THE ROLE OF INSURANCE IN PROMOTING SUSTAINABLE DEVELOPMENT IN NIGERIA (A CASE STUDY OF LEADWAY ASSURANCE, LAGOS)

CHAPTER ONE

INTRODUCTION

1.1   Background to The Study

The role of insurance investment in driving economic growth cannot be overemphasized. In recent decades, the insurance industry has been one of the most important sectors of the Nigerian economy and plays an important role as a foundation for nation building, particularly in developing sustainable means of improving national economic growth. It provides insurance coverage to the insured public from the agricultural sector, trade and industry, oil and gas, business organizations, individuals and the government (Tijani, 2015).

The business of the insurance industry is to provide services in the form of protection against unforeseeable eventualities that are likely to arise in day-to-day activities, thereby resulting in liabilities that turn into financial loss (Olayungbo, 2015). These services are usually offered to the insured person by the insurance company in exchange for a certain small consideration, known as a premium. They essentially serve as a central source of insurance funds and, if well invested, also lead to industrial profits.

Furthermore, the premium paid into the claims pool is used to compensate the insured in the event of a loss and the remaining amount is reinvested to generate a higher proportionate return as profit for the organization (Omoke, 2011). There are two types of insurance business in Nigeria: life insurance and non-life insurance.

Life insurance policies provide a sum of money (Sum Assured) to provide for the insured family or beneficiary in the event of the life insured's premature death or permanent disability (Raji 2018). Risk insurance business that protects the property of the insured and compensates the insured if loss occurs. Insurance has long been recognized as playing an important role in achieving the UN Sustainable Development Goals (SDGs). Some research has been carried out on this topic, but it has usually been either at a very high level or, alternatively, very specific and based on the analysis of individual insurers' contributions to SDG (Allianz, 2019).

Previous research has mainly focused on the comprehensive understanding of the SDG goals rather than their actual components. Given the global relevance of the SDGs and countries' commitment to track progress annually through 2030, insurance supervisors, regulators and investors recognize the need for clear links between insurance and development goals. This communication aims to help strengthen these connections and further explore the role of insurance in achieving the SDGs.

The role of insurance is diverse and includes strengthening the resilience of households and businesses and facilitating the flow of capital. Looking at it from different perspectives, it is clear that insurance contributes to the SDGs.
However, insurance is largely not recognized as a tool to achieve these goals (Holliday et al., 2021).

However, in Nigeria, as in many developing countries, the role of insurance in promoting sustainable development is increasingly recognized as crucial. This recognition is based on the understanding that insurance mechanisms can reduce risks, increase resilience and promote economic growth, contributing to the overall goals of sustainable development. Given Nigeria’s diverse economic landscape and growing population, the need for robust insurance frameworks becomes even greater.

The agricultural sector, a cornerstone of the Nigerian economy, often faces significant risks such as crop failures, natural disasters and market volatility. Insurance tools tailored to farmers can provide critical financial support in times of crisis, encouraging investment and promoting stability in rural communities (Okoye et al., 2020). Likewise, health insurance systems in healthcare play a critical role in improving access to quality healthcare services, reducing out-of-pocket costs, and ultimately improving public health outcomes (Onwujekwe et al., 2019).

By spreading risks and pooling resources, insurance mechanisms can strengthen the resilience of individuals and communities to health-related shocks. Infrastructure development, another key driver of sustainable development, is highly dependent on appropriate risk management strategies.

Infrastructure development, another key driver of sustainable development, is highly dependent on appropriate risk management strategies. Insurance products tailored to infrastructure projects can protect investments, attract financing and accelerate the delivery of essential services such as energy, transport and telecommunications (Anosike et al., 2021).

In addition, insurance companies can promote sustainable practices in companies and industries by incentivizing compliance with environmental, social and governance (ESG) standards, thereby aligning financial interests with long-term sustainability goals (Ibrahim et al., 2023). As Nigeria strives to achieve its development goals, it becomes imperative to harness the transformative power of insurance to address uncertainties, unlock opportunities and build a resilient future for all its citizens.

1.2   Statement of The Problem

The role of insurance in promoting sustainable development in Nigeria is marred by several challenges that impede its effectiveness and reach. One significant issue revolves around the low level of insurance penetration and awareness among the populace. Despite the potential benefits of insurance in mitigating risks and enhancing resilience, many individuals and businesses in Nigeria remain either uninsured or underinsured, exposing them to financial vulnerabilities in the face of unforeseen events (World Bank, 2020). This lack of insurance coverage not only undermines efforts to foster economic stability but also hampers the country's ability to address developmental priorities such as poverty alleviation and infrastructure enhancement.

