Insurance Industry – Review of Accounting System

Insurance Industry – Review of Accounting System  : (A Case Study Of Industrial And General Insurance Company Ltd.)

Insurance Industry – Review of Accounting System  : (A Case Study Of Industrial And General Insurance Company Ltd.)



Accounting is concerned with the qualification of economic events or transactions occurring in the business entity, it is aimed at measuring economics activities with a view to providing information and has been called the language of business since it serves to record and communicate economic phenomena in order to provide on basis on for policy.

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Accounting is not relevant only to business organizations but also to individuals, non-profit organizations, units of government hospital and wherever economic resources are employed.


Insurance, as a business started far back as 3000 b.c when the baby lanais developed a loan system of MARITIME VENTURES. The loan in the events of loss was not repayable, the system subsequently, in ancient Greece, was developed and seems acceptable in the ancient world.

In England by the end of the sixteenth century, as the Act of parliament of 1601 entitled “An Act concerning matter of Assurance amongst merchant” indicated and well established customer of insurance of maritime ventures.

In the seventieth century specialization of some merchants who become the first professional insurance was brought about by the increase in the trade volume.


There was incidence of great fine of London in 1666 what led to the establishment of “THE FIRE OFFICE “ in the city f London to insurer houses and other buildings against fire. After this were several obscure companies and societies mutually formed. The pattern became well established that in the next (30 years) thirty years, the insurance company named HAND in HAND founded in 1996 survived in 1710, sun insurance office was established as well as the union of 1714, invest – minister fire office of 1717 and London Assurance and Royal exchange Assurance of 1720.

In 1706, amicable society was established as the first (1st) life insurer while the London Assurance and Royal exchange Assurance as well as the Equitable jointed the life Assurance list in 1720 and 1762 respectively, until the time of the colonial era, when branch offices were established to take care of business in Nigeria, there was not insurance company. The Royal exchange Assurance was the first of such insurance company after which the sum insurance as an agency outfit in 1958 come which became a full office of the some insurance company group of united kingdom in 1963. It was incorporated as sum insurance as an agency outfit in 1958 came, which became a full office of the sum insurance company group of united kingdom in 1963. It was incorporated as sum insurance office (Nigeria) limited in 1970.


Recently, development centres around the proliferation of insurance companies, old traditional product were enhance as the oil sector insurance and domination of Nigeria. (NICON PLC).

In Nigeria today, we have one hundred and forty insurance companies hence there is a great competition amongst the companies, which led to the intensified market research. The research has resulted in establishing the old traditional products to served the sophisticated in creasing consumers as well as the introduction of new products arising form the need and desires of the consumers.

Economic of West African state (ECOWAS) Brown card was introduced as compulsory third part liability inter country motor insurance policy operating in the Ecowas countries.

In Nigeria, oil remains the major source of income into the Economy, therefore any sector or sub-sector of economy that does not have full benefit (As it is the case of insurance industry) of the oil business would have it growth related if not stand still. This sector has been monopolized by NICON PLC and the re-insurance has been off shore, there has been an argument that this should not be so, that Nigerian insurance companies should insured re-insure the industry.

There will be boom in the insurance industry. The Risk manager, 1995.


As earlier mentioned, there has been a surge in the number of insurance companies operating in the country and no corresponding expansion in the country’s economy. This has led to an unhealthy rivalry amongst the insurance companies since increased number of insurers now shares more or loss the same portfolio of accounts. The following are some of the problems in the insurance industry.

The outstanding premium in the1991 insurance decree, there is a clause that say’s “NO PREMIUM, NO COVER” yet there is still record of premium outstanding insurance industry which happens to be part of staff competition product in the industry, this outstanding premium created mc problems when preparing the financial statement.

Also the value added tax problems. The federal Inland Revenue service has declared that commission paid to brokers and agents is value added taxable. This means that insurance companies are to bear the VAT. This has a significant effect on underwriting profit of insurers and the cash flow. The insurer will pay normal commission and over riding and go ahead to pay VAT to the government just on one business which may later come back with huge claims.

