CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF STUDY

Insurance protects against unexpected losses by using the resources of the many
to compensate for the losses of the few, the more uncertain the event the more
insurance becomes the most economical form of protection. The percentage of
Nigeria’s populations that live in rural areas according to the World Bank
collection of development indicators is about 48.04 % , several studies have
shown that the need to extend insurance services to rural areas in Nigeria is of a
great importance, as it is considered as one of the most effective means of
reducing the vulnerability of the poor from the impacts of disease, theft,
violence, disability, fire and other hazards (Mukhtar. 2013). Savings and
Insurance are two such financial services that can take care of the financial
security needs of the population.

The insurance industries which is part of financial institution exist for the
purpose of indemnifying an insured person in the case of any loss occurrence.
Furthermore, the insurance industry in Nigeria has not been fully accepted by
the people in rural areas. However, the importance of the provision of insurance
services has been recognized in modern Nigeria, through the various products
offered by insurance firms, which are life assurance policies that is classified
into individual life assurance, group life assurance and pension.

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The products offered to these groups/ person(s) are for protection against losses
incurred by them and keeping them in business. Similarly, it is a fact that the
major problem facing the growth and development of the industry in Nigeria
today is ignorance and apathy for insurance services in the country. For this
purpose, business concerns which is also very peculiar to the rural dwellers who
are not easily accessible due to geographical factors and lack of infrastructural
facilities in the rural areas of the country. Hence, the rural dwellers are mostly
engaged in small medium scale activities such as subsistence farming, fishing,
palm wine tapping, hunting e.t.c. which they may find difficult to buy insurance
protection for their benefits against losses that might arise in the course of their
daily activities. Thus, poverty and high rate of illiteracy which is a real factor
limiting against the development and growth of the industry in the rural area. In
the essence, the industry should do well to solve the inherent difficulties faced
by the rural dwellers in finding ways and means of taking insurance services to
them at affordable prices(premium) increase their performance, efficiency and
profitability by embarking on awareness campaigns and creating of good wills.
Similarly, new products should be developed to suit their needs so as to attack
and stimulate participation from the rural dwellers and to settle claims as at and
when due with equity, modesty and quick response without prejudice.

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1.2 STATEMENT OF THE PROBLEMS

The following are the statement of the problems:

Rural areas do not know what is insurance; talk less of insuring their risk.
Poverty and high rate of illiteracy which is a real factor against the development
and growth of the industry in the rural areas. Lack of trained personnel lead to
the unavailability of trained personnel who would work in local areas where the
prospective insured dwells. Lack of adequate infrastructure lead to the absence
of transportation and communication, also affect the extension of insurance
services to the rural dwellers.
Ignorance and apathy to insurance services also bring about the high level of
ignorance even among the so-called educated class and the meaning of
insurance which is yet to be comprehended and by extension to the rural
dwellers has affected the demand for insurance.

1. 3 OBJECTIVES OF THE STUDY

The main objective of the study is to evaluate the performance of the
Nigerian Insurance Industry in the extension of insurance services to the
rural areas. Other objectives include:
 To find out whether the insurance companies extend services to the rural
areas or not.

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  To find out why the insurance industry has not been accepted by the rural
dwellers.
 To evaluate the causative factors of these problems and to provide
possible solutions.
 To determine whether geographical factors and lack of infrastructural
facilities affect the location of insurance companies in the rural areas.
 To find out the reason for lack of insurance culture and to offer strategies
for developing insurance culture in the rural environments.
 To make useful recommendations based on the finding and then give
possible solution to it.

1.4 RESEARCH QUESTIONS

In the cost of this research, certain research questions were generated to guide
the researchers in their findings.
- Does apathy and ignorance for insurance services hinder the provision
of insurance services to the rural areas?
- Will Special packages at affordable price (premium) attract
participation from rural dwellers?
- How does poverty and illiteracy limit factors against the development
and growth of the industry in the rural areas?
- Does geographical factors and lack of infrastructural facilities limit the
extension of insurance services to the rural areas?
- Does prompt payments of claims encourage the acceptance of insurance
services by the rural dwellers?
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1.5 RESEARCH OF HYPOTHESIS

The following hypotheses from the framework for carrying out the study.
HYPOTHESIS 1
HO: Apathy and Ignorance for insurance services do hinder the provision
of services to the rural areas.
H1: Apathy and Ignorance for insurance services do not hinder the
provision of services to the rural areas.

HYPOTHESIS 2

HO: Special packages at affordable price (Premium) would attract

participation from the rural dwellers.
H1: Special packages at affordable price (Premium) would not attract
participation from the rural dwellers.

HYPOTHESIS 3

HO: poverty and illiteracy is not a limiting factor against the development
and growth of the industry in the rural area.

H1: poverty and illiteracy is a limiting factor against the development and
growth of the industry in the rural area.

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HYPOTHESIS 4

H O: geographical factors and lack of infrastructural facilities is not a

limiting factor to the extension of insurance services to the rural areas.
H1: geographical factors and lack of infrastructural facilities is a limiting
factor against the extension of insurance services to the rural areas.

HYPOTHESIS 5

HO: prompt payments of claims does not encourage the acceptance of

insurance services by the rural dwellers.
H1: prompt payments of claims encourage the acceptance of insurance
services by the rural dwellers

1.6 SIGNIFICANCE OF THE STUDY

This study will help the researcher to determine the extension of

insurance services to the rural dwellers in Nigeria which will help to
know whether services are actually extended or not. This study would be
of importance to the rural dweller in Nigeria in knowing how the
financial crises have affected them. This study will equally be important
to the general public, researchers and stakeholders in knowing the impact
of financial crises on insurers. This study will also be important to
government so that relevant policies can be made and implemented in be
proactive in dealing with future financial crises in rural areas in Nigeria.

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1.7 SCOPE AND LIMITATION OF THE STUDY

Lack of time due to academic calendar of the school and inadequate

finance to carry out the research works on National scale, the scope of the
study will be limited to Iseyin Local Government Area, Oyo State as a
yardstick to other rural areas and Lead way Assurance Co. Ltd to
represent other insurance companies.

1.8 DEFINITION OF TERMS

1. CLAIMS SETTLEMENT: this is a process by which the insurance

companies restore the insured in the position he/she was prior to the
happening of the insured events.
2. CULTURE: this is a customs and beliefs, way of life and social
organization of any society
3. DWELLERS: This is a place mentioned where people habitats or lives.
4. INSURED: they are the people that buy or consume insurance services.
5. INSURER: they hold the fund contributed by the insured in return to
safeguard and take care of loss incurred (i.e. the insurance company)
6. INDEMMNITY: this is the restoring of the insured to the same financial
position after a loss as he/she enjoyed immediately prior to the happening
(loss)
7. INSURANCE: it is a safeguard against risk. It could also be defined as a
contract whereby one party called the insurer undertakes to return for the
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 agreed consideration called premium to pay to another party called the
insured a sum of money or its equivalents on the happening of the special
event.
8. MATERIAL FACT: this is a fact that would influence the mind of a
prudent underwriter in assessing a risk.
9. POLICY FORM: is a written evidence of insurance setting out the terms
and conditions of the contract between the insurer and the insured.
10. PERILS: is a loss occurring contingency.
11. PROPOSAL FORM: is like a questionnaire and it is used to elicit all the
relevant material, information required by the insurer to decide on whether
to accept a risk or not.
12. RURAL AREA: is a country side located outskirt of the urban areas.
13. UTMOST GOOD FAITH: it is whereby each party to proposed to all the
material fact concerning the contract.

