HISTORICAL DEVELOPMENT OF INSURANCE

The origin of modern insurance dates back to the practice of merchants in Italy as early as the 12th century. By the 14th century, marine insurance which is the oldest form of insurance had become established in Italy. By the 16th century, the practice of marine insurance had spread to other parts of Europe.

In England, the business of Insurance was initially transacted informally at a coffee house owned by a man named Lloyd in the city of London. People who wished to have cover would pass round a slip of paper containing details of insurance cover required to the people willing to provide it. The slip was initialled by those willing to accept a proportion of the risk. When the total amount of insurance required was fully initialled (underwritten), the contract was completed. The movement of people from one place to another and the need to do business outside one’s geographical location informed the need to invent a faster means of transportation like airplane.

It was discovered that some risks were attached to the use of the airplane and the need for its use resulted in the need to insure against its risk. In 1923, The British Aviation insurance group began offering aviation insurance.

Fire insurance grew following the great fire of London of 1666. The first fire insurance company known as Fire Office was founded in 1680 and changed its name to Phoenix in 1705. The Friendly Society came in 1683 and the Amiable Contributor in 1696.

Life assurance could be traced to the dark-ages, to ancient civilization in Rome (Italy), where burial fund existed. There were burial societies or clubs (Roman Collegial) that rendered burial services by collecting contributions from their members to pay for funeral expenses. However the first real evidence of life assurance took place in Britain on 15th June, 1583. The policy was on the life of Williams Gribbons for a period of twelve months. The sum insured was paid at the death of the assured on 19th May, 1584.

 

PRE-INDEPENDENCE INSURANCE MARKET IN NIGERIA

TRADITIONAL INSURANCE

In Nigeria, the traditional concept of insurance is that of mutual insurance. This can be found in many customary or communal practices of various ethnic societies, whereby members of a family or community collectively come to aid another member in times of disaster or misfortune. Various traditional types of insurance (mutual insurance associations) existed which include age grades, social clubs and extended family system, etc. The benefits derived from belonging to this association include: provision of cash, food, water, free labour in times of difficulty or disaster, or to meet funeral expenses as the case may be.

 

MODERN INSURANCE

The first insurance company to open an office in Nigeria was the Royal Exchange Assurance Company in 1921. It was then a branch of a parent company in England. Three others followed in 1949.

 

POST-INDEPENDENCE INSURANCE MARKET IN NIGERIA

At independence in 1960, there were 28 insurance companies in thecountry.Among them were three indigenous companies which were: The Great Nigerian Insurance Company, the Nigerian General Insurance Company Limited and the Universal Insurance Company Limited. The indigenous participation of Nigerians in insurance business witnessed the involvement of federal and regional governments, and private individuals. The federal government established the National Insurance Corporation of Nigeria (NICON) in 1969 and the Nigeria Reinsurance Corporation in 1977. It is important to note that after independence, Nigerians acquired majority share in the foreign-owned insurance companies.

 

INSURANCE REGULATION

Before 1961, there was no statutory requirement for the registration of insurance business in Nigeria. The first legislation to provide for registration of insurance companies was the Insurance Companies Act 1961. The Act required any person wishing to transact business as insurer to register with the registrar of insurance who must be satisfied that:

1. The class of insurance would be carried on in accordance with sound insurance principles.
2. That the margin of solvency was adequate.
3. That the paid-up capital was not less than £50,000 for foreign insurers and £25,00 for local insurers.

The Insurance Company Act was amended in 1964. This Act made provision for the investment of insurance funds. Both acts of 1961 and 1964 were repealed in 1976 by another Act. Under the 1976 Act, persons wishing to transact insurance business in Nigeria were required to be incorporated in Nigeria under the Companies Act 1968. The Act also prescribed the minimum paid-up capital of N500,000 for life insurance business and N300,000 for nonlife insurance business, and the sum not less than ten times the amount specified in respect of reinsurance business. The minimum paid-up capital is to be deposited with the Central Bank of Nigeria (CBN) as a statutory deposit.

The Insurance Decree 1996 was repealed by Insurance Act 1991 which put the control under the National Insurance Supervision Board (NISB). Six years later, insurance decree 1997 repealed insurance decree 1991, charging the supervision body to National Insurance Commission (NAICOM) headed by commissioner for insurance as applicable under National Insurance Supervision Board (NISB) for more effective control and better supervision of the industry.

The Insurance Act made the insurance decree 1997 a thing of the past. The Act increased the capital to N150,000,000 for life, N200,000,000 for general insurance business, and N350, 000,000 for reinsurance companies.