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Journal for Studies in Management and Planning
Available at https://pen2print.org/index.php/jsmap/
ISSN: 2395-0463
Volume 04 Issue 11
November 2018
Available online: https://pen2print.org/index.php/jsmap/ P a g e | 81
Factors Affacting the Growth of Life Assurance Business in Nigeria
SOLOMON DAVID PERE
solodavid4real@yahoo.com
Department of Banking, Finance and Insurance
Faculty of Management Sciences, Niger Delta University
AGBAJI BENJAIN CHUKWUMA
agbajiben@gmail.com
Department of Insurance and Risk Management
Enugu State University of Science and Technology, (ESUT)
Abstract
This research work examined the factors affecting the growth of life assurance business in
Nigeria. The research focused on the selected insurance companies in Enugu metropolis.
Descriptive research design was used to carry out this study. A sample size of 100 was
derived from a total population of 150 staff using Taro Yamane sampling formula. Data
analyzed in this study were gotten from a well structured questionnaire and data analysis .
Where Z test statistical model was utilized in testing the research hypotheses. Based on
analyzed, it was discovered that life assurance business has positive impact on individuals
and the growth of Nigerian economy. That the patronage level of life assurance business in
Nigeria is still very low, that life assurance business despite its tremendous benefits, has not
significantly contributed to the growth of Nigerian economy due to some challenges which
include; under-developed domestic financial market, poor capital base of Nigerian
insurance companies, poor image Nigerian insurance industry, poor awareness of the
benefits of life assurance, economy instability, poor innovation and new product development
to mention just a few. The following recommendations were made that there is need for
insurance practitioner to periodically develop new product to meet the insurance need of
Nigerians; awareness campaign should be carried out about the benefits of life assurance;
genuine claims should be promptly settled; competent should be employed among other
issues.
Keywords: life Assurance Business, Benefits of life assurance and insurance companies
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Journal for Studies in Management and Planning
Available at https://pen2print.org/index.php/jsmap/
ISSN: 2395-0463
Volume 04 Issue 11
November 2018
Available online: https://pen2print.org/index.php/jsmap/ P a g e | 82
Introduction
According to Nwite (2007), the development of life assurance business can be traced as far
back as 1583. It was in this year that we have the first evidences of life assurance contract
know today. A policy was taken on 18th June 1583 on the life of WILLIAM GIBONS for a
sum of $38 2 the contract was for twelve months and the Money was to be paid if g Gibons
died within the twelve months. He did infact died on 8th May 1584. After a slight dispute
over whether twelve moths meant twelve calendar months, the money was paid.
The short-term form of policy taken by William Gibson was the type of life assurance policy
issued in those early days. The provision of life assurance continued almost unaltered for the
next century with the short-term policy mentioned above, a form of mutual association
similar I design to the ancient burial societies where members contribute to a common fund
out of which payments were made on the death of members (Nwite, 2007)
Olufawo (2005) states that, “today, we have thousands of life assurance polices issued in
Nigerian in form of whole life assurance endowment assurance, term assurance and joint life
assurance.” interestingly in advanced countries, life assurance business has become the greatest
area of investment because it even encourages savings.
According to Popoola (2011), life assurance is a contract between an insured and an insurer,
Where the insurer promises to pay a designated beneficially a sum of money (the benefit) upon
the death of the insured person. Depending on the contract, other events such as terminal illness
or critical illness may also trigger payment. The policy holder typically pays a premium either
regularly or as a lump. Sum other expenses (such as funeral expenses) are also sometime included
in the benefits.
The primary objective or aim of life assurance is to provide assurance guarantee (financial
protection) against the happening of an insured event which could either be death of the life
assured or the expiring of specified period. Life assurance in the first instance existed to pay the
sum insured in the event of policy holder’s death. This is the basic theory of life assurance, but
the investment aspect of it has tended to overshadow the primary purposes of protection against
premature death (Nwite, 2007). In Nigeria, pension business was handled for many years by
insurers until a group sold the idea of a contributory pension scheme to the former scheme) were
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Journal for Studies in Management and Planning
Available at https://pen2print.org/index.php/jsmap/
ISSN: 2395-0463
Volume 04 Issue 11
November 2018
Available online: https://pen2print.org/index.php/jsmap/ P a g e | 83
pensioners could not got their pensions (benefits) after queuing for day led to the collapse of the
old scheme (Nwite, 2007).
The repeal of the old pension Act of 1979 and consequent amendment of the Nigeria social
assurance Trust Fund Act of 1993 brought in the new pension Reform Act, 2004. Today, the
pension fund has grown tremendously and is in excess of N1.6 Trillion, about 10 times the
premium of N164.5 Billion recorded in the assurance sector in 2008 (Fola, 2012). In the present
dispensation, the sector stands the chance to get boosts from some of the statutory polices set for
enforcement. They are employers and annuity opened for voluntary patronage by pensioners. The
Workmen’s compensation Decree of 1987provided cover for permanent or partial disability,
accident, sickness and death of workers arising in the course of their employment. Section 40 of
the Act compelled majority factory owners to have this policy for all their employees, regarded as
workmen.
Section 9 (3) of the Act states that, “employers shall maintain life assurance policy in favour of
the employee for a minimum of three times annual total employment of the employee, under the
group life scheme. Section 4 of the pension Act 2004 provides that on attaining the age of 50
years or at retirement age, which is stipulated by the employees’ organizations, a pensioner’s
RSA shall not be withdrawn but shall be utilized either as programme withdrawal or as annuity.
The Act delegates the duty of providing the annuity services to the life insurers, but their share of
the fund depends on their ability to win the confidence of retires (Aneke, 2006).
According to Ademeso (2013), life assurance business is still developing in Nigeria. What the
operators had done in the past was to sell the same traditional products until recently when new
products started becoming viable. He noted that though life business is still low in the country, it
is not worth comparing the Nigerian economy with others due to certain factor. Some of the
foreign economics with developed assurance sector, he says include pension accounts as parts of
their industries’ (insurance industries) gross figure, which is not the same in Nigerian. He points
out that, “Pension contribution in Nigeria as at report in 2012 was about N1.6 Billion; so, imagine
that if this is part of the figure we record in insurance, we will not be talking about the kind of
low figure that we constantly talk about in life business”.
According to 2008 statistic world’s life premium stood at $2.5trillion from a total of $437trillion,
which African’s record revealed a life premium of $37.9billion from a total premium of
$54.7billion. In Nigeria, the life arm raked in 40.19billion out of a total premium of $1.24 billion
in 2012. In developed economics that have strong insurance industries, the life arm usually
derived the sector by contributing the biggest premium amount. For instance, South Africa, the