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CHAPTER TWO
LITERATURE REVIEW

2.1 PREAMBLE

Insurance in Nigeria is developed quite poorly. The reasons for this come not
only from insurance services but also from economic sector. The prerequisites
of the current situation with insurance were born in the colonial period. Until the
1960s, the leading role in the Nigerian insurance market was played by
European companies. They insured goods sent to centers of the empire. After
colonies gained political independence, African branches of these companies
were nationalized, the government tried to form their own insurance markets to
avoid currency outflows abroad. And they managed to do this with the support
of the UN.
The colonial period set the pedestal for the operations [modern] insurance in
Nigeria. European companies performed services through the initiation of
interregional trade. Since they needed to mitigate risk at a local level, they
obtained insurance licenses from authorities abroad.
Fast forward to post-independence, these European brands needed to retain their
authority in Nigeria. This however led to the creation of branches by these
brands in Africa. One can accrue the eventual visibility of inasurance in Nigeria
to this development.

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2.2 CONCEPTUAL FRAMEWORK

2.2.1 WHAT IS THE MEANING OF INSURANCE

Insurance is often defined as the act of pooling funds from many insured entities
(known as exposures) in order to pay for relatively uncommon but severely
devastating losses which can occur to these entities. The insured entities are
therefore protected from risk for a fee, with the fee being dependent upon the
frequency and severity of the event occurring (Encarta dictionary, 2009). Thus,
it is a commercial enterprise and a major part of the financial services industry.
Insurance is a form of risk management in which the insured transfers the cost
of potential loss to another entity in exchange for monetary compensation
known as the premium. Insurance In economic terms is refers to the pooling
mechanism for reducing the down-side of risk through resource reallocation
from good to stormy states of the world.

Churchill et.al (2003) opines that insurance facilitates financial protection

against by reimbursing losses during crisis. It is designed to protect the financial
well-being of an individual, company or other entity in the case of unexpected
loss. This protection is accomplished through a pooling mechanism whereby
many individuals who are vulnerable to the particular risk are joined together
into a risk pool. Each person pays a small amount of money, known as a
premium, into the pool, which is then used to compensate the unfortunate
individuals who do actually suffer a loss.

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Agbaje (2005) defined insurance as the business of pooling resources together to
pay compensation to the insured or assured (i.e. the policy holder) on the
happening of a specified event in return for a periodic consideration known as
premium. Insurance involved the transfer of risk from one individual to another,
sharing losses on an equitable basis by all members of the group. The group,
known as insurance company, must increase its hold on the premium and widen
its profit margin to cope with the demand of there.

Insurance companies are similar to banks and capital markets as they serve the
needs of business units and private households in intermediation. The
availability of insurance services is essential for the stability of the economy and
can make the business participants accept aggravated risks. By accepting claims,
insurance companies also have to pool premiums and form reserve funds. So,
insurance companies are playing an important role by enhancing internal cash
flow at the assured and by creating large amount of assets placed on the capital
market. Theoretical studies and empirical evidence have shown that countries
with better developed financial system enjoy faster and more stable long-run
growth of which insurance companies contribute to. Well-developed financial
markets have a significant positive impact on total factor productivity, which
translates into higher long-run development.

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2.2.2 HOW INSURANCE WORKS

Insurance is a financial product sold by insurance companies to safeguard you

and / or your property against the risk of loss, damage or theft (such
as flooding, burglary or an accident).
Some types of insurance you have to take out by law such as motor insurance if
you drive a vehicle; some you may need as a condition of a contract such
as buildings insurance as a requirement of your mortgage; and others are
sensible to take out such as life insurance or saving for a pension.
While it is a good idea to make sure you are not paying for insurance that you
don’t need, you should always think about what would happen if disaster struck
and you didn’t have cover to protect you.
You can buy insurance policies for many aspects of your life, for example for
your health, home, car, business, or retirement.
An insurance policy is the contract that you take out with an insurer to protect
you against specific risks under agreed terms.  When you buy a policy you
make regular payments, known as premiums, to the insurer. If you make a claim
your insurer will pay out for the loss that is covered under the policy.
If you don’t make a claim, you won’t get your money back; instead it is pooled
with the premiums of other policyholders who have taken out insurance with the
same insurance company. If you make a claim the money comes from the pool
of policyholders’ premiums.

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 2.2.3 HOW PREMIUMS ARE CALCULATED

Insurers use risk data to calculate the likelihood of the event you are insuring against
happening. This information is used to work out the cost of your premium. The more
likely the event you are insuring against is to occur, the higher the risk to the insurer
and, as a result, the higher the cost of your premium.

An insurer will take two important factors into account when working out the
premium they will charge.

1. How likely is it in general terms that someone will need to make a claim?
2. Is the person who wants to take out a policy a bigger or smaller risk than the
‘average’ policyholder (for example, a young person with a high-powered car
may be charged a higher premium as they are statistically more likely to be
involved in an accident than a mature, experienced driver)?

Only a proportion of policyholders will make a claim in any one year. 

Standard policy conditions 

Although policies have different terms and conditions, in general there are three main
principles that are common across all insurance policies. These include:

 cover is provided for the actual value of the property or item that has been lost
or damaged (its replacement value), but does not include any sentimental value

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  there needs to be a large number of similar risks so that the likelihood of a claim
can be spread among other policyholders. It must be possible for insurers to
calculate the chance of loss so that a premium can be set which matches the risk
 losses must not be deliberate

2.2.4 THE IMPORTANT PRINCIPLE OF INSURANCE

The main motive of insurance is cooperation. Insurance is defined as the equitable

transfer of risk of loss from one entity to another, in exchange for a premium.

Nature of contract is a fundamental principle of insurance contract. An insurance

contract comes into existence when one party makes an offer or proposal of a contract
and the other party accepts the proposal.

A contract should be simple to be a valid contract. The person entering into a contract
should enter with his free consent.

2. Principal of utmost good faith:

Under this insurance contract both the parties should have faith over each other. As a
client it is the duty of the insured to disclose all the facts to the insurance company.
Any fraud or misrepresentation of facts can result into cancellation of the contract.

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 3. Principle of Insurable interest:

Under this principle of insurance, the insured must have interest in the subject matter
of the insurance. Absence of insurance makes the contract null and void. If there is no
insurable interest, an insurance company will not issue a policy.

An insurable interest must exist at the time of the purchase of the insurance. For
example, a creditor has an insurable interest in the life of a debtor, A person is
considered to have an unlimited interest in the life of their spouse etc.

4. Principle of indemnity:

Indemnity means security or compensation against loss or damage. The principle of

indemnity is such principle of insurance stating that an insured may not be
compensated by the insurance company in an amount exceeding the insured’s
economic loss.

In type of insurance the insured would be compensation with the amount equivalent to
the actual loss and not the amount exceeding the loss.

This is a regulatory principal. This principle is observed more strictly in property

insurance than in life insurance.

The purpose of this principle is to set back the insured to the same financial position
that existed before the loss or damage occurred.

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 5. Principal of subrogation:

The principle of subrogation enables the insured to claim the amount from the third
party responsible for the loss. It allows the insurer to pursue legal methods to recover
the amount of loss, For example, if you get injured in a road accident, due to reckless
driving of a third party, the insurance company will compensate your loss and will
also sue the third party to recover the money paid as claim.

6. Double insurance:

Double insurance denotes insurance of same subject matter with two different
companies or with the same company under two different policies. Insurance is
possible in case of indemnity contract like fire, marine and property insurance.

Double insurance policy is adopted where the financial position of the insurer is
doubtful. The insured cannot recover more than the actual loss and cannot claim the
whole amount from both the insurers.

7. Principle of proximate cause:

Proximate cause literally means the ‘nearest cause’ or ‘direct cause’. This principle is
applicable when the loss is the result of two or more causes. The proximate cause
means; the most dominant and most effective cause of loss is considered. This
principle is applicable when there are series of causes of damage or loss.

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2.2.5 THE ROLE THAT INSURANCE PLAYS IN THE LIFE OF A
NATION.

