Government Regulation and State Intervention in Insurance| All You Need know

Government Regulation and State Intervention in Insurance| All You Need know

Tracing from the inception of the insurance business in Nigeria, there was no form of state or government control of the insurance industry. Government regulation and state intervention in insurance have been in effect and the following are all you need to know.

The intention of the government has been to allow the insurance companies to control and manage their business and enjoy complete freedom of action within their internal provisions of ordinary law of the land, that subsisted among them.

As time goes on, it became clear to the governments that this act of zero supervision and regulation of insurance companies was subject to abuse as many individuals irrespective of their background were free to set up an insurance company provided they were able to comply with the very requirements of the ordinary law governing them those days.

There were many records, where some fraudsters and dubious promoters incorporated insurance companies, reduce or undercuts premium rates, collected substantial amounts of premiums, and run off the market as soon as the time for claims payments elapsed.

All these fraudulent activities in the insurance business have awakened the interest of the government to ensure the protection of consumers of insurance products.

However, the government’s control in the insurance industry has shown that it is there to safeguard consumers through insurance insolvency and stating procedures for registering into the insurance industry to avert the rate at which fraudsters enter the market.

Reason for Government Regulation{control}

The main reason for government regulation of insurance is to protect consumers. Government control and regulates the insurance industry to solicit in ensuring that the kind of person or group of persons who sell insurance promises are men who can be relied upon to fulfill their obligations when the appropriate time to do so comes.

Furthermore, in the absence of a comprehensive social insurance scheme, most people take out life insurance policies to protect themselves and their families against death and old age. For some of these people, it is their only life savings.

The government, however, has a duty to protect the savings of such individuals by ensuring that the insurance company is properly run and that the owners or promoters of these companies do not run away with these savings or premiums collected from the public.

Also, the primary purpose of government control is the necessity to protect the interests of the policyholders against possible exploitation by fraudsters or unscrupulous insurers.

Among other reasons for governments’ control of the insurance industry includes

a. Ensure accurate and effective licensing

b. Promote insurer’s solvency

c. Market control and regulations

d. Ensure the fixing of adequate premium rate and as well facilitate
the payment of premium at the agreed timeframe.

e. Making insurance widely available to those in need.

Condition for Carrying out Insurance Business

No one is allowed to run any insurance business of any kind unless the following is fulfilled

1. A company duly incorporated as a limited liability company under or pursuant to the companies decree 1968:

2. A co-operative insurance society registered under any enactment or law relating to co-operative societies; or

3. A mutual insurance company.

In accordance with the provisions of the insurance Decree 1976, no insurer shall commence or carry on insurance business in Nigeria unless the insurer is registered pursuant to this decree.

Application for Registration:

The director shall register an applicant as an insurer if he is satisfied with the following cases.

a. That the class of insurance business will be conducted in accordance with sound insurance principles.

b. That the applicant is one of the bodies referred to in section 3 {1} of this Decree is duly established under the applicable law and has a paid up-up share capital as specified in section 8 of this Decree for the relevant class of insurance business

c. That the arrangements relating to re-insurance treaties in respect of the classes of insurance business to be transacted are adequate and valid;

d. The proposal forms and appropriate conditions of policies are in order and acceptable;

e. The directors and shareholders must be persons, who have not been involved in any fraudulent activities.

f. That the applicants have paid the prescribed fees for registration


Some individuals have thousands of reasons why they cannot purchase insurance coverage. Most of them have been defrauded by some dubious promoters incorporated by insurance companies, undercuts premium rates, collected a substantial amount of premiums, and went underground as soon as the claims start rolling in.

This infidelity act alone has hastened the interest of the government to apply the various legislations, control, and regulations to protect and safeguard the activities of insurance operations.

However, the government defines a procedure to ensure that the general public gets acquainted with the proper knowledge of the insurance industry is made known to the consumers, assuring that all agents and brokers are academically sound {legally recorganized} and licensed to carry out insurance business.

For any organization to run an insurance business, it must be a cooperative insurance society registered under any enactment or law relating to cooperative societies. This is because government regulation and state intervention in insurance has made compulsory that for any organization to carry out any insurance business, the organization must be duly registered. This is to enable the removal of fraudsters from the market. 


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