A Critical Review of Accounting System in Nigeria Insurance Industry
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Abstract on A Critical Review of Accounting System in Nigeria Insurance Industry
This study will survey a critical review of the accounting system in Nigeria’s insurance industry.
This study as a case study is an attempt to review the problems of accounting system in industrial and general insurance company limited. It has become necessary because of proper understanding and correct treatment in various items in the account. This study will make a fair contribution towards the understanding of the treatment of various items by insurance companies.
In collecting the data for the study, the researcher will made use of the tools like structured and in structured interview and question will form primary method data collection while secondary will consist annual report, accounts, journals, insurance year book, and text books etc.
Finally, the conclusion will be that though there are lack of proper understanding and correct treatment of various items in the accountant of the insurance companies, however, the problem can be solve if the researcher can bring to light the difference in the treatment of various items by insurance companies and its effect on intra and inter-company comparison.
Chapter One of A Critical Review of Accounting System in Nigeria Insurance Industry
Insurance accounting as relates to insurance company is a distinct and specialized account that is always referred to as “specialized Accounting” just like taxation is a specialized area. Though it employees the general accounting principles, concepts and conventions, there in need for a clear understanding of its preparations.
In the days of “T- forms” presentation of financial statements an insurance company account could be easily recognized form the sides of the “T” to which income and expenditure items are placed. They where reversed and therefore not in conventional form. The convention was placing revenue items to the right of the “T” insurance company revenue, profit and loess account had the revenue items to the legit of the “T” and expenditure items to the right.
Nowadays, the vertical forms of presentation are adopted and this peculiarity of reversal of sides is no longer these.
However, there are other features that distinguish accounting system in insurance industry or company form other accounting system. There are:
i. Requirement by law for remitting of quarterly and annual returns to central Bank of Nigeria (CBN) and Nigerian insurance supervisory Board (NISB).
ii. Prescription by law of the type and level of investment.
iii. Requirement by law for the maintenance of margin of solvency.
iv. Requirement by law for rendition of returns to the Nigerian insurance supper story board (NISB) with stated deadline.
v. Requirement by law of the maintenance of Reserves known as “TECHNICAL RESERVE” Comprising of insurance fund, Reserves for outstanding losses, reserves for incurred but not reported and contingency reserves.
All these are in addition to rendition of the required returns to the corporate affaire commission (CAC) being an incorporated company under or pursuant to the companies and allied matters decree (CAMD) 1990.
From the above, it can therefore be seen that without a proper understanding of intricacies involved in both the interpretation of the decree as well as the items that makes up insurance account and right treatment is accorded the financial statement generated will not give a true and fair view of the statement of affairs and of profit and loss for the period.
Having read and studies about insurance industry, the researcher fact it worth caring out a detailed researcher work in order to benefit those who have no accounting orientation of formal training in accounting before. Also for the benefit of students in higher institutions and reader alike.
BACKGROUND OF STUDY (INDUSTRIAL AND GENERAL INSURANCE COMPANY LIMITED (igi)
The emergence of industrial and general insurance company Ltd (IGI) on Nigeria’s insurance landscape of dynamism and innovation into insurance practice Nigeria. With a carefully selected board of Directors comprising of distinguished and reputable Nigeria’s
Who have made their marks in their chosen fields likes Yakubu Gowon, Remi Olowode, Ola O. Vincent, Apostle Hayfor I. Alile and many others.
From the inception of the company, the company has a crop of highly skilled and motivated company of today and the future. IGI has, within the 6 years of its existence stamped it identify on the market as a leading professional insurance company in the provision of the highest standard of financial protection and risks management service.
In 1996 IGI became the first private insurance company in Nigeria to hit the N1 Billion market in premium income, and also the targets in terms of volume, and also the targets in terms of volumes of business. IGI’s N500 million authorized share capital of which N200 million is fully paid –up is also the biggest for any private insurance company in the country. IGI’s computer backed under writing and claims management systems, guarantee prompt and efficient services to customers. The company’s reputation as a friendly insurance firm derives, in part form the simply format and content of its policy documents which are couched in simple language devoid of unnecessary technical and legal terms.
Today IGI had become a leader not only in General insurance, but especially in the specialized. Areas like oil, Energy, Engineering, Aviation, medical, insurance and industrial risk management.
The giant studies taken since inception reflect the result –oriented approach of the company and the robust touch it has brought to bear on the practice of insurance in Nigeria.
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