The investment under insurance Decree 1992. Under this Decree, insurance companies is mandated –to invest at least 35% of the total asset in a specifies under the trustees investment account. The securities mostly carries lower interest rate than the commercial rates because they are government securities, which has a great effect on the investment income of the industry in general.


It is essential to understand the organizational structure of an insurance company at this point before furthering to the main subject matter. This will go a long way in solving the problem of establishing the type of accounting systems and controls that provide accounting and financial information required by the 1991 insurance decree to the management.

Under section 2 of 1991 incurrence decree, insurance business is classified into two major classes. (i) Life business and (ii) Non-life insurance business. The non-life insurance business, on the other hand is sub-divided into five compensation” “Auto insurance” “Accident insurance” “Public liabilities” marine insurance” “Aviation” and other miscellaneous insurance business.

The organizational structure in the context is necessary to deal with various departmental activities in the same company. Therefore, critical examination of department inter-relationship is very important so that accounting errors will be reduced.


For the survival and growth of in Assurance Company, underwriting department to read through ad note the conditions guiding the insurance complete the form and return to the underwriter. Let is fundamentally require for the proposed insured to complete the form which will enable the underwriter to know the details of the risk and assess risk for the purpose of fixing payable premium.

The department is also responsible to policy documentation, which is a contract of insurance on the agreed contract.

The register of all policies renewal and open policies in respect of marine insurance transaction and register of new business are kept by the underwriting department for internal use.

He underwriting profit and loss of an insurance company depend greatly assess risk based on the provided information which also enhance the performance of such insurance company.


The department that sees to genuine and prompt payment of claims to the insured generally is known as the claims department. The department is equally important in the insurance industry for one and sundry functions it performs. Effectiveness and efficiency of this department build up the general public confidence in any insurance company as well as the ability of an insurance company to promptly pay claim and correctly too, will be one of the market share criteria of such insurance company. A the claims department registers claims, allocate claims number for reference confirmation of cover, maintenance of claims register, advising broker of insured of the claim and giving black forms for completion and return to the insurer, liaising with loss adjusters for investigation and assessment of claim, if need be, reviewing supporting documents to claims and finally advising the finance department to pay the claim an diving black forms for completion and return to the insurer, liaising with lose adjusters for investigation and assessment of claim, if need be, reviewing supporting documents to claims and finally advising the finance department to pay the claim amount.


Reinsurance, as the name of the department implies means. That the insurance company is also insuring the risk it has taken with another insurance company. This is the system where an insurance company called the ceding company pays in part, the premium received form the insured to the re-insurer while the ceding company will be compensated by the re-insurer by way of claim settlement in proportion to the percentage ceded to it.

The duty of the re-insurance department therefore is to assess the re-insurers and determine the portion to be ceded to each of them.

Also they deal with offer of other insurance company who wants to re-insurance with them and ensure that the risk accepted does not exceed its underwriting capacity. The finance department will be informed of the re-insurance agreement to be effected for payment to the re-insurance company as advised by the re-insurance department, (Nigeria re-insurance corporation).


The finance department is the ultimate of all the three (3) discussed above. It is the centre of privet point in the insurance business. The underwriting department will underwriter and fix premium to be paid by the insured to enforce the contract. The re-insurance department will cede business and risk finance to pay. After the ascertainment of the claims by the claims department finance department will be advised to pay.

Beside the above basic obligations finance department also provides finance department also provides management with accounting information need for decision making. The finance department, as required by the CAMD (Companies and Allied matter decree) and the insurance decree 1991, has specified a lot of requirement in relation to financial statement presentation and statutory returns that the finance department has to comply with.


Insurance is a contract whereby party called the insurer in return for a consideration called premium undertakes to pay another part, known as the insured, a sum of money or tits equivalent in kind upon the occurrence of specific event that is contrary to the interest of the insured.

