CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
Over
the years, the Nigerian insurance industry has been regarded as the largest in
African continent, and is among the largest leading market in the third world
countries. The Nigerian insurance industry is ninety years old this year 2011.
It started from 1921 when the Royal Exchanged Assurance (Nigeria) Plc was
established in Nigeria.
The
administration and accounting of claims were the main operations of the
industry. The re-insurance sector was established in Nigeria with other three
private re-insurance companies between 1983 and 1987 to supplement the
activities of the government owned Nigerian Re-insurance Corporation Plc.
Insurance
industry is a service industry which exists mainly to provide the insuring
public with a system of protection against death and financial loss arising
from accidental and unexpected events. Unlike bank, it operates under its own
peculiar market system.
Though
insurance plays a god role in the social and economic developments of the
country, the truth still remains that the insurance industry has not taken
adequate positive steps to present a good accounting for insurance claims to
the public. There has been several
allegations of malpractices from different quarters against the industry in
recent time.
According
to Igbo (1999), “Malpractices in the insurance industry cannot be quantified
with any degree of accuracy”. This is basically because of the chain of
reaction that is triggered off by even the smallest degree of allegation of
malpractice perpetuated in the insurance industry, the sources notwithstanding.
As
a result, the public have developed a poor and disarted accounting for
insurance claims based on the fact that they (insurers) most often, do not
respond to genuine claims. Moreover, the insurers or the insurance industry
delay in making payments and even refuse or repudiate liability in the
occurrence of the insured risks. There has been incessant conflicts resulting
from non-payment or compensation of the parties concerned by the insurance
industry.
However,
the different methods of perpetuating the ‘act’ differ in scope and dimension,
and have had a negative effect on the image of the insurance industry. The
overall effect is that the greater part of the public have lost confidence in
insurance industry as regards to insuring their lives and properties. Secondly,
the public is denied of new companies that give rise to employment. Thirdly,
the shareholders of insurance industry will not benefit from their investments.
Moreover, the claims of the insured are rather not settled at all, while the
profit of the industry is consequently affected. And at the end, the economy as
a whole suffers.
1.2 STATEMENT
OF THE PROBLEM
The
problem of the insurance industry res solely on clams administration and
settlement; from the data of occurrence of a claim to the date it is issued for
settlement. Many reasons have been advocated for this default which has
culminated into several allegations of malpractice by the industry from the
public, some of these reasons are the inability of the policy holder to comply
with the policy condition by not notifying the insurer on the occurrence of the
insured risk in the policy form. This is assumed to be as a result of
inadequate enlightenment on the scope, functions and limitation of the
insurance industry as well as the basic rules that govern their transactions.
Other
reasons include lack of tremed, educated and honest agents, brokers and loss adjusters.
The insurance due to their seeming fraudulent nature, appears to intentionally
repudiate liability because of minor breach of contact that need no disclosure.
Section 20 of the Nigerian Marine Insurance Act 1961 states, “Every
circumstance is material which would influence the judgment of a prudent
insurer in fixing the premium or determining whether he will have the risk”.
The allegations of the insurer against the
insured ranges from the breach of utmost good faith to forging of documents to
facilitate claims demand, the insurance of non-existent subject matter and
double insurance. The insured on their own parts claim that the inadequate
practices indulge by the insurers such as concealment of some basic facts
necessary for one to enter a contact, delay in claim settlement and alteration
of premium rates.
It
is in the light of the forging that the researcher wish to inquire into the
allegations of malpractice in the industry. And to find out the causes,
consequences and cure of malpractices as alleged to the industry.
1.3 OBJECTIVES
OF THE STUDY
The
purpose of insurance is not really to guarantee against loss occurrence but a
method of assuring that payment or indemnity will be received for losses that
occur as a result of the risk insured against.
Due
to the default in claims settlement by the insurance companies with the amount
and degree of allegation emanating from the different parties to an insurance
contact, this study is therefore aimed at achieving the following objectives:
a. Whether
actually malpractice exists in the insurance industry
b. What
are the sources of this malpractices
c. What
are the functions of the National Insurance Commission (NAICOM)?
d. Are
the malpractices instrumental to the bad image of the insurance industry?
e. If
the malpractice exist, to make suggestions where necessary on how best to curb
the situation
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