CHAPTER ONE

1.0 BACKGROUND OF STUDY

The saying “HAD I KNOWN”, is a frequent question of the human race. The phrase can be induced or possibly eliminated if human beings can foresee or visualize what would happen in future. Life itself is full of risks and uncertainties abound. Every individual faces risks, either of personal nature or business nature. A businessman for instance faces the risk of his goods being damaged by fire while his dependant may suffer loss of income through his death. Equally, a manufacturing firm runs the physical risk of possible loss of goods by fire or theft or such other technical risk as loss of trade as a result of government policies, loss of trade of trade due to change in fashion, loss of profit as a result of fire outbreak. A car owner for instance stands to face the possible theft of his car and damage through accident. Efforts can be made to avoid some of these risks. Accidents can be avoided if proper precautions are taken. An individual can avoid airplane disaster or crash by not engaging in air travel no matter how careful one can be, some form of danger still hangs around. Some risks are inherent in nature or life itself and cannot be avoided. For instance, men are mortal and must die, when complete avoidance is impossible, man attempts to reduce or possibly assumes risks. A thatched roof house is a greater fire risk than one with tiled roof. Many people accept the small risk of building house of standard construction than that of thatched roof. Here the risk has not been avoided but reduced. Risk assumption may also arise out of ignorance or may even be an intentional art where the degree of expose risk is slight or possible loss is minimal. Assumption is even possible where a deliberate provision has been made for consequences of loss happening. Many individuals would however prefer to shift or spread the risk where possible. It is here that Social Economic Services rendered by Insurance companies will be appreciated. Insurance has been described as a social device by which the Insured agrees to transfer all or part of his risks to the Insurer who agrees to indemnify him when the risk insured against happens on the payment of the premium. The basic role of insurance is to create a common pool into which the individual or organization contribute premium commensurate with the degree of risk for which insurance is sought. The members of the pool who are unfortunate to suffer loss are compensated with the contributions of others in the pool. In this way, the larger society is made to be made to be responsible for providing compensation for the unfortunate few who unavoidably incur financial losses through the operation of certain mishap. It is therefore obligatory on the part of the insurer to compensate the insured (their client) whenever, is loss on the item insured against as long as the insured abides to the conditions stated in the contract or policy. Thus, the modern society retain insurance as the method of solving the risk associated with their activities, in that it helps to soften the financial blow that would have resulted. When the public feels that this function is not being carried out the industry may suffer or face a possible collapse.