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Also it is referred to as the polling of interest or a contract of indemnity. The purpose of insurance company therefore, it provide compensation to the insured based on earlier contract in case of misfortune with the aim of restoring the insured to his previous position before the occurrence of the misfortune. Universally, insurance policy has bee accepted as the only instrument of risk reduction. Industrial building are susceptible to fire, if there is no insurance cover, the occurrence of five outbreak may lead to the end of such company.

Cost-push, inflation has greatly push up the cost of motor vehicle to an alarming level, which, if involved in an accident of there is theft or fire with out an insurance cover, this may ruin the company lower.

Shi owners are exposed to total loss at he occurrence of ship wreckage where there is no insurance coverage, which could head to winding up of such business. Death is a necessary and certain evil that must come one day. There is need to provide for the family for the continuance of life at the death of the breadwinner.

All these and sundry are provided for in the insurance policy. The above stated purposes are inexhaustible Oyegun. “Insurance a necessity of life”. The Nigerian Account” December, 1994.


2.3.2 Couple with the above purpose of risk bearing, the insured feel secured and has something to fall bank on in the case of any eventuality.

Although, the fear of loss is not totally erased form the mind but there is an assurance that on bring him/her former position before the occurrence of the loss and makes he/she feel comfortable.


Universally, insurance is known to be one of the best ways of pooling funds together form various sources and channeling such funds into profitable investment areas. It is sometimes referred to as institutional investor.

Insurance generate a lot of found form the policyholders in form of premium. The insurance decree of 19991 encourage the insurance company to invest such funds in various types of investment instruments and that a proportion among these instruments are clearly stipulated.

Insurance business also serves as means of public lending to the government securities, which can easily be inferred through the pooling of invisible funds for instrument directly. The following supplementary purpose are attached insurance companies in the economy growth by binding the gap between the surplus funds and the deficit, that is surplus funds in the hand of small contributor and deficit in the company embarking on projects requiring more funds.

Also it is a public lending means to government in a depressed economy”. The risk manages, December 1997.


In the course of business, investors wants to be sure that his fund is secured before providing the factors of production into a particular venture which includes money and capital.

Investor also wants to ensure continual guarantee security f their funds, which is done by insurance industry; hence insurance business has a direct impact on the development of commerce and industry of the economy.


The Decree was enacted in 1991 to replace the 1976 insurance Act. Lt is the regulation of the following:-

i. Registration of insurance companies

ii. Mode of operation

iii. Premium and commission

iv. Amalgamation and transfer

v. Insurance, agents, brokers and loss adjusters

vi. Insurance interest and assignment

vii. Administration and enforcement

viii. Disclosure, condition and warranty.

ix. Claims and fire insurance

x. Miscellaneous and supplementary.

Mode of operation which spells out the requirement of the insurance company as it relates to finance will only be considered by the researcher I the course of this project work.

There are some sections in the decree 1991 which relates to finance they are as follows:- section 18 (1) state that a separate and district account shall be carried to and form a separate insurance fund with the appropriate name where an insurer carries on the two classes of insurance that is life and non-life. However, in the case of life insurance business, there shall be (a) the ordinary life business fund (b) The pension business fund.

Also section 19. (ii) State in respect of non-life insurance business an insurer shall maintain.

a. 45% of the total premium as reserves for un-expired risk in the case of non-life insurance business and 25% of the total premium in the case of marine cargo business.

b. Reserves for outstanding claims which shall be credited with an amount equal to the total estimated amount of all outstanding claims together with a further amount representing 10% of the estimated figure for outstanding claims in respect of claims incurred but not reported at the end of the last preceding year.

An amount not less than 3% of total premium or 20% of the net profit (which ever is greater shall be set aside as contingency reserve. The amount shall accumulate until it reaches the minimum). All these make the financial statement to be improperly prepared.

Moreover, section 21 (1) state that at all times, in respect of the insurance business transaction by an insurer in Nigeria, it shall invest and hold investment in Nigeria, an assets equivalent to not less than the amount of funds in such insurance business as show in the balance sheet and the revenue accounts of the insurer. In this case the amount must be stated clearly when preparing the final account.