The role that insurance plays in the life of a nation can never be over
emphasized, apart from the responsibility of bearing the financial losses of the
insured person and institutions, provides stabilities to both individual and
commercial undertaking, insurance companies encourage saving and ensure that
dependents of the deceased bread winners who carry policies agree not left
destitute.
Broadly speaking, the industry within a nation protects and conserves wealth;
hence, insurance is the business that exists in order to ensure the success and
survival of the other business.

Unlike many other business in our economy that only become relevant when
there is an economic booms, the insurance industry depression (Emeliefo, 2001)

In spite of the fact that insurance industry is made to play a vital role in the life
of an individual, organizations and nay, a nation. The industry fails to reach the
most populated area in the nation which is the rural dwellers, according to
statistics.

2.2.6 WHAT ARE THE REASONS FOR THE LACK OF INSURANCE

CULTURE?

Many writers have attributed the low level of insurance culture in Nigeria to the
young age of the industry and have gone as far as to prophesy that the fortune of
the insurance industry is tired to that of the nation.

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While it is true that insurance is relatively young in Nigeria compared to the
other developed economies, I do not want us to hide under the excuse and
behave like prophet Eli whose attitude of what will be held to the demise of his
entire family and image forever. We should rather face challenges squarely so
that when the up coming ones shall ask us what we did to develop the industry
which {insurance} earn a living, we can confidently answer them.

The factors responsible for the poor insurance culture in our rural areas are both
society induced and industry induced. In addition, many of the society induced
are deep rooted and unfortunately cannot be divorced from the fallout of the
culture, political and socio-economic challenges we are facing as a nation.

I shall now briefly look at some society and industry induced factors:

1. HIGH RATE OF ILLITERACY: The literacy level in Nigeria is currently

put at 62 percent. Some experts and those who have had the opportunity to
work in our rural areas are vigorously questioning this figure. Even at that
level, we are endangered. A population with our level of illiteracy is very
challenging to galvanize for any meaning effective culture transformation.
How do you make sales presentation to a man or who cannot read or write?

2. IGNORANCE AND APATHY: A philosopher once posted that there is a

strong direct relationship between illiteracy, ignorance, apathy and poverty.
According to him, illiteracy leads to ignorance, which in turn leads to
poverty. Poverty perpetuates illiteracy, again starting the cycle. I cannot but
agree with him. A very high proportion of our population, especially in the

18
 rural areas is ignorant about insurance and what it can do for them. Only a
tiny percentage of the population, even amongst the educated ones, knows
what insurance is all about while insurance is not taught at all in primary
schools; the insurance content in the curriculum at both the junior and senior
secondary schools is very shallow.

3. POVERTY: With a national income growth of 2:3 percent a population

growth of 2.8 percent and an income per capital put a less than one dollar per
day; there is no doubt that our population is facing stat poverty. In the rural
areas, the situation is grimmer with the absence of industries and an under
developed agrarian economy that still thrives a subsistence farming.
Insurance is another graceful name for savings. We all know that savings is
function of income as no one due can save income that is already consumed.
The marginal propensity to save is inversely related, to the marginal
propensity to consume.
There can be vibrant insurance industry without a savings culture.

4. SOCIO- CULTURAL BELIEFS: Our socio cultural belief, especially in

our rural areas contributes to our poor insurance culture. A woman once
refused to buy life assurance from an insurer for the simple reason that if she
does, her husband would run to her insurance company, collect the money
and marry as many wives as he fancies. In some part of our rural areas, there
are some husbands who would feel that their wives are rubbing shoulders

19
 with them when the wives take insurance policies even when the woman can
pay her premiums.

5. RELIGION: Amongst some of our religious folks, there are very strong
objective to the idea of life assurance on the ground that it is immoral, wrong
and therefore contrary to their religious doctrines for a person to benefit from
the proceeds of insurance.

According to Emilefo (2005:37) typical Muslim see life as a taboo and sin
before Allah: Become life and soul of every Muslim are in the hands of Allah
when he dies.

Moreover, the beneficiaries of the money fro the insured’s life policy will
become lazy and an irreligious because they have not sweated for it. Some
church leaders also ask if the insurance companies will replace their life if they
buy insurance policy and later dies.

6. ABSENCE OF LOCAL REPRESENTATIVES IN THE RURAL

AREAS:
In many of our rural areas, there is vitality no sign to show the existence of an
industry called insurance. As a result, there is nothing like insurance in their
memory.

7. IMAGE OF THE INSURANCE INDUSTRY

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The image of insurance has also contributed to the general apathy to insurance
in Nigeria. Over the years, the insurance industry has been delivered by
unwholesome activities such as the mushrooming of take insurance companies
and intermediaries refused to pay genuine claims, long delays in payment of
benefits, rates cutting.

In the industry, the misconduct of insurance agent who embezzles insurance

premiums has been most devastating to its image. Some who has a little
knowledge about insurance sets up an office as an agents and collect premiums,
which will never, remits to any company.

These types of cover never pay claims when it arises what happens in licensing
offices all over the country is an open secret.

2.2.7 INSURANCE IN THE EYE OF THE PUBLIC

The insuring public has a poor perception of the insurance industry in

Nigeria, which has made insurance culture not to be imbibed in the country as a
whole. The industry is seen solely as money making one, taking money for
goods never delivered since the only evidence is a paper document. This is
because insurance is solely a service oriented product credited to specifically
cover unforeseen risk.

Osaka (1993), the illiteracy level and the economic power of individuals
in the country is a limiting factor because a lot of Nigerians are not literate why
majority cannot afford to pay premium it given opportunities.

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However, the biggest barrier between the insurers and the public is claim
settlement and insurance is seen as a legalized fraud by other.

Similarly, some feel the concept of insurance (life assurance) is a taboo, a

western import that has no relevance to Africa. All too often, insurance is
dismissed by the average Nigeria as activity akin gambling, luxury or immoral
practice. This attitude affects the institution and makes it impossible to see the
primary role in protection and securing lives and properties by the industry
which has yielded low patronage and its operational capacity.

According to Emilefo (2005) typical Muslims see life assurance as a taboo and a
sin before Allah’ when he dies. Moreover, the beneficiaries of the money from
the insured\s life policy will become lazy and irreligious act because they have
not sweated for it. Church leaders also ask if the insurers will replace their life,
if they buy policy and later die.

2.2.8 CREATING AWARENESS OF INSURANCE TO THE RURAL

DWELLERS

The insurance industry in Nigeria has a role of creating the necessary

awareness among the rural populace on the importance of insurance to their
lives. The purpose of such awareness programmes will be to penetrate the areas
and dispel prevalent myths and misconception about insurance among the
dwellers.

The way by the industry would achieve these are as follows:

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 a. It should locate branch office in the rural areas.
b. It should embark on enlightenment campaign by educating the
populace on the roles and activities of insurance through lectures,
symposium and seminars.
c. It should share its social responsibility of providing scholarship for
education, research and encourage cultural activities, games through
sponsorship.
d. The industry should develop new producers that will be suited for the
rural dwellers bearing in mind the peculiarities of the domestic market
and also engage in product innovations.

2.2.9 CHALLENGES FACING THE INSURANCE INDUSTRY

The industry (insurance) can play a pivoted role in hastening the process
of national economic recovering, if its potentials are fully tapped. It can help
attain greater financial liquidity in the economy by generating more funds that it
is doing currently. This ability to play the role will depend on creativity,
innovation, professionalism and foresight of its operations. They must be able to
read current trends identify prevalent lapses and develop strategies for effective
performance in this dynamic ever changing world, (Osaka 1999)(Daily
Champion 6th May,2008) highlight the crucial challenges confronting the
industry as:

i. The industry must brace up to participate activity in the evolving

globalize and liberalized market.
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 ii. Should enhance its financial base by achieving an acceptable level
of capitalization, which they do but should not over increase the
premium.
iii. How permeate the Muslim community and some church leaders on
why they should undertake life assurance policies
iv. How to take insurance business to the rural areas and at the same
time making the rural populace to accept it.
v. Creation of new products and product innovation at affordable
prices that will meet the various needs of the rural populace. vi.
Getting motorists to insure their cars, motorcycles etc at
appropriate insurance companies and to stop taking illegal covers.
vii. Creating the necessary awareness among the public on the
importance of insurance in their lives and properties. viii. How to
use new and improved system of standard of documentation using
it and how to limit agency and system risks.

