Essential Ingredients Of Insurance Market

By WILSON ASEKOMHE

The insurance market, like every other, is a place of selling and buying insurance cover.  The difference, however is that unlike in the physical market of buying and selling, the insurance market sells various insurance products.
The market provides the insuring public with a system of protection against financial losses which may arise from the unexpected vagaries of life.
Notwithstanding the long history of insurance in Nigeria, the general pubic is yet to fully understand the “nitty-gritty” of insurance.  The insurance market therefore, refers to available facilities for the placing of insurance.
A typical insurance market is made up of the insuring public who make up the buyers, the insurance companies who represent the sellers and insurance agents and brokers who act as the middlemen.
The buyer here includes every individual and corporate body who due to the exigencies of unexpected losses is expected to have one form of insurance protection or the other.  However, it is widely known that in spite of the rich financial position of some people, and the degree of understanding, they still treat insurance with disdain.  This is not forgetting those who see insurance as a luxury which is the exclusive preserve of the rich and knowledgeable.
This is why it is expedient for the insurance market to be well understood for the industry to move forward.
The level of insurance awareness in Nigeria is still very low.  Besides, because of the low level of our national per capital income, only a limited number of buyers are rising up to the advantages offered by both life and general insurance.
It is expected that with increasing awareness and enhancement of social and economic lives, more and more people will be buying the different types of insurance cover available.
Till date, some people only patronize insurance where insurance is made compulsory as in motor insurance or some contractual term which requires an individual to buy the appropriate cover.
Unfortunately, even in the face of compulsory insurance, some buyers still avoid it, preferring instead to patronize touts who sell fake certificates to them merely as a tool to beat police checks.
This explains why till date, the bulk of the insurance premiums collected by the insurance companies come from the large, small and medium sized industrial and commercial companies, rather than from individuals.
The insuring public is crucial to the existence of insurance as without them, the industry will cease to exist.  This is why the insurance companies have an obligation to ensure that the policy holder is fully indemnified whenever a covered loss occurs.
The sellers:
The insurance business is conducted by the insurance companies.  These are incorporated limited liability or state-owned corporations who are legally authorized to do insurance business.
Apart from the state-owned insurance companies are established and owned by the shareholders, who having subscribed their capital, expects to run them for profits.  
The insurance business in Nigeria is regulated by the National Insurance Commission (NAICOM) and by extention, the Federal Ministry of Finance.  These bodies are responsible for defining the operational framework and policies which guide smooth insurance business.
After the recapitalization exercise, the Nigeria insurance market today has registered insurance companies.
The classes of insurance business which they are expected to transact are also spelt out.
All the registered insurance companies, outside their head office, have branches scattered across the nation, according to their financial strength.
Usually, these insurance sell their products directly to the buyers across the counter or through their own sales agents and supported also by brokers who introduce their client's business to the insurance companies.
The Middlemen
The insurance business cannot be exhaustively dealt with without due reference to the middlemen.  There are two kinds of middlemen; the agents and the brokers.
An agent is a person who is employed by another, called his principal, to act for another.  His function is to link his principal into a contractual relationship with a third party.  In insurance, the agent may be fully employed to perform this duty or he may do so on part-time category may be accountant, a solicitor, motor garage owner, a businessman, a banker etc.
The agent on completion of his duty, is paid a percentage out of the premium he generated as commission.
By law, the agent cannot be sued for any professional negligence as he is not usually an insurance professional.  He may not even possess a technical knowledge of the complexities of insurance business.
The Brokers:
On the other hand, an insurance broker is a full-time expert whose duty extends to advising, recommending, arranging insurance cover as he possesses sound technical knowledge of all classes of insurance.
His main function is to assist the insured in the handling of his insurance problems.  Among these are claims settlement and using his vantage position and connections in the market to obtain the best bargain for his client.
He is in a position carry out a physical examination of his client's business premises with a view to understanding the whole facts with a view to obtaining love premium and good returns from the insurers.
If a claim arises, the broker's duty involves negotiating settlement with the insurers and their loss adjusts while ensuring that his client gets a fair settlement from the insurer.
Because, he is required to have a sound technical knowledge of the law and customs that guide insurance, he is therefore liable to be sued if he gives a faulty advice.