However, section 22 (1) required the insurer to sub-mitt not later than 31st July in each financial year, the following statement in writing to the directors.

A balance sheet dully audited showing the financial position of the insurance business of the insurer at the close of the year with a copy of the relevant profit and loss account which is to e presented by the insurer at the annual general meeting to the share holders.

A revenue account a pliable to each class of insurance business for which the insurer maintains a separate account of receipts and payments is to be kept by the insurer.


The body was established in 1992 with the sole aim of monitoring and overseeing the affairs of insurance as the head and a commissioner of insurance with seven (7) others form insurance bodies such as:

Nigerian co-operation of insurance brokers.

Niger insurance Association (NIA)

The institute of loss Adjust of Nigeria.

The chartered insurance institute of Nigeria (CIIN)

The board and the Decree require so much form insurance company that makes it important for an accountant to diligently work for an insurance business which require an individual that has the thorough knowledge of accounting system especially in insurance industry.


Preparation and presentation of financial statement is the end product of financial accounting processes in any industry, be it a specialized industry or non-specialized industry. The principles, postulate, assumptions, policies as well a method adopted can significantly affect the operational results and financial position presented to the public as a whole.

Therefore, it is essential that principles, policies and methods upon which the financial statement presented is based out of the several assumptions should be disclosed. The companies and allied matters decree 1990, (CAMB) in its disclosure of the method used or basis of calculation, the necessary information in an account or items. Where such method or basis is failed to be explained the account be misleading.

The fundamental accounting concept referred to above are discussed a below


This concept holds that cost is the appropriate basis for initial accounting recognition of all assets acquisition, services rendered or received, incurred creditors and owners interest and so on unless there is need to dispose or liquidate a business, cost is the best.


The concept hold although there are various ways of treating items in the account but consistency concept holds that the4 moment any of those method is selected, it should be stickled to and should be continued with (unless condition warrants a charge) to use that method in subsequent period so that a comparison of accounting figures will be meaningfully overcome.

Treatment of items such as depreciation, value added tax, with holding. Tax, commission, preparation of solvency margin, miscellaneous income etc. must be consistently followed.


Until final liquidation of business unit result cannot be determined but business community and financial statement users required that the business be divided into accounting periods usually one year. The result of the position is measured over these periods.


The concepts established the rule of periodic – recognition of revenue as soon as it is capable of objective measurement and the value of assets received or receivable in exchange is reasonably certain. That is the reason why premium though not yet paid it always earned once the contract has been concluded and the insurer has agreed to cover the risk.


This concept highlights the fact that a transaction has a two-fold effect on a firm. That for every debit accounting entry, there must be a corresponding credit entry, which is the basis of bookkeeping. On this foundation, as well as insurance account built on.


This states that I am accounting period, revenue generated and the expenses incurred in generating such revenue should be matched against each other in an accounting period. It is more pronounced in an insurance account as profit is not finally taken until adequate provision has been made for unearned premium or unexpired risk, outstanding claims and incurred, but not, reported claims. This is to ensure that revenue of a period is adequately matched with the expense and claims of such period.


Business entity is viewed as continuing indefinitely on operation. Business operation is a perpetual process it is envisaged to come to an end quickly. The following are the conventions referred to above:


This principle cannot independent judgment on the part of account preparing the financial statement. It requires support by verifiable evidence in contrast to subjectivity or dependence on the unverifiable opinion of the accountant.


The principle demands exercising great care in recognition of profit while all known losses are adequately provided for by this provision are made for. By this provision are made for investment and other deposit in banks so as to forestall unexpected losses.


The assumption here is that a transaction should be considered firstly on the basis of its substance and financial reality before looking at the legal principles yet they are accounted for and presented in accordance with their substance and financial reality before looking at the legal principles yet they are accounted for and presented in accordance with their substance and financial reality and not merely there legal form.