2.2.10 STEP TO CREATE RELEVANCE INSURANCE IN THE RURAL

AREAS.

The insurance need to create necessary impact by engaging in activities that will
be beneficial to the rural populace, which will induce them into taking up
insurance policies. According to Barley the industry has not been able to come
up with any thing concrete over time and he believes they can have programs to

24
educate the people to let them know that insurance is life food or the malaria pill
which must be taken regularly

Okonkwo (2004, 62) was of the opinion that the steps to be taken by the
industry in creating relevance in the rural areas are as follows:
a. Establishment of contact offices setting up underwriting offices
in the rural areas so as to be easily accessible to the populace.
b. Developing agricultural insurance policies to protect the effect
of natural hazards, protects plant and machines which will help
reduce the emergence assistance provided by government in
times of agricultural disaster (Odo 2003,38)
c. Creation of awareness by education the populace on the
importance of insurance as to tackle the ignorance and apathy to
it. Providing socio economy assistance like development of loss
prevention, techniques, sponsorship of cultural activities,
scholarship to students and contribute views in shaping the
political and social ideologies of society.
d. Development of new products to meet peculiarities of the
people based on the various cultural beliefs, practices and the
various and the various socio economic factors prevalent in the
areas.

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2.2.11 INSURANCE POLICIES MOSTLY NEEDED BY THE DWELLERS

The rural dwellers who predominantly are farmers and also engaged in
agricultural activities and non-agricultural activities like palm wine taping, craft
which needs appropriate cover that will mitigate the financial impact of losses
arising from their investments. To liberate the rural communities from the claws
of poverty required policies which must protect its main economic activity that
is agriculture.
Hence, the transformation of this in the rural sector means an overhaul
traditional system of agriculture to mechanized system. The extension of
insurance policies to the rural people will enhance income status of the rural
populace which will improve their living standard, Odo (2005:1). The mostly
needed insurance policies by the rural dwellers are:

a. WHOLE LIFE ASSURANCE POLICY: this is a life assurance

protection that covers a stated definite sum assured to be paid to the
legal representatives of the assured at the event of death.
b. AGRICULTURAL INSURANCE: it is a collective system for
reducing economic uncertainties that are associated with investment in
agricultural and protects farmers from the effects of natural hazards.

These are policies that have been designed to take care of agricultural risks and
they are as follows:
i. Crop Insurance: this protects food crops of a farmer all risk
perils to which it is exposed to.

26
ii. Livestock Insurance: this is taken against death from
diseases or accident, losses from flood and drowning of
animals.
iii. Farm Building Insurance: this policy covers the farm
building and possible contents against fire and other perils.
iv. Machinery Breakdown Insurance: this covers damage and
breakdown that they may arise from use of plants and
machineries.
v. Good in Transit Insurance: this covers the possible loss
of farm products accessioned by accident while transporting
from farm to home stead of owner or the point of disposal.
vi. Health and Accident Insurance: it provides cover for ill
health or accident that brings some measure of relief by
providing some sum of money.
vii. Travelling Insurance: this covers any hazard that will
occur while embarking on travels.
viii. Fidelity Guarantee Insurance: this is also provides cover
for the loss of farm sets by such acts of employee, arm assets
like fixtures and fittings funds etc.
ix. Credit Insurance and Credit Bond: this covers the loan
that is given to the dwellers for trading
x. Marine Policy: it covers damages, inquiries and loss of
properties that may arise from the use of hunter water ways.

27
 xi. Fire Insurance: this policy covers the farm building and
private dwellers against fire.
xii. Theft/burglary Insurance: this policy is taken against theft
and breaking of farm building and private dwellers in the
rural areas.
2.2.12 PROBLEMS OF EXTENDING INSURANCE SERVICES IN THE

RURAL AREAS.

Extending of Insurance services deals with the public and it is significant toward
slapping public perception of insurance with trained personnel and
professionals.

Deson (2011:5) stated that a member of factor have been known to hinder the
introduction of extending insurance to those in the rural areas:

i. High Rate of Illiteracy:

The literacy level in Nigeria is currently put at 62.02 percent. Some
experts and those who have had the opportunity to work in our rural areas
are vigorously questioning this figure. Even at that level, we are
endangered. A population with our level of illiteracy is very challenging
to galvanize for any meaning effective culture transformation. How do
you make sales presentation to a man or who cannot read or write?

ii. Ignorance and Apathy to Insurance services: the high level of

ignorance even among the so called educated class and the meaning

28
 and the significance of insurance which is yet to be comprehended and
by extension to the rural dwellers has affected the demand for
insurance.
iii. Lack of Basic Data: there are inadequate basic information in
respect to agricultural yields, loss experience over a period of time
where the pattern is established and such information are not available
which hinders the business.
iv. Lack of Trained Personnel: the varied agricultural practices
often give rise to high variability in yield rendering it difficult to
establish insurance coverage and premium.
v. Lack of Adequate Infrastructure: the absence of good roads,
networks, efficient means of transportation and communication also
affect the extension of insurance services to rural dwellers.
vi. Lack of Local Representatives in the Rural Areas: in any of our
rural areas, there are virtually called insurance in their memory.
vii. The Intangibility Nature of Insurance: insurance services which
cannot be seen touched has made its extension difficult for it be
accepted. viii. Economic Instability: the economic situation of the
country also effect the business in that when the economic indexes
such as inflation rate, money supply overtime are relatively unstable
and unpredictable for business decision. It makes the insuring public
averse to taking insurance protection which reduces the expected
premium income of the insurer.

29
2.2.12 PROSPECTS FACING EFFECTING SERVICES OF INSURANCE

TO THE RURAL AREAS

According to Emilefo (2005:37) the provision of effective service to the rural

areas will bring about the following:

1. The rural dwellers will begin to understand the importance of

insurance.
2. It will increase awareness of people about insurance
3. The problem of the rural dwellers will be understood by the
insurance companies and the type of risk surrounding them will
be known.
4. With seminars, other local modern advertising the rural
communities will know more about insurance and its services.
5. It will increase employment
6. It will also increase patronage from the rural dwellers.
7. It will reduce social burdens on the rural populace and the
government.
8. It will also encourage other industries to invest in the rural
areas.
9. It will increase production mostly to the rural farmers.
10. It will improve the standard of living in the rural areas as well
as the country as a whole.

30
2.2.13 BENEFITS OF INSURANCE TO THE RURAL DWELLERS

In the extension of insurance services to rural areas, it will be beneficial to the

rural populace as follows:

1. It will promote and stabilize production and income of farmers,

through indemnification which enables them go back to business if
they so wishes.
2. It will provide protection and compensation against farm losses,
fishery loss and death of these in the rural areas etc that arises from
causes beyond the control means of the farmers.
3. It will aid the traditional far sector in adopting riskier technologies,
rather than being scared, farmers are confident to try the new
technologies because insurance provides a shield against the risk
factors.
4. It will encourage the introduction of risk management culture into the
rural areas.
5. It will reduce the level of unemployment culture occasioned by risk of
investment in agriculture.
6. It will reduce the level of illiteracy by introducing an educational
endowment to the rural populace
7. It will integrate the rural economy with the mainstream of the
monetized economy.

31
 8. It will free government funds normally provided on adhoc basis to
help farmers who suffer loss of investments through natural disasters
such as flood, drought.
9. It will be useful national development
10.It will encourage other industries to invest in the rural environment,
with which will enable the rural populace to have assess to their
business.

