CHAPTER ONE 1.0     INTRODUCTION

It is obvious that in every economy the financial system is the most important sector. Infact, it is upon this back drop that the financial sector is vigorously subjected to serious regulation in every monetary economy. To this end, the insurance industry belongs to the financial sector; hence they must abide by the government regulations in cause of caring out their operations. Therefore, if they must perform their expected role of risk transferring mechanism, there is therefore, need for such regulation which aimed at distortions, eroding of the public confidence, instilling discipline and soundness in its operation.

On this note, it is the business of this work to ascertain the impact of government regulations on the operation of insurance industries in Nigeria.

1.1     BACKGROUND OF THE STUDY

Insurance as a risk transfer mechanism is as old as the human race. Risk had even existed therefore human race (in the Garden of Eden). In the same vein, the transfer of risk was identified first on the date Adam and Eve sinned. Both persons disowned the blame and shifted it to someone else. This was the pointer to the fact that man certainly does not like the burden of risk bearing and thus desires to transfer it.

Ever since, man has devised several ways to gain relief from losses when they occur. On the traditional science, people have greatly obtained relief from losses through charitable organizations, friendship societies, clubs, religious groups and so on.

Despite this primordial desire to transfer risk, the organized commercial act of risk transfer is a very recent development.  The history of insurance is somehow distorted because of the different development of various classes of insurance (marine, fire, life and accident).

Modern marine insurance started about the beginning of the fourteenth century. In 1563, the Antwerp merchant (37 English underwriters) insured three ships. Whereas, some scholars have it that fire insurance started in German cities under a municipal arrangement. Fire insurance arrangements in both U.K. and U.S.A emerged after devastating fire outbreak.

In U.K, it was on Friday 2, September 1666 when an oven in the king’s bake shop became over heated and resulted in a fire that blazed London for five days and nearly destroyed the whole city. And in U.S.A there was a fire outbreak in Boston in 1630 and another one in 1653.

Life insurance may have been the next class after marine insurance development. The earliest recorded life insurance was one granted by sixteen individual underwriters on done 18th 1583, on the life of William Gibbons.

1.2     STATEMENT OF THE PROBLEM

This study aims at appraising the impact of government regulations on the operation of insurance industry in Nigeria. But then, the problem lies on how best government regulations could control the policyholders as well as how the nation can derive maximum benefits from the activities of the insurance industry.

Again how the government regulation could protect the interest of beneficiaries of retirement and pension schemes, and how such scheme could be adequately insured with an insurance company dully registered.

1.3     PURPOSE OF THE STUDY

One cannot really dispute government regulation. It is imperative to note also the impact of government regulation on the operation of insurance industry in Nigeria.

Bearing this in mind, the study would help to accomplish the followings:

       To critically evaluate the impact of government regulation on the operation of insurance industry in Nigeria.

       The benefit of government regulation to the insurance industry and to the Nation.

1.4     RESEARCH QUESTION

1. Does insurance market really exist in Nigeria?
2. What constitutes insurance products/services?
3. Does government play any role in the insurance industry?
4. Is it true that government regulation guide the insurance industry?
5. Is there any justification for government to regulate the activities of insurance industry?
6. Of what significant is NAICOM, to the insurance industry?
7. Does the purchase of insurance products being inhibited by any factor(s)?
8. Do you agree that risk acceptance is undertaking according to policies?
9. Has government regulation make any impact on the operation of insurance industry?
10. Has insurance industry recorded any growth over the years.
11. Does the present of insurance industry have any impact on the Nigerian economy?
12. Does government regulation benefits the insurance industry in any way?

1.5     RESEARCH HYPOTHESIS

H1:    There is a co-relationship between effective regulation and the operation of insurance industries.

Ho:    Effective regulations would enhance the productivity of insurance services.

1.6     SIGNIFICANCE OF THE STUDY

The significance of this study is to evaluate the impact of government regulations on the operation of insurance industry in Nigeria. A study of this nature is to enable the government to concentrate on the activities of the insurance industries to take appropriate measures so that the insurance companies can execute their aim effectively.

This study enlighten the government on how to monitor the regulation of insurance industry.

1.7     SCOPE/LIMITATION OF THE STUDY

The researcher as a result of limited time factor and the financial constraints involved in putting this project work together, decided to carry out his research within Port Harcourt and Bori, internet, library and other materials were used.

Often times, the researcher was faced with one problem or the other, chiefly among them are:

1. Conservative attitudes of some insurance industries to provide information.
2. Inadequate fund to carry out the research work and obtaining of the research materials.
3. Time factor, as the time frame for this work is rather short.

1.8     DEFINITION OF TERMS

CONTRACT OF INSURANCE: It is an agreement between the insurer and the insured, whereby the insurer in consideration of money paid to him by the insured, called the premium, promises to indemnify the insured on the happening of the event insured against.

INDEMNITY: According to Kanu, N.O.N (2011), indemnity is the restoration of the insured to the same financial position he/she was before the occurrence of the loss.

INSURED: A person who buy an insurance policy to cushion off a loss or damage.

INSURER: A limited liability company or society licensed to issue insurance policies.

PREMIUM: this is the monetary consideration paid by the insurer to the insured.

ASSURED: A person who takes up a life insurance cover. This term is also in marine insurance.

POLICY FORM: This is a document produced by the insurer which set out the terms of the contract. The policy is not the contract, it is merely written evidence of it.

INSURANCE SERVICE: This is an intangible goods offer to the public by the insurance company.

PROPOSAL FORM: This is a drafted questionnaire from the insurer to elicit information from a proposer of a risk.

PROPOSER: A prospective buyer of insurance policy or a person making offer to an insurer.

POLICY HOLDER: The person who bought an insurance policy.