A large number of Nigerian society find the term Insurance irrelevant to their daily activity. Only duty-bound do many carry out the purchase of the third-party motor insurance made compulsory by the governing body. This post with the snippet of its tale is made to paint a picture of what insurance is all about to the layman.
For us to appreciate the meaning of Insurance, it will be necessary we look at a fable that was on the website of the Association of British Insurers. The fable goes thus: that eleven families lived in an imaginary village and each family had owned a pig as a source of its livelihood. It happened that one of the families in the village lost its pig – the source of its livelihood and so had to leave the village. In order to foster any member of the village leaving as a result of the loss of its source of livelihood, the remaining members approached a wise man who requested them to each part with the sum of 10pounds so that in the event of the death of a pig, the wise man will replace it. it happened that one of the pigs died after the members of the village had contributed the £10 and the cost of the pig at the time of loss was £95 as against the earlier £90 the wise man had to replace the pig as promised and still made a profit of £5. In the end, everybody was happy.
In looking at the above story, we can identify two key concepts, that of risk transfer and the creation of a pool for the risk transfer. The wise man serves as a means through which a pool was created for the transfer of risk by the members of our imaginary village.
From the above, we can attempt to define insurance, as a risk transfer mechanism through which a party, known as the insured transfer his risk to another, known as the insurer based on a consideration, known as a premium, so that in the event of a loss, the insurer will indemnify him.
Culled from: Insurance Agency Certification Training Manual by College of Insurance And Financial Management and Established by the Chartered Insurance Institute of Nigeria(CIN).
Culled from: Insurance Agency Certification Training Manual by College of Insurance And Financial Management and Established by the Chartered Insurance Institute of Nigeria(CIN).