2.3 THEORETICAL FRAMEWORK

2.3.1 EFFICIENT MARKETS THEORY

This theory states that the market prices for shares/financial securities
incorporates or captures all the known information about that stock/security.
This means that the stock is accurately priced or valued until a future event
changes that valuation. Because the future is uncertain, an adherent to the
efficient market hypothesis is far better off for owning a wide range of stocks
and profiting from the general price rise of the market. Opponents of efficient
market theory point to a few works such as Warren Buffett and other investors
who have consistently beaten the market by finding irrational prices within the
overall market.
This Markowitz efficient behavior exhibited by insurance companies while
investing is usually associated with five cardinal patterns:

a) Preference for more returns on investment to fewer returns.

32
b) Envisaging expected returns on investment to depend on possible current

returns.

c) Envisaging risk on investment as directly depending on the size of expected

returns.

d) Preference of less risk to more risk.

e) Saving/premium-investment (intermediation) decisions are based on the

parameters of risk and returns (Ezirim and Muogholu, 2002).

(Ezirim, 2007), observed that Markowitz efficient market hypothesis is basically

a theory of return and risk, which phenomena are the building blocks of modern
portfolio theory. In their investment and intermediation activities, insurance
companies construct portfolios in the process of creating and holding different
types of both real and financial assets. The portfolio behaviour of insurance
companies is targeted at creating optimum amounts and varieties of assets, and
hence optimum returns on investment, at a given level of risk. The effect would
be to minimize the level of risk possible at any given level of expected return.
Such portfolio behavior is in line with what has been described as efficient
portfolio behavior.

2.4 EMPIRICAL FRAMEWORK

The work of Ching, Kogid and Furuoka (2010), examined the causal effect of
life insurance assets on economic growth. This was experimented using the co-
integration analysis with quarterly data drawn from Malaysia for the period
33
1997 to 2008. On the whole, the evidence, particularly from the regression
result seems to suggest that there is a one way relationship flowing from real
GDP to life insurance sector. No causal relationship flowed from life insurance
to GDP. This shows that the response by the economy growth indicators to life
insurance sector variables like savings mobilization, risk management and
investment do not completely grow the economy. Chen, Lee and Lee (2011), in
their work that sampled sixty (60) countries for the years 1976 to 2005, examine
the effects of life insurance market on GDP per capital growth. The study
focused on the relationship between life insurance market development as well
as stock market operations and the implication for economic growth. A
derivative of the endogenous growth model was employed to analyze the
relationship. The generalized method of moments (GMM) technique was used
in estimating the equations that link life insurance and stock market with
growth. The result from the study shows a supplyleading impact of the
development of the life insurance market on economic growth. The results
further showed some evidence that stock market and the life insurance market
are substitutes rather than complements. The results imply that causality runs
from life insurance market to economic growth.

Agwuegbo, Adewole and Maduegbuna (2010) predicted insurance investment

using a factor analytic approach and the implication for economic growth in
Nigeria. The study focused on the role played by insurance companies in
enhancing the efficient functioning of the financial system in Nigeria. It was
observed that insurance companies issue and sell indirect financial securities to

34
the surplus economic units and consequently, purchase other financial
securities, which are primary in nature, from the ultimate borrowers of those
funds. The study reported that the insurance industry in Nigeria holds a
reasonable percentage of the country’s total investable fund generated by the
capital market. These investments in the stock market serve as a shield for
insurance against predictable underwriting losses (covered losses) which are
more prominent than their return on investment. These findings suggest that
insurance investment activities not only boost the output level of goods and
services in the economy but also, enhance the performance of the risk
management function of insurance, hence, stabilizing and growing the
economy.

CHAPTER THREE RESEARCH DESIGN AND

METHODOLOGY

3.1 PREAMBLE

This chapter reviews the method of data collection/selection for their research
work. It is designed in a way that study problem is exhaustively addressed.
Areas like sources of data, population of study, sample size, area of study,
sample techniques/procedures validation of the instrument and method of data
collection and method of data analysis are discussed.

35
 3.2 RESEARCH DESIGN

3.3 AREA OF STUDY

The area of study has been restricted to Iseyin Local Government Area, Oyo
State which has been used as good representations that will enable the study
achieve its objective.

Lead way Assurance Co.Ltd also has been used as a yardstick to other insurance
companies in the country. It also serves as a good representation to other
insurance companies.

Iseyin LGA falls under the tropical savannah climate and has an average
temperature of 28 degrees centigrade. The average humidity level of the LGA is
60 percent while the total precipitation in the area is estimated at 1850 mm of
rainfall per annum. Farming is a major occupation undertaken by the people of
Iseyin LGA with a number of crops such as tobacco, cotton, and cocoa
cultivated in large quantities within the area. Iseyin LGA is a hub for the
production of Asoebi clothing materials which are a popular fashion item for
people of the Southwest. Trade also flourishes in iseyin LGA with the area
hosting a number of markets such as the Aso ofi International tourism market.
Then, there was no organized insurance business as we know it today. But there
existed some traditional system of risk sharing which could be described as
crude or primitive forms of mutual and social insurance schemes.
These include the extended family system, age grade associations, and town or
clan union e.t.c. were some mutual insurance like schemes for showing

36
benevolence to the members who had suffered some misfortunes such as death,
ill health, fire ravages or court cases. Both the extended family system and the
clan unions, age grade associations still exist in the rural areas as the most and
to some the only way of risk sharing because of the fact that the insurance
companies never extend services to the rural dwellers or even fail to create
awareness to the rural dwellers.

3.3 METHOD OF DATA

The data for this study comprises of both primary and secondary data.

3.3.1 PRIMARY DATA

These are information that was generated specially for this research work so to
gain insight into the research topic. These information were obtained through
oral interviews, questionnaires and observations.

3.3.2 SECONDARY DATA

These are already made information that existed before the conduct of this
research work. The secondary sources of data used by the researcher include
textbooks, materials from libraries, insurance journals and articles, newspapers,
information from website were consulted and used.

3.4 POPULATION OF THE STUDY

The population used for this study is seventy (70) which consists of the
insuring public who are the rural dwellers and some insurers.

37
The population of the insuring public under survey is sixty (60) which was taken
from the total population by the researcher using the random sampling
techniques and ten (10) insurers, randomly picked. The event was taken a true
representation of the entire population.

The breakdown of the population sample size

Respondent Frequency Percentage (%)

Iseyin Local Government 60 86%

Area, Oyo State

Lead way Assurance 10 14%

Total 70 100%

Source survey Field, 2021.

3.5 SAMPLE SIZE AND SAMPLE TECHNIQUE

In order to avoid error that could emanate due to calculation of large members,
the high cost of printing of questionnaires that will cover the entire population.
The researcher used Taro Yamane information to determine the sample size.

DETERMINATION OF SAMPLE SIZE

n = N

1+ N (e)2

Where n = sample size

38
 N = Total Population

E = Error Margin

1 = Constant
For the purpose of the study 5% was chosen by the researcher as the margin of
error.

Therefore,

N = 70
1 + 70(0.05)2
N = 70
1+70(0.0025)
N = 70
1+0.175
N = 59.57
N = 60
3.6 RELIABILITY OF THE INSTRUMENT

The reliability is generated from the information obtained for this research
work. This can include information for primary and secondary data.

3.7 VALIDATION OF THE INSTRUMENT

Validity is often defined as the extent to which an instrument measures what

it asserts to measure [Blumberg et al., 2005]. Validity of a research instrument
assesses the extent to which the instrument measures what it is designed to
39
measure (Robson, 2011). It is rare, if nearly impossible, that an instrument be
100% valid, so validity is generally measured in degrees. As a process,
validation involves collecting and analyzing data to assess the accuracy of an
instrument.

