Impact Of Indemnity Legal Principle On Settlement Of Claims In Nigeria Insurance Company

Impact Of Indemnity Legal Principle On Settlement Of Claims In Nigeria Insurance Company: A Case Study Of Selected Companies

ABSTRACT

This study is on impact of indemnity legal principle on settlement of claims in Nigeria insurance company. The total population for the study is 200 staff of selected insurance companies in Uyo. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up direct sales officers, marketers, senior staff and junior staff was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

CHAPTER ONE

INTRODUCTION

An insurance contract has been defined as an agreement between two or more parties in which one party, the insured, pays a specific sum to the other, the insurer, in exchange for the latter’s indemnification for losses incurred as a result of certain risks, contingencies or occurrences specified under the contract. For such an agreement to be judicially enforceable, the insured must have an insurable interest in the property insured. The rule of insurable interest has developed to eliminate the element of wagering from insurance contracts. At common law, wagering contracts were enforceable, and wagering contracts on companies and individual lives. As to property insurance, specifically fire insurance, wagering contracts. (core.ac.uk)

Insurance contracts are aleatory contracts, that is, the insurer need perform only if a condition occurs. To that extent the insurance contract is contingent upon the chance of an event. That is not to say that an insurance contract is a wagering contract. A wagering contract is founded upon chance, not upon the chance of an event; it creates its own risk win all or lose all. An insurance contract is founded upon dispersion of a risk-the insured transfers a large risk for a small cost. He is not seeking a gain, he wants to avoid a possible future loss. Thus, the requirement of an insurable interest is the distinguishing element between awagering contract and an insurance contract. Although insurance contracts are seemingly wagers, the concept developed that if there is an interest in the subject insured which is independent of the occurrence of the risk, then there is no wager. The authorities, however, are divided on the question of what relationship between the insured and the subject of insurance will produce an insurable interest. One view holds that there must be a legal relationship or property interest which a court of law or equity will recognize and enforce. Another view subscribes to the factual expectations theory under which an insurable interest exists when a person profits by the continued existence of a thing and would suffer some loss by its destruction whether or not he has any legal interest in it.( ESSENTIALS OF INSURANCE LAW 137 (2d ed. 1957)

While Nigerian valuers are subject to Stated-based, as opposed to a national, licensing regimes, consistently these require professional valuers to maintain a level of professional indemnity insurance in order to practice. This requirement is in addition to those relevant to the acquisition and maintenance of core skills and competency as evidenced by the separate obligations regarding continuing professional development. Maintaining the requisite level of insurance covers imposes a level of obligation that is separate to that enforced by the State-based regulators and professional bodies. A core feature of any insurance cover is that the insured has an obligation to notify their insurance provider of both actual and potential claims. This obligation, as the paper discusses, also is a feature of professional indemnity insurance policies. An actual claim clearly will impact upon future policy acceptance and, if the prospective insured is accepted for ongoing coverage, the premiums paid. Notification of a potential claim, whether or not the notification crystallizes into an actual claim, also can have an impact upon the insured’s claims history and premiums (Blake and Eves (2012)

In today’s world, as was mentioned by Sinha (2013), any professional or professional bodies that render skilful advice and services to people, can be sued for negligence, errors and omissions on their part, the cost of which in some cases can be excessive. However, according to Harris (2005), a few design firms claimed that they do not belong to any professional association yet never had a claim during their long establishment as organizations. Therefore, they do not think that it is necessary to insure for PI Insurance. Other than that, an unclear limit of liability gives bad judgments towards the application of PI Insurance as professionals think that they do not need such liability, and rather than paying for the premium, they would rather ‘going bare’, or in other words, they doubt on what the policies offered by the insurers. Through this research, all the needs and the importance of PI Insurance are underlined to increase the awareness and understandings on its other benefits it could offer.

Insurance is usually seen as the financial risk transfer medium, and yes it actually is. However, its importance is frequently recognized only after a major loss. Businesses that offer advice, designs or similar services in a professional capacity are potentially at risk either they are multinationals that operate all over the world or smaller private firms of partnerships.

The major reason for the establishment of insurance company is to provide a cushion for individual or organization that has or may suffer some misfortune at a price called premium. Sometimes when loss occurs and claims presented, they are delayed or declined and when paid it does not restore the insured to his former financial position. This has formed the architect of dispute between the insured and the insurer. These I think affect the attitude of insuring public and development of the insurance industry in Nigeria. It is therefore the purpose of the study to find out why claims are delayed or not paid at all and the role played by the insuring public that result in claim being settled or declined. The study also finds out if approach to claim settlement affect attitude of the insuring public and to what extent it affects the development of the insurance industry.

The objectives of the study are;

1. To ascertain the impact of indemnity legal principle on settlement of claims in Nigeria insurance company
2. To find out what the perception of the public is towards insurance companies.
3. T ascertain the relationship between indemnity legal and settlement claim in insurance company

The following have been put forward for testing

H0: there is no impact of indemnity legal principle on settlement of claims in Nigeria insurance company

H1:  there is impact of indemnity legal principle on settlement of claims in Nigeria insurance company.

H0: there is negative perception of the public towards insurance companies.

H1: there is positive perception of the public towards insurance companies.

• SIGNIFICANCE OF THE STUDY

Claim administration is the core of insurance business; an efficient and prompt setting service is the best of advertising for an insurance company.
But since claim settlement has been a subject of controversy this study will help
-The insurer claim. Setting superior value and effective settlement of claim. The insurance company can change their customer expectations and make them the engine fuel of innovation by listening to their careful analysis, complaints compliment and evaluation of their services delivered.
-The study will also be relevant to academicians who may wish to know themselves of data and information about claim settlement situation in companies, it will also enlighten the public at large on insurance matters. More so the study will serve as a dimension to put up researchers and will give them the bases for validating and disapproving the finding of this study.

• SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers impact of indemnity legal principle on settlement of claims in Nigeria insurance company. The researcher encounters some constrain which limited the scope of the study;

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

1.7 DEFINITION OF TERMS 

CLAIM FORM: – This is a form in which the insured states the circumstances of the occurrence of the damage or loss for which he sought the form given to him by the insurer.

CLAIM: – This is an application by the policy holder to exercise the right to indemnify or benefit under the policy.

LOSS ADJUSTERS: – This is an independent firm whose services are employed by the insurance company if there is excess claim by the insured to assess such claim. After their assessment, their judgement is final and they are paid for such services by the insurance company.

INSURABLE INTEREST: – Legal to insure arising out of financial relationship between the insured and subject matter of insurance enforceable at law.

INDEMNITY: – Is the control principle of justice. Brett n Castellen V. Preston (1883). Indemnity is a mechanism of pulling the insured back to the former position he enjoyed immediately before the loss.

RISK: – Is the chance of loss. Risk is also the uncertainty as to the occurrence of an economic loss.

• ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

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