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 termed, 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.
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