3.8 METHOD OF DATA ANALYSIS

The data collected from the respondent through questionnaire shall be treated
and analyzed using tables and percentages. This is to cover the information at a
given glance for easy understanding. Also the hypothesis shall be tested using
chi-square(x2) method and the formula is

x2 = E (fo – fe)
fe

where x2 = chi-square
£ = summation
Fo = frequency observed
Fe = frequency expected

CHAPTER FOUR DATA PRESENTATION AND ANALYSIS

4.1 AN OVERVIEW

This research project has gone into identifying how insurance services could be
extended to the rural areas; its problems and prospect using Iseyin Local
Government Area, Oyo State , as a yardstick to other rural areas. And Lead way
Assurance Co.Ltd as a yardstick to other companies. Quantitative figure
collected from the dispensed questionnaires both to the dwellers will now be
40
examined. Hence, there is need to state that from the previous chapter a total of
sixty questionnaires were administered to Iseyin Local Government Area, Oyo
State, which forty-one (41) were returned while ten (10) questionnaires from
distributed the insurance practitioners out of which nine(9) were returned.

4.2 PRESENTATION AND ANALYSIS OF DATA

Table 4.1 allocation and collection of questionnaires

Respondents Number Number Percentage (%)

Distributed Returned Returned

Rural dwellers 60 41 82

Insurance 10 9 18

Practitioners

Total 60 - 100

Source: Field survey, 2021

SECTION A

TABLE 4.2 ANALYSIS AND INTERPRETATION OF SEX

SEX FREQUENCY PERCENTAGE
(%)

MALE 31 76

FEMALE 10 24

TOTAL 41 100

41
 Source: Field survey, 2021

The table above have shown that the number of male that gave positive response
were thirty-one (31) while female were ten(10).

SECTION B

ANALYSIS AND INTERPRETATION OF DATA FROM THE RURAL

DWELLERS.

QUESTION 1: Have you heard of Insurance?

TABLE 4.3
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 27 66

No 14 34

TOTAL 41 100

v Source: Field survey, 2021.

From the above table it shows that twenty-seven (27) respondents attested to
have heard of insurance while fourteen (14) gave negative response.

Question 2: If the answer is yes, do you have idea of how it operates?

This question only set out to determine whether the twenty-seven (27)
respondents who attested to, out of the twenty-seven (27), respondents, nine (9)
admitted to have known it operates.
42
QUESTION 3: Are insurance services provided in your areas?

Here, the researcher wants to determine whether insurance services are actually
extended in the rural dwellers.
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 9 22

No 32 78

TOTAL 41 100

Source: Field survey, 2021

The table shows that nine (9) respondents are of the opinion that insurance
service are provided in their area while thirty-two (32) respondents said
otherwise.

QUESTION 4: Do you have any insurance policy covering you?

Table 4.5
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 5 12

No 36 88

TOTAL 41 100

Source: Field survey, 2021.

43
The table shows that five (5) respondent (12%) have insurance policies covering
them.

QUESTION 5: If the answer is yes, indicate which?

Here the researcher wants to know the kind of policy covering the respondents
that said yes to the previous question.

TABLE 4.6
RESPONSE FREQUENCY PERCENTAGE (%)

Agriculture 1 12

Life Assurance 2 5

Motor insurance

Others

TOTAL 41 100

Source: Field survey, 2021

The information above shows that one respondent has agriculture policy, four
(4) with motor insurance, two (2) with Life assurance and the remaining thirty-
four
(34) do not have any insurance policies.

QUESTION 6: Do you think insurance could be extended to your area?

RESPONSE FREQUENCY PERCENTAGE
(%)

44
 Yes 14 34

No 27 66

TOTAL 41 100

Source: Field survey, 2021

The above table showed that fourteen respondents are of the positive view that
insurance services could be extended in their area which twenty seven (27)
respondents gave negative response.

QUESTION 7 & 8: Here, the researcher used an open end question to

determine why yes and why No as in above , for those that said yes; listed such
reason as loan acquisition, the benefits etc in either way, those that said no listed
no reasons such as poverty, illiteracy and ignorance etc.

QUESTION 9: Have you heard of agriculture insurance in your area?

TABLE 4.8
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 19 46

No 22 54

TOTAL 41 100

Source: Field survey, 2021

The above table shows that forty-six (46) answered yes to have heard of
agricultural insurance while fifty- four (54) said no.
45
QUESTION 10: Do you have any agricultural insurance policy?
TABLE 4.9
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 14 34

No 27 66

TOTAL 41 100

Source: Field survey, 2021

Based on the above table, 34% attested that agricultural insurance is relevant,
while 66 said no.

QUESTION 11: Do you know that a policy could protect you against
accident; damage and theft from sea private water, loss of animal in you’re
your farms?

RESPONSE FREQUENCY PERCENTAGE

(%)

Yes 11 27

No 30 73

TOTAL 41 100

46
Source: Field survey, 2021

From the above table, eleven (11) 27% attested to have known about the policy,
while 73% were of the negative view.

SECTION C ANALYSIS AND INTEPRETATION OF DATA

FROM THE INSURANCE PRACTITIONERS

The section centers on the analysis on the insurers and interpretation of data that
were collected from nine (9) insurance practitioners from Lead way Assurance
Co. Ltd

QUESTION 1: Do you extend insurance services to the rural areas?

TABLE 4.11
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 3 33

No 6 67

TOTAL 9 100

Source: Field survey, 2021

The information above shows that 33% attested to have extended services, while
sixty-seven (67) responded no in respect to it.

QUESTION 2: Does ignorance and apathy for insurance services hinder the
extension of insurance services to the rural areas?
TABLE 4.12

47
 RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 8 89

No 1 11

TOTAL 9 100

Source: Field survey, 2021

This clearly shows that 89% agreed that ignorance and apathy for insurance
services hinders the extension of insurance to the rural areas while 11% said no

QUESTION 3: Do you think making special packages and at affordable

prices (premium) would attract participation from the rural
dwellers?

TABLE 4.13
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 7 78

No 2 22

TOTAL 9 100

Source: Field survey, 2021

The information stated that 78 said yes and 22% said no to affordable price
(premium) attracting participation.

48
QUESTION 4: Are poverty and illiteracy factors limiting against the
development and growth of the industry in the rural areas?

TABLE 4.14
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 3 33

No 6 77

TOTAL 9 100

Source: Field survey, 2021

The table clearly shows that 33% agreed to poverty and illiteracy being
limitation while 77%disagreed.

QUESTION 5: Do the percentage level of insurance awareness in the rural

areas encouraging?

TABLE 4.15
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 3 34

No 6 76

TOTAL 9 100

49
Source: Field survey, 2021

The table above shows that 34% of the respondents said that the level of
awareness is encouraging while 76% said it is not encouraging.

QUESTION 6: Do you think that with reasonable awareness campaign by the

insurance industry, the rural dwellers will take up insurance policies?

TABLE 4.16
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 7 78

No 2 22

TOTAL 9 100

The table clearly shows that 78% of the respondents agreed that with awareness
campaign in the rural areas, insurance will be taken while 22% disagreed.

QUESTION 7& 8: The researcher used an open ended question to determine

why yes and why no as in above. For those that that said yes, they listed
reasons as loan acquisition financial relief benefit that will accrue to the
dwellers while no reason as illiteracy, lack of income, determination, poverty,
lack of interest etc.

50
QUESTION 9: Do you think agricultural insurance policies would help
bring back agriculture to its prime stage, there by the revamp the economy
of the country?

TABLE 4.16
RESPONSE FREQUENCY PERCENTAGE
(%)

Yes 9 100

No -

TOTAL 9 100

Source: Field survey, 2021

The table up shows that 100% of the respondents said yes to agricultural
insurance revamping the economy of the country, while nine(9) disagreed.

QUESTION 10: What do you think is responsible for the low level of the
industry’s penetration o the rural areas?

This question sets out to know the cause of the low penetration the rural areas
respondents gave reasons as lack of amenities, illiteracy, poverty,
understanding, bad image of the industry in the country and lack of awareness.
This question sets out to get solution and suggestion on how to improve
insurance services like creation of awareness, provision of special packages,
help in sponsoring social activities in the rural areas.

