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Social And Economic Benefits Of Insurance

3150 words - 13 pages

Name – Olagunju Tahir

Matric No. – 139022111

Course Title – Theory of Risk and Insurance

Topic - Social and Economic benefits of Insurance.

Insurance occupies a critical position in any developing economy yet insurance penetration remains abysmally low in Nigeria. Insurance penetration is measured by Total Premium to Gross Domestic Product. Nigeria is ranked 85th in terms of global Insurance Density Premium Per Capita (IDPPC) while South Africa occupies 32nd position-Sigma Publication 2011. The latter is number 1 in Africa with IDPPC of $1,037 while that of Nigeria is $10. Prior to rebasing of the GDP, insurance contribution was N 300billion or just a little less than 1% of Nigerian ...view middle of the document...

Insurance remains one of the critical tools for handling this contingency.

With a population of 169million, Economy size of $510billion (following the rebasing of 6th April 2014) and an annual GDP Growth rate of 6.18%, Nigeria qualifies as one of the fastest growing emerging economies. With the total privatization and/or emancipation of the economy from the yoke of Power Holding Company of Nigeria (PHCN) combined with the unyielding efforts to contain corruption, the economy appears set to witness a rebound and an exponential growth never known in its 53years of existence. The global community is coming to terms with the reality that Nigeria has leapfrogged itself to the position of 26th largest economy in the world and leads the pack not only in the sub-region but in Africa. Global investors have defied insurgents and have converged in Abuja in droves in spite of prevailing insecurity. This speaks volume on investors’ confidence in the Nigerian economy.

The core challenge facing us today as a nation is developing the requisite leadership cadre and strategy to move 70% of our population presently in the world’s league of poorest of the poor 6 Nations to wealth and prosperity. What strategies are to be adopted and adapted? What organizations and companies will be involved in this horrendous change? Insurance remains strategic and critical to this transformation and this is the challenge facing the industry today.

However despite these set backs insurance plays a pivotal role in the social and economic development of the economy as highlighted below.

a) Social Protection – By providing protection to individuals, insurance also has broader implications for the organization of the society. At the most general level, insurance frees individuals from social constraints. Without insurance the individual remains dependant on the support of the family or the community or else risk poverty and destitution and even in the case where such support is available, many of the shocks will continue to have strong welfare effects on the poorest. Further social ties are loser on large cities and the support of the larger family is weakened. By mitigating the effects of exogenous events over which we have no control i.e illness, accident, death, natural disasters, insurance allows individuals to recover from sudden misfortune by relieving or at least limiting the financial burden, in the case of health insurance and life insurance, it could even mean the difference between life and death. Those countries that do not enact a fundamental shift in their welfare strategy risk suffering from low economic growth, depressed demand and an erosion of their competitiveness due to growing demographic pressures. There is room for task sharing between private and social insurance and insurance can play an important part in helping states provide security to citizens while alleviating their financial burden i.e NSITf (Nigerian Social Insurance Trust Fund). In conjuction...

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