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ASSESSING THE ROLE OF INSURANCE COMPANIES IN THE ECONOMY OF INSURANCE INDUSTRY

ABSTRACT

The primary goal of this study is to determine the impact of insurance companies on Cameroon’s economy, utilizing the country’s insurance business as a case study. The goal of this research is to determine whether insurance companies play a role in the Cameroon economy. In order to examine the impact of both life and non-life insurance businesses on Cameroon’s economy, we had to divide our main goal into two parts. This is done utilizing secondary sources of data on Cameroon’s GDP and other insurance company metrics such as total insurance coverage, social insurance adequacy, insurance, and financial services. The major findings of the investigation revealed that insurance businesses have an impact on the economy.

There is much disagreement over the role of insurance companies in the world, but for the sake of simplicity, we will focus on Cameroon’s economy. Throughout history, there has always been a need for insurance, whether it is called insurance or assurance. Fear of the unknown, risk, and loss all contribute to the need for insurance (Webster dictionary, 1997). People wish to be protected from the unknown and external causes over which they have little control. However, insurance as we know it did not emerge overnight, but has evolved over centuries as needs, regulations, and technology have changed ( Buckham & etal , 2010).

The earliest known insurance instrument originates from around 2250 BC in Babylonia (Buckham & etal, 2010)

CHAPTER ONE

INTRODUCTION

Background of the study

In this case, the lender took over the risk of the goods in transit in exchange for a higher interest rate. These marine loans survived in the Italian city governments of Genoa and Venice until the thirteenth century. Buckham and Etal (2010) (Buckham & Etal, 2010).

Pirates were continuously posing a threat to ships and cargo, thus financial and non-financial risk diversification was devised in the form of joint stock operations, which pooled the commodities of several merchants to be sold together. Buckham et al. (2010) The merchant did not formalize the notion of probabilities in the statistical sense; instead, they used intuition, subjective experience, and objective records to guide their estimation rather than the previous probabilistic reasoning based on actuarial evidence. The first actuary was born as a result of the Pascal triangle. Pirates were continuously posing a threat to ships and cargo, thus financial and non-financial risk diversification was devised in the form of joint stock operations, which pooled the commodities of several merchants to be sold together. Buckham et al. (2010) The merchant did not formalize the concept of probabilities in the statistical sense; instead, they used intuition, subjective experience, and objective records to guide their estimation rather than the previous probabilistic reasoning based on actuarial evidence. figuring out insurance premiums (Beattie, 2016). An economy is the sum total of what people produce and the relationships that enable that production (Ian welsh, 2013). Others define an economy as the process or system by which goods and services in a country or region are produced, sold, and purchased (Merriam Webster,1828). Cameroon’s economy, like any other economy in the world, suffered an economic crisis in 1986 as a result of changing international economic and domestic policy environments (Derrick, 1992). It had previously boomed with a 7% growth rate and a per capita income of $800 in the mid 1970s (Wilfred &Mufor, 2011). The failure of some Cameroonian banks, including the Cameroon bank, Meridian BIAO, and BICIC.

From the mid-1970s to the end of the 1980s, Cameroon experienced a boom in renewable and exhaustive natural resource exploitation, according to (Molua, 2010). Cameroon’s economy has evolved over three decades.

This includes the period of actual economic growth, especially from 1960 to 1986.

The time of economic crisis that began in 1986 and ended in 1994, and the period of economic recovery that began in 1995 and continues to this day, is known as globalization. Cameroon’s response to the crisis was to cut state spending (Baye et al, 2002).

 Statement of the problem

In a market, insurance companies act as financial intermediaries. They bear risk by definition, and these risks are dependent in part on the insurer’s ability to predict the frequency and magnitude of the risk they promise to cover. They move money from individuals who want to save to those who want to invest (Richard et al, 1990). In fact, the economy would nearly come to a halt without the insurance industry (McGrath, 1990). This statement by (McGrath, 1990) leads to the key question: What role do insurance companies play in an economy?

As a result of the foregoing, we can formulate the following concrete questions:

• What role do life insurance businesses play in the economy of Cameroon?

• What role do non-life insurance businesses have in the economy of Cameroon?

 Research Objectives

The major goal of this research is to look into the influence of insurance companies in the Cameroon economy. With specified goals such as;

• Determining the economic importance of life insurance firms in Cameroon.

• Examining the economic impact of non-life insurance companies in Cameroon.

Making Recommendations is one of the most important aspects of the job.

Working Hypotheses

The following working hypotheses will be used:

H1: The economy of Cameroon is influenced by life insurance businesses.

H2: The economy of Cameroon is influenced by non-life insurance firms.

Significance of the Study

This research is critical for a variety of stakeholders, including students, organizations, and the government. It is critical for students to understand since it will assist them in identifying flaws in an organization or economy. It will also act as a baseline for future scholars who are interested in tackling this issue. Finally, it is a university requirement that must be completed in part in order to enroll in a bachelor’s degree program.

In terms of an organization, it will assist it in determining its key position in the economy or the function it plays in economic development. If properly understood, it entitles businesses to review their policies or services to ensure that they meet the needs of their customers.

It also aids the organization in comprehending the changing environment.

Last but not least, the study is equally significant to the government because it will guide them in the implementation of their policies by defining the major responsibilities of insurance companies, which will provide useful data that can be used to forecast the future. It would also be beneficial for them to compare the company to other companies in the same industry.

Scope and Delimitation

This research aims to highlight the influence of life and non-life insurance businesses in the economy over the course of a year, namely the academic year 2015-2016. The Cameroon insurance business serves as a case study to explain this issue. The most difficult aspect of this study is obtaining credible information about the subject under investigation.

Plan of the Study

This research is divided into five sections, as shown below.

The background information, the problem statement, the research objectives, the research hypotheses, significance of the study, scope and limitation, and finally the study design are all found in Chapter One, which is divided into seven sections. The literature review is in chapter two, and it includes sections such as conceptual concerns, related theories, empirical literature, and theoretical framework, while the technique is in chapter three.

 

In chapter four, we give the results of the data analysis and interpret the findings, whereas in chapter five, we summarize the study, draw conclusions, and make recommendations.

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