51
QUESTION 11: What suggestion would you proffer for the general
improvement of insurance practice in the country?

The suggestion given by the practitioners are as follows: prompt claims

settlement, charging affordable premium, Awareness programs, government
support, adequate training, for insurance practitioners, embarking on sponsoring
social activities such as football, radio and television programmes etc.

4.3 TESTING HYPOTHESIS

To satisfy the objective of this study which are embedded in the chapter one, the
researcher will now proceed to test the various hypothesis. However, to further
substantiate and authenticate any conclusion draw form. The hypothesis will be
tested using the chi-square contingency table statistical technique.

STATISTICAL EXPLANATION
Fo = frequency
observed
X2 = chi-square

> = Greater than

< = less than

Df = degree of freedom

R = row

C = Column
ATTRIBUTES

52
 Level of significance = 0.5% of 5%
formula
Frequency expected (Fe) = Total frequency

Number of
option
Computed Chi-square X2 =
X2 = £ fo – fe

fe

we need to agree on the hypothesis before you test it

HYPOTHESIS 1

HO: Apathy and Ignorance for insurance services do hinder the extension
of services to the rural areas.
H1: Apathy and Ignorance for insurance services do not hinder the
extension of services to the rural areas.

TABLE 4.12 is used to test this hypothesis

Response Fo Fe Fo –fe (fo – Fe)2 Fo - fe2

fe

53
 Yes 8 4.5 3.5 12.25 2.72

No 1 4.5 -3.5 12.25 2.72

Total 9 4.5 0 0 5.44

Source: Field survey, 2012

Fe = 9/2 = 4.5
X2 = (8 – 4.5)2
4.5
= 5.44
Df = k-1 = 2 - 1=1
Level of significance = 0.05 at 1 table value
= 3.841
X2 = 5.44 > 3.841
Therefore the Null hypothesis (Ho) is rejected based on this, it is concluded that
ignorance and apathy for insurance service do hinder the extension of insurance
services to the rural areas.

HYPOTHESIS 2

HO: special packages at affordable price (premium) would attract

participation from the rural dwellers
H1: special packages at affordable price (premium) would not attract
participation from the rural dwellers

54
 TABLE 4.16
Response Fo Fe Fo –fe (fo – Fo - fe2
Fe)2
fe

Yes 7 4.5 2.5 6.25 1.39

No 2 4.5 -2.5 6.25 1.39

Total 9 4.5 0 0 2.78

Source: Field survey, 2012

Fe = 9/2 = 4.5

X2 = (9 – 4.5)2

4.5

= 2.78

Df = k- 1 = 2 -1=1

Level of significance = 0.05 at 1 table value

= 3.841

X2 = 2.78 < 3.841

2
Therefore, X is less than the table value, so the null hypothesis (H O could be
accepted)

HYPOTHESIS 3

HO: Poverty and illiteracy is not a limiting factor against the development
and growth of the industry

55
 H1: Poverty and illiteracy is a limiting factor against the development and
growth of the industry

TABLE 4.17
Response Fo Fe Fo –fe (fo – Fe)2 Fo - fe2

fe

Yes 8 4.5 3.5 12.25 2.72

No 1 4.5 -3.5 -12.25 2.72

Total 9 4.5 0 0 5.44

Source: Field survey, 2021

Fe = 9/2 = 4.5
X2 = (9– 4.5)2
4.5
= 5.44

Df = k- 1 = 2 -1=1
Level of significance = 0.05 at 1 table value

= 3.841

X2 = 5.44 > 3.841

56
Therefore the Null hypothesis (HO) is rejected and alternative hypothesis will be
accepted which states that Poverty and illiteracy is a limiting factor against the
development and growth of the industry

HYPOTHESIS 4

HO: Geographical factors and lack of infrastructural facilities is limiting

against the extension of insurance services to the rural areas.
H1: Geographical factors and lack of infrastructural facilities is not
limiting against the extension of insurance services to the rural
areas.
TABLE 4.18 is used to test hypothesis 4
Response Fo Fe Fo –fe (fo – Fe)2 Fo - fe2

fe

Yes 7 4.5 2.5 6.25 1.39

No 2 4.5 -2.5 -6.25 1.39

Total 9 4.5 0 0 2.78

Source: Field survey, 2021

Fe = 9/2 = 4.5
X2 = (9– 4.5)2
57
 4.5
= 2.78

Df = k- 1 = 2 -1=1

Level of significance = 0.05 at 1 table value

= 3.841
X2 = 5.44 > 3.841

Therefore, X2 is less than the table value, so the null hypothesis (H O) could be
accepted

HYPOTHESIS 5

HO: Prompt payment of claims would encourage the acceptance of

insurance services by the rural dwellers
H1: Prompt payment of claims would not encourage the acceptance of
insurance services by the rural dwellers

TABLE 4.18 is used to test this hypothesis

Response Fo Fe Fo –fe (fo – Fe)2 Fo - fe2

fe

58
 Yes 8 4.5 3.5 12.25 2.72

No 1 4.5 -3.5 -12.25 2.72

Total 9 4.5 0 0 5.44

Source: Field survey, 2021

Fe = 9/2 = 4.5
X2 = (9– 4.5)2
4.5
= 5.44

Df = k- 1 = 2 -1=1
Level of significance = 0.05 at 1 table value
= 3.841
X2 = 5.44 > 3.841

Therefore the Null hypothesis (HO) could be rejected and alternative hypothesis
will be accepted which states that Prompt payment of claims do not encourage
the acceptance of insurance services by the rural areas.

59
CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND

RECOMMENDATIONS.

5.1 SUMMARY OF FINDINGS

In summary of the research work, which was concluded with the ultimate
aims to ascertain the extending insurance services to the rural areas in Nigeria -

60
problems and prospects. In order to achieve its objectives, Iseyin Local
Government Area, Oyo State , was used as a yardstick to other rural areas in the
country, as well as Leadway Assurance Co. Ltd was also used to represent other
insurance companies. In the cause of this study, the researcher discovered that
only 66% of the rural dwellers have heard of the insurance for the first time,
while only 34% know how it operates. Hence, the researcher also discovered
that geographical and lack of infrastructural facilities is another hindrance
limiting the extension of insurance services to the rural dwellers by the
insurance industry.

Furthermore, in the analysis also, the researchers equally discovered that

high level of illiteracy, ignorance and apathy for insurance services to the rural
dwellers. I also discovered that only 34% of those that have heard of insurance
agreed that policy can protect them. About 66% of the insurance practitioners
agreed to have enough policies to meet the peculiar needs to the rural
populace.
However, the study further revealed that agricultural insurance will help to
boost up the economy of the country and special packages at affordable prices
(premium) would attract participation from the rural dwellers if more awareness
and enlightenment on the insurance industries on the importance of insurance is
initiated by the insurance industry. Also prompt payment of claims would
encourage the rural dwellers from taking up insurance policies, thus enhancing
customers’ satisfaction.

61
5.2 CONCLUSIONS

To conclude this research work, the researcher has seen what some authors,
insurance practitioner and other, have written as regard to this topic “Extending
Insurance Services to the rural areas - problems and prospect”

From the above, we can draw a conclusion that the future of the industry
in Nigeria is very high. If they succeed in development of an insurance culture
in our rural communities, they can expect increase patronage from them in the
near future.

To make road into the rural communities, they must go beyond their
current conventional role and make the industry one of the vital and formidable
weapons in a way against illiteracy, ignorance and poverty. If the insurers can
give the desirable attention to her reputation and benefits she provides to her
clients, developing new products that take into account of our peculiar cultural
and religious belief, bring down the prices (premium) prompt settlement of
genuine claims improve our customer relationship and delivery system. The
development of an insurance culture, whether in the rural or urban areas, will be
a fact accomplish.

