MANAGEMENT OF LIFE ASSURANCE FUND IN NIGERIA INSURANCE INDUSTRY (A CASE STUDY OF UNION ASSURANCE LIMITED)
During the course of the project the research review some write up concerning management of it life assurance funds in Nigeria insurance industry I look time to go through many newspapers, magazines. Internet browsing etc.
The except below are some of the reviews:
Oyejidand Soyode (1976) investigation the patterns, growth and problem of insurance company’s investment in Nigeria., the objective of the work was to look at the insurance companies in general and the life insurance companies in particular as investors noting their characteristics, and their potentials in the Nigeria capital market. The approach was basically library research presented with descriptive statistical table and percentages.
The study underlined “the need of the life insurance companies for long- term securities for high- yield ,even risky, industrial ordinary stock: and its non- need for marketable short-term securities”. The author also observed large and growing size of investible funds.
Akintola Bello (1986) in his write up the investment behavior of insurance companies in Nigeria said, the fact that insurance companies as financial institution play an important role, not only in the mobilization of contractual saving but also in the efficient allocation of capital, the author purposed to examine the behavior of insurance companies as institutional investor in Nigeria. his immediate interests in the study were: what governs the investment behavior of insurance companies? What are the emerging pattern of behavior and the changes (if any) that have occurred over the years? What are the prospect of change that indicted for policy direction? The analysis concluded by noting the great variation in the asset holdings of life and non-life insurance companies, owing to the need to march asset with the maturity structure of their liabilities.
2.2 HISTORICAL DEVELOPMENT OF THE CASE STUDY
Union assurance company limited is an associate of union bank of Nigeria plc. The company was registered as an insurer on November 18, 1993 and actually commences business in 1998. At the time, it was the first attempt by any bank to venture into universal banking, the board of the union assurance company is no doubt the function types and it is dominated by expert and professional. The board is headed by managing director and chiefs executive officers in the person of Mr. Godwin EjembiOdah and in Enugu Zona Mr. Onu Emmanuel. This organization is divided into five (5) departments.
- Administrative and business development department
- Life operations department
- Account finance and compliance department
- Information technology (IT) department
- Auditor department
With an authorized capital of N10 Billion And Paid Up Capital N 5.2 billion the company provides customized and efficient risk management solutions as well as supporting individual and group with customized financial service in life insurance and general business. The organization however is divided into zonal and head offices in order to decentralized operational levels.
2.3 History Of Life Assurance Program
Before 1960 many Nigeria shunned the idea of effecting life assurance cover. They felt generally that the insurance agents were wishing them bad-luck premature death and therefore would never have anything to do with insurance and their agent (Amordi O 1997)
However, life assurance as practice today is part of the nation colonial heritages obviously, the British introduced life assurance into Nigeria hence the practice closely follows, the British pattern. The earliest colonial insurance interest in Nigeria was directed to the general insurance of the goods and cargo. Few life business which tricked in were referred to British home officers in London for processing. Only affluent could afford then because it was considered as enormous risk to insure person living in the tropics and cost of providing such life cover was very expensive and uneconomical. (Iijadu J 1989).
With independent in 1960, life assurance started to change insurance industry in Nigeria start developing as a join venture between Nigeria and expatriates. It therefore became the strong to hold business in Nigeria recently, people started seeing need for insurance, companies see it as risk management frame work at the same time, the Nigeria life and pension consultant together with the Nigeria universities management consultant indicated the development of group life and pension scheme in Nigeria.
2.4 Meaning and Purpose Of Fund
Oxford advance learner dictionary defined “fund” as sum of money saved or made available for a particle purpose e.g disaster relief fun, a pension fund etc.
However, management is the act of running and controlling business or similar organization so as to achieve the organizational goal. Life assurance fund are funds accumulated in pool of risk manage by the insurance company through investment for the purpose of meeting their obligation as to settle claim. The risk bearer invest in variety of security with good investment decision and risk management framework so as to invest wisely.
Ezirim (200:80) state that the safety of fund should be a major consideration in an investment decision. No available risk should be taken without profitability and it should not be at the mercy of securities because a bad investment can be wipe off all the good effort of management a fund. the insurance act 2003 comple insurance companies to invest 25% of their fund in government securities such as stocks bonds and other issued by the government of the federation.