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In a situation where the incurred, but not report ed risk will be higher then 10% stipulated by the decree, provision may be made for greater percentage.


Accounting is only useful if the recording of a transaction is worthwhile materiality may be in items of value or in items of incidence. The principle holds that only of significant value are recorded and shown in the financial statement. Materiality of and depend on the nature and size of the organisation.


The principle holds that there should be on basis to any or user group of the account and in applying all other principles fairness has to be applied along side with them.


As earlier mentioned in the accounting concepts and conventions that insurance account also rest on those concepts. This section is aimed at demonstrating treatment of some items in the insurance account with out the violation of accounting principles and at the same time being objective.


They are income that accrues as a result of the following.

i. Purchasing securities dividend

ii. Income from leasing and rentals

iii. Discount on bill discounting and commercial papers.

iv. Interest form money paid in bank and financial houses.

v. Loan syndication

vi. Interest on local purchasing order financing

Investment income should be apportioned to the various lines of business based on the premium so that the total profit of each line determine since investment income depends mainly on the amount invested. The consolidated profit and loss can then be addition of the profit transferred form each line. This treatment will aid comparisons over the and in variance analysis when investment income is received.

Dr Bank (with investment income received) investment income (with investment income received).

At year-end, when the whole investment income is accumulated and aggregated, it should be apportioned by: Dr investment income (with the portion meant for each time). Cr each line of Business (with the portion meant for each line)

The apportionment is calculated thus: Net premium for the line X Total investment Total Net premium for all line


N000 N000 N000

Net investment income 116

Net premium fire 4,395

Accident 8,012

Marine 2,194

Motor 10,424 25,025

25,025 116

The apportionment will thus be:-

Fire 4,395 X 116

25,026 = 20

Accident 8,012 X 116

25,028 = 37

Marine 2194 X 116

25,025 = 10

Motor 10,424 X 116

25,025 = 48



The work “commission” in insurance industry is a universal language because insurance business largely depends on commission. Payment of commission is therefore one of the means by which an insurance company can assess its strength to increase production in the market, apart form ability to pay claims as and when due.

Commission can be defined as the reward for services rendered. It is neither a cash discount nor a trade discount but some how related to the latter. Commission is a charge against profit and not an appropriation and can directly be traced to the line of business.

1991 insurance decree recognizes commission payment and therefore decree that two insurance company shall pay an amount exceeding 10 percent of he premium in respect of vehicle, workmen compensation on contractor all risk and engineering insurance or more than 15 percent of the premium in respect of any other sub-division to any insurance agent or broken or any the intermediary. When premium is received in full and the company is to pay the premium, the premium, the treatment account will be: Dr. Bank (with the gross premium received) Cr premium account (with the gross premium received) for the commission:

When only the net premium is received:

Dr. Bank account (for the commission payable) Cr Agent/Broker Account (for the commission payable).


ABD Insurance brokers introduces a business ot PDP in insurance PLC depositing a cheque of N90,000 after deducting its 10% commission.



Bank 90,000

Premium income 90,000

Being Net premium received

Commission payable 10,000

Premium income 10,000

Being the commission deducted

Out source, now adjusted


One of the schedule or analysis book that should be maintained is premium analysis book. It is the mains source of posting into the general ledger of premium receivable, payable and also commission receivable and payable.

The premium analysis is only prepared for non-life aspect of the account.



Direct Business 1000 2000 500 500 3000 15000 500

Addire-ins inward 5000 3000 1500 500 1500 500 1500

6000 5000 2000 1000 4500 2000 2000

Less: Re-in-outward 2000 1000 500 200 1500 500 1000

4000 4000 1500 800 3000 1500 1000


Direct business 100 200 50 50 300 150 50

Add: re ins. inward 500 300 150 50 150 50 150

600 500 200 100 450 200 200

Less: Re-in outward 200 100 50 20 150 50 100

400 400 150 80 300 150 100










Sections 19 and 20 of the insurance decree 1991 stipulated the various provisions and reserves that an insurance company must maintain beside the normal provision or reserves. This is not an appropriation items as it is with the normal reserves but it is rather a charge against the profit. It is computed for all lines of business based on the decree. For reserves for unexpired risk, it is 45% or 25% of the total premium as the case may be.


