Insurance industry is indispensable in any country. It is a means of mobilising fund for economic and social development.
Insurance is a transaction between two persons the insurer and the insured. The insurer undertakes to indemnify the insured by paying him a specific sum in the occasion of his suffering a loss from an occurence of a specific incident or event.
The principles and practice of insurance had been in existence in Nigeria and Africa as a whole before the arrival of Western civilisation.
In Nigeria, various forms of insurance which were practised in the olden days are in some cases being practised now. The most common forms of insurance are the extended family system and the cultural unions. An example of this type of insurance is the contributions jointly made by groups of people and taken in turns. Members of the group or association provide some kind of insurance protection to their members especially during the period of need. For example, if a bread winner in a family dies, the burial is undertaken by members of the family who also agree to shoulder the responsibility of taking care of the children until they are of age.
With the arrival of Western civilisation and modern enterprises, it became imperative for individuals to insure themselves, rather than relying on the extended family insurance.
The first major insurance company to be established in Nigeria was the Royal Exchange Assurance Company in Lagos in 1921. Later on, a number of insurance companies sprang up including the first indigenous insurance company, the Great Nigerian Insurance Company (owned by
the Western Nigerian Government), The Nigerian General Insurance Company and the Universal Insurance Company. These Insurance companies have been in the market since 1960.
The emergence of more insurance companies was noticed after independence in 1960. Many indigenous insurance companies sprang up.
In the year 1969 the Federal Government established the National Insurance Corporation of Nigeria (NICON). The oil boom encouraged the influx into the insurance industry. The Insurance Act of 1976 was enacted to regulate activities of insurance companies. Before the Act was
enacted, there existed many mushroom insurance companies in the market without the capital base and the managerial capacity to undertake the risks involved in the insurance business. Many of them existed to exploit members of the public in the sense that they were not
able to pay claims of policy holders. Presently there are about 86 insurance companies and also about 150 insurance brokers recognised by the government.