An Assessment of Insurance Policies and Their Relevance to the Distribution and Transportation Sub-Sector
Chapter One
Objective of the study
The main objective of this study is to assess insurance policies and their relevance to the distribution and transportation sub-sector in Nigeria.
The specific objectives are to:
- Examine the types of insurance policies available to operators in the distribution and transportation sub-sector.
- Assess the level of awareness and adoption of insurance policies among distribution and transportation businesses.
- Evaluate the impact of insurance coverage on risk management and operational efficiency within the sub-sector.
- Identify the challenges affecting the effective implementation and utilization of insurance policies in the distribution and transportation industry.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Insurance Policy
An insurance policy is a legally binding contract between an insurer (insurance company) and an insured (individual or organization) in which the insurer agrees to provide financial protection or reimbursement against losses in exchange for a premium. The policy outlines the terms, conditions, coverage limits, exclusions, and the obligations of both parties. In essence, it serves as a formalized mechanism for risk transfer, enabling individuals and businesses to manage uncertainty and reduce potential financial loss due to unforeseen events.
According to Onoh and Uduma (2023), insurance policies serve as a cornerstone of modern economic systems by enabling risk-sharing and providing a safety net for individuals, businesses, and governments. Through insurance, risks associated with property loss, health, life, liability, and business operations can be pooled and redistributed, thereby promoting financial stability and business continuity.
Insurance policies are broadly categorized into life insurance (such as term life and whole life policies) and non-life or general insurance (such as motor insurance, health insurance, fire insurance, marine and aviation insurance, and goods-in-transit insurance). Each policy type is designed to address specific risks and offer protection within clearly defined terms. In the transportation and distribution sub-sector, for example, policies such as fleet insurance, cargo insurance, and third-party liability insurance are crucial for mitigating logistical and operational risks (Adegbite & Salami, 2022).
The structure of an insurance policy typically includes the declaration page, which summarizes key details such as the insured party, coverage period, and limits; the insuring agreement, which explains what is covered; exclusions, which list what is not covered; conditions, which outline the responsibilities of the insured; and endorsements, which are amendments or additions to the standard policy.
In Nigeria, the legal and regulatory framework for insurance is governed primarily by the Insurance Act of 2003 and supervised by the National Insurance Commission (NAICOM). These policies aim to ensure transparency, fairness, and the protection of policyholders’ rights. Despite these regulations, the uptake of insurance policies in key sectors like transportation remains low due to factors such as lack of awareness, perceived complexity, and skepticism about claims settlement (Igbokwe & Hassan, 2021).
CHAPTER THREE
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RESEARCH METHODOLOGY
This chapter outlines the procedures and strategies adopted in conducting this research. It includes the research design, area of the study, population, sample and sampling technique, method of data collection, instrument validation, reliability of the instrument, method of data analysis, and ethical considerations. The methodology was guided by the following research questions:
What types of insurance policies are available to operators in the distribution and transportation sub-sector?
To what extent are distribution and transportation businesses aware of and adopting relevant insurance policies?
Research Design
This study adopted a descriptive survey research design. The design was appropriate because the study sought to gather data from a representative sample of individuals operating in the distribution and transportation sub-sector to assess their awareness, usage, and the relevance of insurance policies to their business operations. According to Creswell (2021), the survey design is ideal when the aim is to collect data that reflects the views, practices, and perceptions of a population on a specific issue.
Area of the Study
The study was conducted in [insert location, e.g., Lagos State or Nigeria’s South-West region], a commercial hub that hosts a large concentration of transport, logistics, and distribution companies. This area was selected due to its high volume of goods movement, diverse transportation services, and active insurance market, which provides a rich context for examining the relevance of insurance policies in the sub-sector.
Population of the Study
The population of the study comprised owners, managers, and operational heads of registered transport, logistics, and distribution firms operating within the study area. According to the Corporate Affairs Commission (CAC) database (2023), there are over 2,500 registered companies in this sub-sector in the selected location.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS, AND DISCUSSION OF FINDINGS
This chapter presents and analyzes the data collected from respondents using the structured questionnaire. The results are organized around the research questions guiding the study. Descriptive statistics such as frequency counts, percentages, and mean scores are used to interpret the findings. A total of 250 copies of the questionnaire were distributed, out of which 238 were returned and found usable, giving a response rate of 95.2%.
CHAPTER FIVE
SUMMARY, CONCLUSION, AND RECOMMENDATIONS
Summary of Findings
This study was undertaken to assess the relevance of insurance policies in the distribution and transportation sub-sector in Nigeria. The research specifically aimed to identify the types of insurance policies available to operators in the sector and evaluate the extent of awareness and adoption of these policies. Data was collected from 238 respondents using structured questionnaires and analyzed with descriptive statistics.
Key findings include:
Types of Insurance Policies Available:
The study found that a variety of insurance policies exist for operators in the sub-sector. These include third-party motor insurance (legally mandatory), comprehensive motor insurance, goods-in-transit insurance, warehouse/property insurance, public liability insurance, employer’s liability insurance, and marine insurance. Despite the wide array, adoption beyond third-party and comprehensive motor insurance remains low.
Level of Awareness and Adoption:
A significant majority of operators are aware of the different types of insurance policies, especially those directly related to vehicles. However, awareness does not necessarily translate into adoption. While awareness levels are relatively high (mean = 3.91), the adoption of non-compulsory insurance policies is moderate to low. Most respondents admitted that their businesses only subscribe to insurance when required by law.
Insurance and Risk Management:
Many operators still do not view insurance as a vital risk management tool. Instead, insurance is treated as a regulatory obligation. This approach undermines the strategic value of insurance in safeguarding business continuity. Respondents cited factors such as high premiums, lack of trust in insurers, poor claims settlement history, and limited engagement by insurance providers as barriers to broader adoption.
Conclusion
This study concludes that while insurance policies are available and known to many distribution and transportation businesses in Nigeria, actual usage is still largely driven by compulsion rather than voluntary, strategic risk management. The level of adoption remains low particularly for policies that protect against cargo loss, property damage, or third-party liabilities beyond vehicular accidents.
This limited adoption undermines the potential of insurance to serve as a powerful tool for financial protection and operational resilience within the sub-sector. There is a pressing need for more robust insurance education, stakeholder engagement, and innovation in policy structure and pricing to increase adoption and ensure long-term business sustainability.
Recommendations
Based on the findings of this study, the following recommendations are made:
Insurance companies and regulators (such as NAICOM) should intensify awareness campaigns to educate logistics and transport businesses on the benefits of comprehensive insurance coverage. Sector-specific seminars, workshops, and roadshows should be organized.
Insurers should design affordable, flexible, and tailored insurance packages that suit the needs of small and medium enterprises in the distribution and transportation sector. For example, bundled micro-insurance for SMEs can improve accessibility.
Leveraging technology to simplify policy subscription, claims processing, and customer service will build trust and increase adoption. Digital platforms should be deployed to enhance user experience and transparency.
References
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- · Nwachukwu, T., & Ibrahim, U. (2022). Assessing the role of insurance in SME logistics performance. African Business Continuity Review, 4(2), 55–70.
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- · Oluwafemi, D., & Adeyemi, K. (2024). Insurance and operational efficiency in Nigerian logistics companies. West African Journal of Transport Innovation, 5(1), 18–33.