Gross premium 30,000 10,000 70,000 110,000

Add: Re-ins inward 5,000 2,000 20,000 27,000

35,000 12,000 90,000 137,000

Less: Re Ins Outward 10,000 4,000 20,000 34,000

25,000 8,000 50,000 103,000

Prov. For unexpired risk rate 45% 45% 25%

Provision 11,250 36000 12,5000 25,750

After the computation:

Cr reserve account

Cr provision for unimpaired risks


For no-life business the reserve shall be 3% or 3% of the net profit. The reserves is to make up or any impairment on the investment of insurance company.



Net premium 2,363,44 24,162,379 2,990,762

Net profit 415,405 1,397,963 200,410

3% of premium 70,902 724871 68,723

20% of profit 83,081 279,593 68,723

After the computation:

Dr. Reserve Account (with the amount ahead calculated)

Cr contingency Revery (With the amount already calculated)

For life business, the reserve shall be 1% (one percent) of the gross premium or 10% of the profit (whichever greater).


Premium N20,000

Net profit 5,000

1% of premium 200

10% of profit 500

Therefore the reserve is N500

Dr life profit and loss 500

Cr contingency reserve 500


Statutorily, General revenue account is required for each class of insurance business for which the insurer is to keep a separate account of receipts and payment which must be annually prepared and be submitted to the National insurance supervisory Board (NISB). The Revenue accounts stands for trading account of manufacturing or trading organisation.

The premium stands for the profit while there is a slight difference forms that of a commercial enterprise. Although there was no particular laid down formal, below is format that is widely used and it shows the profit or loss form each line of business.





Net premium X X X XX

Operating out standing X X X XX


Opening IBNR Recovery X X X XX

Opening contingency recovery X X X XX

Commission received X X X XX


Claim paid X X X XX

Commission X X X XX

Management expense X X X XX

Closing unexpired reserve X X X XX

Closing contingency X X X XX

Reserve X X X XX





Profit (A-B) X X X XX

Investment income X X X XX

Other income X X X XX


Investment expense X X X XX

Pro. For diminishing X X X XX

In value of investment X X X XX

Transfer to general


For companies that operate both life and non-life she has to prepare a separate revenue account.



Opening fund XX

Premium XX

Less: commission X

Claims: maturity X

Withdrawal X

Partial maturity X

Management expenses X

Closing life fund X XX

Underwriting profit XX

Investment expenses X

Loss on disposal of fixed asset X

Loss on disposal of investment X

Diminishing in value of investment X XX

Transfer to genera P&L XX


The profit and loss account should not be confused with the need for a separate profit and loss account; this in fact is not a substitute for a revenue account.

This is a statutory requirement. The profit and loss account in it simplest term is a summary of all the various business results form each of the revenue account both life and non-life. Income and or expenses that cannot be directly traced to any of the line shall be brought here with taxation for the year.

If any adjustment for extra-ordinary items is required, it will come immediately ad taxation after which is the appropriation.

This is where the whole or part of the profits are appropriated for various purposes if it is directors intention to do so.





Transfer form: fire X

Accident X

Marine X

Life X

Other sundry income XX

Administration expenses (X)

Profit before taxation XX

Less: taxation (X)

Profit after taxation, before extra ordinary, items XX

Proposed dividend (X)

Retained profit for the year XX

Brought forward profit XX

Reserves for bonus issue (X)

Retain profit craned forward XX

Earnings per ordinary share XX kobo

Dividend per ordinary share XX kobo


The balance sheet is the summary of all the ledger balance (i.e assets and liabilities) which shows the financial position of business as at a particular date. It is one of the statutory require returns by the decree.

