CHAPTER ONE

1. INTRODUCTION

1.1   BACKGROUND OF STUDY

Insurance law regulates insurance conditions and methods as well as supervision of insurance activities. The insurance industry is a highly specialized industry that gives greater security to the fortunes of common people and among the whole society. It is one of the financial institutions in Nigeria today that aid economic development and growth.

Egeria (1996) describes insurance as handmade of commerce which plays a vital role in the going concern of humans as an economic animal. Chikeleze and Echekoba (2008), defined insurance as a contract whereby one party, called the insurer, in return for a consideration, called the premium, undertakes to pay the other party, called the insured a sum of money or its equivalent in kind upon the happening of specified event that is contrary to the interest of the insured.

The role of insurance sector in mitigating sudden and devastating occurrences thereby stimulating economic development cannot be over emphasised. Both in developed and developing countries, insurance sector contributes to economic development both sectorally and geographically. Since insurance sector has links to sectors such as industrial, transportation, agriculture, mining, petroleum and trade both locally and internationally, its relevance to general human activities has continued to grow for all ages as all categories of risks increase. Recently, several interesting lines of research have begun to map the specific contributions of insurance to the economic development processes as well as to the wellbeing of the poor. In particular, several studies have focused on the relationship between insurance and economic development.

However, no consensus has emerged on the impact of insurance development and economic development For example, studies such as Arena (2006), Haiss and Sumegi (2008), Mojekwu et al. (2011), and Pen-Fen et al. (2011) found that insurance had positive impact on economic development However, study by Webb et al. (2005) showed that insurance had no significant positive effect on economic development. The number of empirical studies is relatively small (for survey sees Levine, 1997; Thiel, 2001; Ang, 2008). Indeed, most existing studies on insurance-growth nexus are focused on the developed and few industrializing countries. In the developing countries, not many studies have focused on the insurance sector probably due to the small size of the sector before the reforms in the early 80s.

Indeed, few studies to our knowledge have been published on the insurance-growth nexus in Nigeria. These are, no, doubt big gaps in the literature that needed to be filled. It is expedient to inquire not only into the growth of the insurance sector in Nigeria but also how the sector has impacted economic development. This is why the main objective of this article is to examine both the short and long run relationship between insurance and economic development in Nigeria.

Economic Development is the expansion of capacities that contribute to the advancement of society through the realization of individual, firm and community potential. Economic Development is measured by a sustained increase in prosperity and quality of life through innovation, lowered transaction costs, and the utilization of capabilities towards the responsible production and diffusion of goods and services. Economic Development requires effective institutions grounded in norms of openness, tolerance for risk, appreciation for diversity, and confidence in the realization of mutual gain for the public and the private sector. Economic Development is essential to creating the conditions for economic growth and ensuring our economic future.

1.2   STATEMENT OF THE PROBLEM

        The level of growth and development which should be commensurate with Nigeria’s huge potentials has not been attained and may never be attained since independence. Several factors have been advocated for this lack of development of the Nigerian economy and among such notable factors is inadequate funding for investment purposes which have limited insurance penetration in the economy. Finally, several researches have been carried out but not even a single research has been carried out on insurance laws as a tool of economic development in Nigeria.

1.3   AIMS AND OBJECTIVES OF STUDY

        The main aim of the study is to examine insurance law as a tool of economic development. Other specific objectives of the study include;

1. to determine the effect of insurance law on economic development of Nigeria.
2. to determine the factors affecting insurance law and its effect on economic development of Nigeria.
3. to determine the extent to which insurance law affects economic development of Nigeria.
4. to proffer possible solutions to the problems.

1.4   RESEARCH QUESTIONS               

1. What is the effect of insurance law on economic development of Nigeria?
2. What are the factors affecting insurance law and its effect on economic development of Nigeria?
3. What is the extent to which insurance law affects economic development of Nigeria?
4. What are the possible solutions to the problems?

1.5   STATEMENT OF RESEARCH HYPOTHESIS

H0:   Insurance law has no significant effect on economic development of Nigeria.

H1:      Insurance law has a significant effect on economic development of Nigeria.

1.6   SIGNIFICANCE OF STUDY

        The study on insurance law as a tool of economic development will be of immense benefit to the entire Nigeria in the sense that it will serve as an eye opener to policy makers by revealing the current level of insurance awareness and factors influencing or militating against the cultivation of insurance awareness/habit in Nigeria. It will also guide them in the formulation and implementation of appropriate insurance policies and enactment of insurance laws that will bring insurance services nearer to the people at the grassroots and inculcate good insurance consciousness and habit into the Nigeria populace. It will also be of immense benefit by encouraging the development of good insurance culture, awareness and penetration of insurance in the rural and urban sectors, the study will help to increase the level of patronage of insurance products, understanding of the benefits of insurance as a financial solution to risks, and the deepening of the density of insurance, and as an efficient savings, credit and investment mechanism. Finally, the study will contribute to the body of existing literature and knowledge to this field of studies and basis for further research.

1.7   SCOPE OF STUDY

        The study on insurance law as a tool of economic development is limited to Nigeria.

1.8   LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9   DEFINITION OF TERMS

Insurance Law                Is the practice of law surrounding insurance, including insurance policies and claims.

Economic Development                 Is the growth of the standard of living of a nation’s people from a low-income (poor) economy to a high-income (rich) economy.