance companies to make a long term planning and make optimal use of fund for investment.
Based on the fore-going this research investigates the contribution made by the insurance industry on the economic growth and development of Nigeria. Possible factors affecting the impact of insurance on the economy will be reviewed.