It shows outstanding balance assets liabilities, reserves and the issued and paid-up capital as at the particular accounting date. Below is the format for insurance company balance sheet.





Fixed Asset XX

Long terms investment XX

Statutory deposit XX

Defend charges XX

Current Assets XX XX

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Less creditors (Amount due with 1yr) (X)

Net current Assets XX

Creditors (Amount due within 1 year) (X)

Net Assets XX

Finance by Authorized share capital XX

Issued share capital XX

Returns earnings XX

Shareholders fund XX

Contingency reserve XX

Outstanding claims reverse XX


From the above, it can be clearly seen that there is need for clear understanding of the account of insurance so that correct treatment can be given to each items and thus preparation of financial statement that will show a true and fair view of the financial statement and of the profit and loss account for the period.



Attempt is made in this chapter to analysis data collected during the research. The analysis is based on the completed questionnaires and interview conducted. In the analysis and hypothesis testing, mathematical and statistical technique especially percentage (%) and chi-square will be effectively used.


Name of coy No of quest distr. Nos of quest, 1. RTD Nos of Quest. Dist % of Nos Quest RTD %of quest RTD %of No quest Not RTD

IGI Ins. LTD 17 15 2 100 88.24 11.76

Niger Ins. PLC 13 10 3 100 77 23

Total 30 25 5 100 83.33 16.66

Table 1, above shows that 30 questionnaire were distribute to the respondent while only 25 were returned which represent 83.33% and the remaining 5 not returned represent 16.67% .

Those given to industrial and general insurance company limited (IGI) shows that 17 were distributed, representing 11.67% are those not returned while a total of 13 where distribute to those in Niger insurance PLC, in which 10 were returned which represent 77% and the remain 3 represent 23% were not returned.


` To analysis direct questions that require TRUE OR FALSE response. Those question numbers are 6,11,13,17,18,19.20 and 22. The remaining question will also be analysis. From question 6, that do you attend course, workshop, and seminars organized indoor or organized by external body? 18 of the respondent, which represent 72%, choose true only 7, which represent 28%, choose false.

Also question 11, shows that 22 of the respondents which only 3 of the respondent that their company has internal control system while 4 (16%) of the respondents that their company has internal system in their company.

From question 17, shows that 15 of the respondents which represent 60% can prepared the financial statement in full of their organisation while only 10 which represent 40% of the respondents cannot prepared it in full.

Analysis of question 18, reveals that 6 (24%) of the respondents gave the answer that insurance industries have peculiar format of preparing final account as opposed to the conventional accounting system while 19 (765%) of the respondents gave false answer. Also question 19, shows that 18 of the respondents which represent 72% said that the peculiarity of the format is in – line which the dictate of the provisions of the accounting standing while only 7(28%) of the respondents said false.

Analysis of question 20, reveals that 21 of the respondents which represent 84% said true that the insurance industries classified their asset and liability as fixed and current asset, long, short and current liability while only 4 (16%) of the respondents said false.

Analysis of question 22, shows that 19(76%) of the respondents said true there are enough qualified accounts in their organisation while only 6(24%) of the respondents said false.



In the course of this project the following were made

There has been a noticeable increase in the vacuum of the insurance business in Nigeria. This is attributed mainly to the higher percentage of educational people in the society as well as the growth in the economic activities. Also, the urge by the general public and organisation to insured their life and properties.

There has been an increase in the requirement of government form the insurance company in items of information on finance, investments, reserve and deposit as well as various statutory returns. The investment amount of insurance company continues to grow as shown in the previous chapter.

Lack of good accounting system in insurance companies can lead to poor decision-making, which is necessitated by poor financial information provided by insurance companies to the public.

The Government, through its agencies can also withdraw the certificate of incorporation of any insurance company who failed to compile with the requirement.

It has also been discovered that adequate training of the staff will lead to proper and accurate accounting information n the industry.

There has been agitation for the standardization of the accounting system so as provide timely accurate and reliable information for the financial statement users. Also since the business environment is daily becoming complex in terms of size, government influences the capital market internalization as well as technological development. There is need for separate accounting standard in the industry since is a specialized industry of its own.