Okwor (2005:62) said that insurance companies requires the services of an investment department. They will first need to know the liabilities that undermine the fund as different consideration apply to the general long term and annuity contract funds. Their knowledge of the investment market should be such that there are capable of making intelligent projection based on the study of companies report of part fund and future fund expectation the investment manage should also be able to access the price security yield and market equity, share and other suitable types of investment.(Agiobenebo and Ezirim 2002, Ezirim 2004). This is a clear indication for the urgent need for healthy portfolio management practices the first would be managerial re orientation staring from the point of business policy and strategy. It was observed by Ezirim (1999) that contain insurance company have no laid down investment policy on the excuse that government insurance decree acts are already in place. This is rather a negligent practice. A clear cut investment policy is urgently needed for all companies that would incorporate the essential strategies and guideline of investing their resources.
Furthermore, if capital must still be increased as currently required then it must be seen as a satisfactory caution of safety for parties interested in insurance companies operatio0ns. The reduced gearing, as a result would brings down degree of susceptibility companies to financial risk as observed from the survey evidence in Ezirim (1999)
2.5 Management Of Insurance Fund
Iyadu (1998:24) in one of his exposition as insurance said: meaning insurance fund is ability to direct the resources of the of the organization to resource of the organization to achieved cooperate goal which the management of fund must be able to known his functions:
He must realize that he is one member of an overall management term. His activities is not an individual but a contribution to the vital management effort and must therefore coordinate properly with other contributions manage must have implied function of planning and control, he must set out an objective and plan on how to achieve it, he must the resource uses and the situation in which they operation so as implement its planes the management of insurance varies from company to company and the independent on this companies provide capital base and volume of business. The orientation of management in a particular company play a vital role in directing decision making on investment policies most companies are usually decide by the board of directors and handed down to the management for implementation. The policy is reviewed periodically in line with the economic realities and also to meet the company domestic requirement. It is the duty of management or investment department to formulate investment policies through the board the board of directors to decide on which to follow.
2.6 MODEL TO GUILD ASSURANCE FUND.
One of the duties of an insurance management is to ensure that funds which are under his control are invest wisely the following are some of the criteria that should guild him in determining where and how to invest insurance fund .
- Safety environment: the primary consideration for the investment manage must satisfy that the project which he intends to invest is safe and has a high influential environment.
- Investment decision: after checking the safety of an environment, investment manage should try to know where to invest on either long term, short term or annuity funds.
- Another criteria is to know the source of fund to be generated before investment decision is to be embarked on.
- Investment must have an investment policy either on his own or dictated by the boards (Ojukwu) J.C
2.7 Problem Encountered In The Investment Of Insurance Fund .
The poor implementation of the year 2012 appropriation by the federal government is taking its toil on insurance operation in Nigeria as most MDA are yet to finalise their insurance for year 2012.
Government is a major player in the economy and most underwriters rely on the public sector to generate huge premium. Unfortunately the current situation has affected the projection of most companies- broken and underwriter, as most government ministries, department and agencies (MDAs) have remained un-insured due to paucity of funds
Investigation revealed that some MDAs have carried out bids but are unable to conclude the process due to their inability to determine how to fund the premium. Some other have placed the covers but are yet to pay the premium. In effect, most are not covered and might find is difficult to make claim on their insurance policies.
For insurance, the head of service of the federation insurance bid for the group life assurance scheme was concluded early 2012. The policy was supposed to run from January 2012 to December 2012 unfortunately, the policy is yet to renewed due to non-available of funds. Yet some MDAs have recorded deaths.
Observes are of the opinion that this trend portends grave dangers for the viability and continued existence of the Nigeria insurance industry because when insurance premiums are paid after the loss had occurred, the insurance industry is the major loser. This is because the industry is denied the benefit of investment of the fund. this erodes the reserve of the insurance companies (and by extension the entire industry) and violates the basis of insurance operation. The result could better be imagined.
It should be noted that the Nigeria police group life assurance scheme was a loss to insurance company because premium where paid after losses occurred. How would the insurance industry not be extinct when the rate charged are not commensurate with the risk and there is no opportunity for the funds to be invested before claims are being paid (http//inssurancenews.com) August 1 2012.
2.8 Prospect Of Adequate Management
Considering the Nigeria environment in management of life assurance fund, the insurance industry must facilitate and sustain the positive interaction between the organization as a corporate entity, its employee and external environment, individual or corporate shareholders and other stakeholder or interested parties i.e to foster good insurance image in the country which people currently now is insurance is positive direction (CIIN DO4).
The future of the management of life assurance fund in Nigeria forecast good and booming in investment portfolio. During the early stage of organized insurance v business investment of insurance fund was not considered as component unit in the industry.
The enactment of insurance acts of 2003 gave impetus to the need to think of how surplus insurance fund would be invested in Nigeria. underwriting result of most insurance companies pointed to the positive return even though those returns were in conflict with inflation at a time using acquiring cost and management experiences upset the balance sheet in spite of the good underwriting result.