Dysfunctional Nigerian Insurance Industry: Failure of Law or Regulation?

Abstract

This work interrogates the reason for the poor performance of the Nigerian insurance industry. The reason for doing this is that there is a strong correlation between insurance and development. The illiterate villager in the remotest part of Nigeria understands the advantages of "pooling" in risk mitigation. A system of coming together to contribute resources into a pool in order to take a small percentage of same to compensate the few members of the group who suffer risks is very much part of the everyday life of the traditional Nigerian society. This is what insurance is all about. Insurance, as we see it today, developed from this rudimentary aspect to the sophisticated business which it has become today. Being that our people are familiar with the tenets of insurance what then is the problem of Nigeria’s modern insurance industry that makes it remain at the lowest ebb in terms of performance in the financial services industry? Is the problem that of inadequacy in our law or ineffective regulation? Using the doctrinal method, the study examines both the legal and the institutional framework for insurance business to ascertain what the problem is. Our finding is that notwithstanding some grey areas in the Insurance Act, 2003, the major problem of the industry is failure of regulation. We recommend that the regulator, the National Insurance Commission (NAICOM) be more proactive to enable the industry take its pride of place in Nigeria as is the case all over the developed world.