Moreover, economic depression, inadequate knowledge of the industry by te public as well as delay n, or non-settlement of claims by same insurance companies, contributed to low services rendered by insurance companies are not enough to facilitate mass patronage ad he confidence as well as creditability rating of insurance firm are very low.


The implication of the above summary can be enumerated below:

i. Accurate and timely prepared financial statement will generate accurate and precise decision because any decision based on the financial statement cannot be better than the provided data in the financial statement, that is an accurate and precise decision made is a function of timely and accurate financial statement.

ii. Accurate ad reliable financial reporting is a function of proper understanding of accounting in the industry.

iii. Relevant and adequate training is a direct function of understanding and treatment of various terms n the account preparation.

iv. An introduction of a separate accounting standard will embrace uniformity in the financial reporting of all insurance company.

v. A properly prepared financial statement leads to proper company performance leads ot proper company performance assessment which will enhance inter and intra company comparison or decision.

vi. Introduction of computer as a advanced technical know-how into the accounting system of he industry as a means of reducing cos, detect errors or fraudulent act an also increase profitability.


Having gone through the completed questionnaire response form oral interview as well as literature review, the researcher wishes to recommend the following which if implemented, will go a long way to improve the financial reporting of the industry as well as the performances.

There should be adequate internal control system. In that case segregation of duties between departments of sections in an organisation. The financial department, for insurance should be adequately separated or distinct items of duty, grouped or person’s duties should be distinguished form each other so that double treatment of items and omission of items will be reduce. This will eliminate or reduce the risk of fraud or errors form occurring. The responsibility of each department of section should not be hanged over others. There should also be the need for the introduction accounting standard for the insurance industry as recognized by the insurance decree, 1991 which recommends by way of note that the Nigerian accounting standard board should provide a standard and uniformed reporting of financial statement as well as more meaningful comparisons. The insurance companies should organize relevant and proper training of staff so that there will be improvement of the skill of its staff form time to time. In house or indoor training channel towards the need of such insurance company should be encourage. This will enhance effective and efficient performance of such staff to meet the need of the company and all items be correctly treated.

The need for employing professionals who are qualified personnel and competent hand in insurance industry to enhance and improve financial reporting.

This is because qualified and competent personals will have adequate understanding of the items involved, hence proper treatment, will be accorded to hem individually. The Liaison between department is also necessary. Staff from other departments need to liaise with finance departments. This will be enable them to know the type and level of information required by the department so that nothing falling short will be provided as a data to the finance department.

In addition, it is necessary that all insurance companies should introduce computer into their accounting system, for it is an indispensable equipment in business as well as all field of human endeavour. Computer is been characterized as fast, efficient, effective, neat, realizable and logical in operation and is able to cope with large volume of data, computer will also compliment and improve the growth in insurance business.

Lastly, the control of government on the industry so far has been considered too much, especially in the has to be kept and its effect on the profit of the insurance company.

Income derived on most investment recommend are found to be too low couple with high level of inflation, increase in operating expenses and management expenses of insurance companies can be frustrating which can lead to such companies liquidation.


Insurance companies are risk bearers that can easily be turned to other business in time of loss or problems, which implies that they cannot be neglected in the economy at large without paying full attention to him. The premium income, investment and public fund in insurers hand is growing continuously. The government statutory demand increase daily and the outstanding premium in the hands of the insured, all this creates more problems, to the industry. However, there is need for proper understanding and correct treatment for the components of theirs accounting items like commission premium reserve and others.

Moreover, the employment if qualified staff, professional and regular and constant training of these staff should not be under mind or neglected. The insurance industry in the earliest future could be posed for higher level with improvement in the economic situation couple with widely and proper knowledge and education of the populace about what insurance is and what it entails.

Insurance Industry – Review of Accounting System  : (A Case Study Of Industrial And General Insurance Company Ltd.)



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