TITLE:
Contributory Pension Scheme and the Premium Base of the Nigerian Insurance Industry
AUTHORS:
Cosmas Ogobuchi Odo, Wilson Uchenna Ani, Ishmeal Umunnakwe Agbo
KEYWORDS:
Pay-as-You-Go, Contributory Pension, Premium, Insurance Industry
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.10 No.2,
April
30,
2021
ABSTRACT: The paper investigates the veracity of the hypothetical expectation that the implementation of the Pension Reform Act of 2004, as amended, would lead to a quantum growth in the premium base of the Nigerian insurance industry. Given that prior research had confirmed the power of mandated contributory pension scheme to facilitate growth of the financial sector, the paper argued that the insurance industry, being a subsector of the financial system, would experience its fair share of the expected growth. Employing annual gross premium as a proxy for insurance industry growth and measured over a span of eleven years (2005-2015), regression analysis of data showed that premium income of insurance industry had a positive and no significant relationship with contributory pension scheme (β = 0.8496; t = 1.8282; p = 0.1415 ≥ 0.05). The result not being significant at 5% could be traced to two related factors, namely, the manifest reluctance shown by MDAs and other public sector employers to comply with the provisions of section 9(3) of the Pensions Reform Act, 2004 and the failure of PFAs to expose the early retiring workers to the annuity option of pension payment structure; this hamstrung the growth of the annuity business, a major component of the insurance industry in Nigeria. The paper therefore recommends that pension regulatory authorities in Nigeria should compel strict compliance with the relevant provisions of the Act in order for the insurance industry to experience the expect quantum growth.