5.3 RECOMMENDATIONS

Based on the findings the researcher will go ahead to make relevant and
useful recommendations that will enhance the insurance industry to extending
insurance services to rural areas and give customers satisfaction.

62
In the high of the findings obtained in this research work by the researcher, the
following recommendations were made:

a. All insurance companies should extend insurance services to the

rural areas.
b. They should encourage and assist the government in providing
social amenities to the rural populace.
c. They should embark on serious tasks of educating the rural
dwellers, through seminar, workshops, sponsoring of social and
cultural activities such as football, dancing e.t.c. providing social
economic assistance like water project e.t.c. all they will enable the
rural dwellers to be aware of insurance service.
d. The industry should collaborate with cooperate social clubs,
contribution clubs and other rural institutions to develop an
insurance culture in the rural areas.
e. They should research the phenomenon called co-operative society
and how to make effective use of them to reach the rural populace.
f. Employment and training of agencies are very important because
agencies forms very important link in the insurance claim. In their
desire to reach the rural market, insurance companies due to
challenges of resources, cannot establish offices in all the rural
areas. They should work through trained and skilful and disciplined
agents

63
 g. Branch offices should fashion out policies at affordable prices
(premium) to meet the peculiar needs of the rural dwellers and
settle claims as at when due.

BIBLIOGRAPHY
Agu K.O.C. (1999), Insurance Claims in Nigeria Enugu:
Glanic ventures.

Emilefo, S.A. (2010), Strategies for Developing an Insurance

Culture. In the Rural environment, Lagos Leadway Assurance Co. Ltd.

Anaynwa, O.M. (1990), Theory And Policies of Money and Banking Enugu,
Hossanna Publications.

Aneke, J.I. (2006), Management of Insurance Business 1st Edition.

Agud, Lagos: John Kens and Willy Nigeria Ltd.

Iloh. J. (2001), Fundamental of Financial Management Enugu,

Glanic Ventures.

Ibekwe, J,J.(1991), Industrial Pollution and Development in

Lagos daily times.

Dauserean P. (1966), “Ecological Impact and Human Ecology” in F.F. Darling

and J.P.Multon future environment on North America New York.

64
Ezema Clifford Anene (2012), “The Principles and Practice of Risk
management in Insurance.

Ezema Clifford Anene (2012), Life Assurance underwriting.

Irukwu J.O. (1999), You and Insurance; Basic Facts About Insurance,
Lagos Bima Publication.

REFERENCE

https://www.urbanet.info/ https://www.legit.ng/1109352-brief-history-

insurance-nigeria.html

Agu K.O.C. (1999), Insurance Claims in Nigeria Enugu:

Glanic ventures.

Anaynwa, O.M. (1990), Theory And Policies of Money and Banking Enugu,
Hossanna Publications.

Irukwu J.O. (1999), You and Insurance; Basic Facts About Insurance,
Lagos Bima Publication.

Nwite S.C. (2000), Introduction to Agriculture, 1st Edition, Enugu

Immaculate Publications Limited.

Emilefo, S. A. (2010), strategies for Developing an Insurance

Culture in the Rural Environment, Lagos Lead way Assurance
Co.Ltd.

Ezema C. (2012), Risk Management and Insurance Institute of

Management and Technology Publication Ltd.
65
Eche Anne (2012), management of insurance company; IMT publication LTD.
Onah R.E.(2012), Life Assurance Law, Claims and Taxation.

Ibeabuchi H.(2012), Liability of Insurance and Underwriting.

Ejiofor Francis A.(2012), Co-operation societies in Providing Health

Insurance in Rural areas. A Masters Degree of Political
science.

Agu, K.O.C (1999), Insurance Claim Nigeria, Enugu Glamic Ventures.

Anyanwu, O.M.(1990), Theory and Policy of Money and

Banking Enugu, Hosanna Publication.

Irukwu J.O. (1999), Yon and Insurance; Basic Facts about Insurance
Lagos, Bima Publications.

Nwite S.C. (2000), Introduction to Agriculture, 1st Edition, Enugu

Immaculate Publications Limited.

Emilefo, S. A. (2010), strategies for Developing an Insurance

Culture in the Rural Environment, Lagos Lead way Assurance
Co.Ltd.

Ezema C. (2012), Risk Management and Insurance Institute of

Management and Technology Publication Ltd.

Onah R.E.(2012), Life Assurance Law, Claims and Taxation.

Ibeabuchi H.(2012), Liability of Insurance and Underwriting.

66
Ejiofor Francis A.(2012), Co-operation societies in Providing Health
Insurance in Rural areas. A Masters Degree of Political
science.

APPENDIX SECTION

.A.

 Please tick (v) as appropriate in the box(es) provided below

Personal data of the respondent

Sex…………………….. Age……………………….

Marital status (a) married (b) Single (c) Others

SECTION .B.

QUESTIONNAIRES DESIGNED FOR THE RURAL DWELLERS

1. Have you heard of Insurance? (a) yes (b) No

2. If yes do you have any idea of how it operates?

(a) Yes (b) No

3. Are insurance services provided in your area?

(a) Yes (b)

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 4. Do you have any insurance policy covering you?
(a) Yes (b) No

5. If the answer is yes indicate which?

(a) Agriculture (b) life (c) Motor (d) None

6. Do you think Insurance Services could be extended to your area?

(a) Yes (b) No

7. If yes why? ………………………………………………….

8. If No why? …………………………………………………..

9. Have you heard of agricultural insurance in your area?

(a) Yes (b) No

10. Do you have any agricultural policy?

(a) Yes (b) No

11. Do you know that agricultural insurance is relevant to the people in

your area?
(a) Yes (b) No

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12. Do you know that a policy could protect you against accident damage and
theft from sea pirate on the water, loss of animal in your farms?
(a) Yes (b) No
13. Would poverty and illiteracy stop the people from taking up insurance
policies in your community?
(a) Yes (b) No

14. Will those elites in your area as means of reaching the people in your
community influence participation from your area?
(a) Yes (b) No

15. In your area do you have any other ways of sharing risk or transferring

risk before the advent of modern insurance? (a) Yes (b ) No

16. Which class of farmer do you belong to?
(a) Small scale (b) Middle scale (c) Large scale
(d) None

SECTION QUESTIONNAIRE FOR INSURANCE PRACTITIONERS

1. Do you extend insurance services to the rural areas?

(a) Yes (b) No

69
 2. Does ignorance and apathy for insurance services hinders the
extension of insurance services to the rural areas?
(a) Yes (b) No
3. Do you think making special packages and at affordable prices
(Premium) would attract participation from the rural dwellers? (a)
Yes (b) No
4. Are poverty and illiteracy factors limiting against the development
and growth of the industry in the rural areas?
(a) Yes (b) No
5. Is the percentage level of insurance awareness in the rural areas
encouraging?
(a) Yes (b) No
6. Do you think that with reasonable awareness campaign by the insurance
industry, the rural dwellers will take up insurance policies? (a) Yes (b)
No

7. If yes why?
…………………………………………………………….

8. If No why?
………………………………………………………………

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9. Do you think agricultural insurance policies would help bring back
agriculture to its prime stage, thereby to revamp the economy of
the country?

(a) Yes (b) No

10. Do you think prompt payment of claims would encourage the
purchase of insurance by the rural dwellers?
(a) Yes (b) No

11. Is geographical factors and lack of infrastructural facilities, limiting

against the extension of insurance services to the rural areas?
(a) Yes (b) No
12. Do you have enough policies to meet the peculiar needs of the rural
populace?
(a) Yes (b) No
13. What do you think is responsible for the low level of the industry
penetration to the rural
areas?..................................................................................................
..
....................................................................................................
14. What suggestion would you proffer for the general improvement of
insurance practice in the
country?..............................................................................................

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 ..... ......................................................................................................
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