CHAPTER ONE INTRODUCTION 1.1 Background of the Study
BACKGROUND OF THE STUDY
“Risk is a phenomenon which has been in existence since the beginning of the world. Risk exists whenever the future is unknown” (Lemon 1989: 17). This means that the word implies some element of doubt about future and the outcome may be worse than what it had been at the moment. This man in his daily operations could be viewed as a risk manager, in that man does his best possible to reduce, eliminate, avoid, retain or share risk where they are present.Tough there were some forms of risk management before the advent of insurance companies in Nigeria such as the extended family system, age grade association and others. insurance in its modern form was introduced into Nigeria by British.
In 1921, the Royal Exchange Assurance Company was established and it was the first insurance company to open full branch in Nigeria. In 1949, three other companies emerged. In 1958, Africa insurance company. By 1965, the number of insurance companies rose to 70. in 1977, the Nigeria Re-insurance company was established as a federal government owned insurance company. Nigeria was however under the British colonial rule up to 1960 when she gained her political independence and as a developing country. From 1960 to date a lot of insurance companies came into operation. Insurance is a modern method of sharing loss or spreading risk lightly over a great number of people so that the few unfortunate ones o r persons who sustain or suffer loss do not heavy financial loss as a result of their misfortune to the community. the insured pay premium into a common pool outcome of which the unfortunate few who suffer loss are compensated.
The secondary function of insurance companies includes:
Provision of loans for building on the security of a life policy.
Encourage and promote commercial enterprise men and industrialist
The accumulated sum of money by insurer re invested to state approved securities and this helps to provide the state with a steady flow investment funds with which the state can provide development and promotions to the local industries which will be of benefit to the community.Insurance is a contract whereby a person called the insurer or assurer agrees in consideration of money paid to him or her known as premium by another person called the insured or assured to indemnify him against loss resulting to him on the happening of certain events. However, it was known that risk exist whenever the future is unknown and therefore insurance exist primarily to combat the adverse effect of risk.