Moreover, the insurance landscape in Nigeria is plagued by regulatory and institutional shortcomings that hinder the development of innovative and inclusive insurance solutions. Fragmented regulatory frameworks, limited capacity within regulatory bodies, and inconsistent enforcement of regulations contribute to an environment that is less conducive to insurance market growth (Olayinka & Iyortim, 2018). Furthermore, challenges related to product affordability, distribution channels, and trust in insurance providers exacerbate the barriers to expanding insurance coverage, particularly among marginalized communities and informal sector workers. Addressing these systemic issues is crucial to unlocking the full potential of insurance as a catalyst for sustainable development in Nigeria.Top of Form

1.3 Objectives of The Study

The main objective of the study is to examine the role of insurance in promoting sustainable development in Nigeria. Specific objectives of the study are:

1. To assess the impact of existing insurance products on promoting sustainable practices in Nigeria.
2. To identify potential new insurance products that could address sustainability challenges in Nigeria.
3. To evaluate regulatory and educational barriers to wider adoption of insurance for sustainable development in Nigeria.

1.4 Research Questions

To guide the study and achieve the objectives of the study, the following research questions were formulated:

1. To what extent do current insurance products in Nigeria encourage or discourage sustainable practices in key sectors?
2. What innovative insurance products could be developed to address specific sustainability challenges in the Nigerian context
3. How can regulatory frameworks and public education initiatives be improved to promote the use of insurance as a tool for sustainable development in Nigeria?

1.5 Research Hypothesis

The following research hypothesis was developed and tested for the study:

Ho: There is no significant relationship between insurance and promoting sustainable development in Nigeria.

1.6 Significance of The Study

The study is important for many reasons. The following are the major stakeholders this paper through its practical and theoretical implications and findings will be of great significance:

Firstly, the paper will benefit major stakeholders and policy makers in the Insurance sector. The various analysis, findings and discussions outlined in this paper will serve as a guide in enabling major positive changes in the industry and sub-sectors.

Secondly, the paper is also beneficial to the organizations used for the research. Since first hand data was gotten and analyzed from the organization, they stand a chance to benefit directly from the findings of the study in respect to their various organizations. These findings will fast track growth and enable productivity in the organizations used as a case study.

Finally, the paper will serve as a guide to other researchers willing to research further into the subject matter. Through the conclusions, limitations and gaps identified in the subject matter, other student and independent researchers can have a well laid foundation to conduct further studies.

1.7 Scope of The Study

The study is delimited to lead way Assurance, Lagos.  Findings and recommendations from the study reflects the views and opinions of respondents sampled in the area. It may not reflect the entire picture in the population.

1.8 Limitations of The Study

The major limitations of the research study are time, financial constraints and delays from respondents. The researcher had difficulties combining lectures with field work. Financial constraints in form of getting adequate funds and sponsors to print questionnaires, hold Focus group discussions and logistics was recorded. Finally, respondents were a bit reluctant in filling questionnaires and submitting them on time. This delayed the project work a bit.

1.9 Organization of The Study

The study is made up of five (5) Chapters. Chapter one of the study gives a general introduction to the subject matter, background to the problem as well as a detailed problem statement of the research. This chapter also sets the objectives of the paper in motion detailing out the significance and scope of the paper.

Chapter Two of the paper entails the review of related literature with regards to corporate governance and integrated reporting. This chapter outlines the conceptual reviews, theoretical reviews and empirical reviews of the study.

Chapter Three centers on the methodologies applied in the study. A more detailed explanation of the research design, population of the study, sample size and technique, data collection method and analysis is discussed in this chapter.

Chapter Four highlights data analysis and interpretation giving the readers a thorough room for the discussion of the practical and theoretical implications of data analyzed in the study.

Chapter Five outlines the findings, conclusions and recommendations of the study. Based on objectives set out, the researcher concludes the paper by answering all research questions set out in the study.

1.10 Definition of Terms

1. Insurance
   Insurance is a financial arrangement in which an individual or organization pays premiums to an insurance company in exchange for protection against specified financial risks or losses. It serves as a risk management tool that provides compensation in the event of unexpected incidents such as accidents, illnesses, or natural disasters.
2. Sustainable Development
   Sustainable development refers to economic growth and development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It encompasses economic, social, and environmental dimensions to ensure long-term progress and well-being.
3. Leadway Assurance
   Leadway Assurance is a leading insurance company in Nigeria, headquartered in Lagos.