The market is a place of business interaction between producers, sellers and consumers for the exchange of goods and services. It takes the form of shop , office, street market, etc. Insurance market refers to the facilities that are available for placing of insurance and it is made up of the insuring public (buyers of insurance), the insurance companies (sellers of insurance) and the insurance intermediaries (agents and brokers).

The market of insurance products is mostly made possible through the assistance of insurance intermediaries whose main duty is to bring the sellers (insurance companies) and the buyers (insuring public) of insurance policies into contractual relationship. The nature of products sold in insurance transaction differentiates it from other forms of market in the sense that goods to be exchanged in other forms of market is physically available for the buyer to see before taking decision. Whereas insurance deals with financial interest of the buyer in those subject matters brought for protection of the seller of insurance product. Insurance market is made up of the following:

  1. The buyers of insurance products
  2. The sellers of insurance products
  3. The intermediaries.



These are the people that require insurance products; they are also referred to as insuring public. They purchase insurance policies with the aim of cushioning the financial effects of a loss experienced following the happening of the event insured against. They are made up of the followings:

  1. Individuals.
  2. Business institutions.
  3. Corporate organizations.
  4. Government (federal, state and local).
  5. Government parastatals.
  6. Societies.
  7. Clubs, etc.



Insurance policies are made available to the buyers by the supplier through the following:

  • Insurance companies.
  • Reinsurance companies.
  • Industrial assurance companies.



Insurance companies are classified according to the functions or services rendered to the insuring public. They are:

a) Proprietary companies: These insurance companies are owned by the shareholders, incorporated as limited liability. Under this arrangement, the companies have an authorised and issued share capital to which the shareholders, The profit after taxation accrues to these shareholders. The shareholders attend general meetings mostly for presentation of audited accounts and declaration of dividends.

A proprietary insurance company can sell to the public directly by passing through the intermediaries (agents, brokers).


b) Mutual companies: In mutual companies, group of individuals with common interest mutually agree to come together for the promotion of their business interest along with their members welfare benefits. The bulk of transaction in mutual companies is coming from their members as policy holders. The policy holders enjoy lower premium in insurance business placed with them and share among themselves the realised profit.

The policy holder could be called to make further contributions to the fund if the annual premium was inadequate to meet claims and expenses. Most mutual insurance companies are limited by guarantee in the recent times. This class of insurance business is not popular in this part of the world.


c) Specialist company: This form of insurance company specialises in one class of insurance business. Example of such company is Africa Alliance Insurance Company which specialises in life assurance.


d) Composite insurance companies: These are companies engaging in more than one insurance business. This type of insurance company is common within Nigeria and the world insurance market. Examples of such companies in Nigeria are:

  • Niger Insurance Plc.
  • Royal Exchange Assurance.
  • NICON Insurance Corporation, etc.

The administration required might be elaborate than that of specialist company, i.e. each class of insurance will likely have its underwriting staff which will only deal with such risk. Such companies usually have life manager, marine manager, property manager, etc

The capital required to establish a composite insurance company is much higher than that of specialist insurance company.


e) Tariff companies: This refers to the insurance company that is a member of an association which regulates the business activities of the members, such as premium charging, policy wordings, codes of ethic, technical advices, etc. Examples of these companies are those which are members of Nigeria Insurers Association (NIA), West Africa Insurance Association,Africa Insurance Association, etc.


f) Independent company (non-tariff companies: These are companies which do not belong to any insurance association. They decide on their own policy wordings and premium to be charged. Although they still follow the same rules that are applied by tariff companies as regard the level of premium charged and policy wordings.



Reinsurance companies accept risk only from the insurance companies. They provide protection by reinsuring what had been insured by the insurance companies. Their operation is international, in the sense that they accept risks from insurance companies in other countries. The Nigerian reinsurance market comprises of few reinsurance companies. They are:

  • Continental Reinsurance.
  • Globe Reinsurance.
  • Nigeria and Africa Reinsurance, etc.



This is usually a proprietary company with involvement in insurance business limited to the policies sold to the policy holders at their homes and offices. These companies arrange for the collection of premium frequently (on weekly or monthly basis) unlike the usual form of collection that can be annually, half yearly or monthly.



Insurance intermediaries are the middle men who usually constitute the link between buyers and sellers of insurance services.Bulk of insurance business transactions in Nigeria is done by the use of those intermediaries. They include:

  • Agents.
  • Brokers.
  • Loss adjusters.



An agent is the one who is employed to perform an act on behalf of his principal within a specified guideline. A duly appointed agent, acting within the scopeof his authority binds his principal by his action just as though the principal has performed them personally. They are individuals or firms who are not professional insurers but can play a role of agent in the transaction of insurance business. Examples are accountants, estate agents, solicitors, builders, and garage owners. Any of these could be appointed as agent since their clients may require insurance cover. Today, an agent, whether on full time or part time basis is expected to have a certificate of proficiency in insurance, issued by the Chartered Insurance Institute of Nigeria before he is licensed by the National Insurance Commission as an agent. Agents must have the details of their clients and the insurance companies they use.



These are professional intermediaries that connect the insurance companies (the sellers) with the insuring public (the buyers). They understand themarket of insurance and they are in better position to know the need of the insuring public.

The expert position of a broker gives him the advantage to give advice to the insuring public as to the type of cover available and the suitable one to be purchased. Their technical advice will centre on the type of cover required, claim procedure, interpretation of the policy conditions, etc.They receive commission from the insurance companies.




A loss adjuster is a professional intermediary whose principal function is to investigate insurance claims with the view of making impartial recommendation to the insurance company as regard the extent of their liability under the terms of the policies.

Where the insurer has a liability, it is the responsibility of the loss adjuster to adjust the claim appropriately without bias. The loss adjuster submits the report of the investigation to the insurer. For him to be able to perform his functions adequately he should investigate thoroughly. He must be transparent and honest. His integrity should not be in doubt to the insurance company because the insurance company is expected to rely on his advice.



This is an arrangement by which a big industrial company with enough fund decided to set aside some funds to meet some funds to meet future losses instead of transferring the risk to any insurance companies. It has always been to the advantage of any company, to minimize cost as well as to increase company profit. They try to retain the insurable risk which they are exposed to, and make available to the fund an amount considered as lower than what would have been charged as premium by insurance companies.

The absence of buying and selling in the usual insurance business is present, although there are some of these companies that will retain some risks to themselves and insure the remaining risks with insurance companies.



  1. It has lower premium.
  2. It increases profit base of the organisation.
  3. There is direct incentive for loss reduction and control.
  4. There is absence of claim disputes.
  5. The company enjoys control over its employed insurance personnel.



  1. The fund created can be wiped out in the event of a catastrophe.
  2. The absence of risk transfer function of insurance is recorded under self assurance.
  3. Statistical analysis is difficult since companies control the fund.
  4. There is absence of technical advice and risk prevention.
  5. Funds to be used for further investment are tied down.
  6. The need to borrow from the fund for other purposes will defeat the reason for setting aside the fund.
  7. The fund does not qualify for corporation tax.
  8. The shareholders may not be pleased with the arrangement as they feel that money which is supposed to form part of dividend fund for a year will be set aside for the fund.

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