Insurance Project Topics

Relevance of Insurance Policy in Distribution and Transportation

Relevance of Insurance Policy in Distribution and Transportation

Relevance of Insurance Policy in Distribution and Transportation

Chapter One


The general objective of this study is to make an indebt investigation in the following areas;

  1. To ascertain the effect of insurance in the operation of the organization.
  2. To find out the type of contracts or goods insured by the Nigeria Bottling Company, Owerri.
  3. To find out the extent to which the Nigeria Bottling Company insures its distribution and transportation
  4. To ascertain the extent of losses, if any, the Nigeria Bottling Company Owerri incurs through damages, losses, thefts etc.
  5. To ascertain how best to reduce high losses through good documentations.




Definition of an Insurance Contract

A legal definition of insurance that appears in many insurance laws is the following: A contract of insurance is that whereby one party, the insurer, undertakes, for a premium or an assessment, to make a payment to another party, the policyholder or a third party, if an event that is the object of a risk occurs. It is often defined as a contract of indemnity. The insured is not to make any profit out of the insurance but should only be compensated to the extent of the pecuniary loss. Although various definitions have been offered, one of the most helpful is to define insurance as a mechanism (or a service) for the transfer to someone called the insurer of certain risks of financial loss in exchange of the payment of an agreed fixed amount. The payment is due before the contingent claim is serviced by the insurer. If from the insured’s point of view, insurance is a “transfer,” from the insurer’s point of view, insurance as a “pooling” mechanism. It is possible for the insurer to reduce the risk which he faces by offering an “insurance service,” by pooling together a large number of exposure units or risks.

Insurable Risks

While the definition presented above indicates what insurance is from the point of view of the policyholder, there are many risks of economic loss that no insurance company is willing to accept. From a risk management perspective the ideally insurable risk is a pure, static and particular risk. From the viewpoint of the insurer, certain conditions must exist before insurance is possible (Table 8.1). The fundamental requirement for the existence of insurance contracts is the existence of a large number of similar loss exposures. What makes insurance feasible is the pooling of many loss exposures, homogeneous and independents, into classes (classes of business), according to the theory of probabilities (the law of large numbers). Even if the probability that an event will occur is accurately known, the statistics do not apply to an individual exposure or even a small group. Similarly, it may be difficult for an insurance company to cover catastrophic risks such as earthquakes, flood, or war damage, because it may affect a large number of insureds at once. The pooling of loss exposures and the reduction of the risk of variation from the expected outcome is one reason insurance companies can issue insurance contracts to individuals unable to diversify themselves the risks. Another reason is that insurance companies can diversify the residual risk of each class of loss exposures by combining several classes of business into a portfolio. An insurance company cannot have all of its eggs in one basket.1 The law of large numbers, though necessary for insurance, is not sufficient. A further condition is the possibility to determine exactly the nature of the loss exposure and to be able to calculate, either by estimating the underlying probabilities, or by judgment, the frequency and the severity of the possible loss. Moreover, even if the cost of insurance can be calculated, insurance is not practical if the premium that is determined by the insurer is too high and as a consequence the individual (or firm) is unwilling to pay for it.

Pricing Models for Insurance Policies

Consider a one period insurance contract with a random loss L paid at the end of the period. Traditionally actuaries have priced such insurance contracts using the pure premium (expected loss) plus a loading for expenses, risk, and profits. Ignoring the expenses and profits, the traditional risk-loaded premium can be written as ptrad = (1 + e)lE[L] l+r where r is the valuation interest rate. Buhlmann (1970), Gerber (1979), and Eckhoudt and Gollier (1995) among others, have identified several so-called premium calculation principles (or criteria) for deriving the risk loading, e. Examples include the variance principle, the standard deviation principle, the safety first (the semi-variance) principle, and the expected utility principle. Kreps (1990) introduces the reluctance premium calculation principle, which suggests that the risk loading is a linear combination of the standard deviation and variance of the losses on the policy and depends on the covariance of the policy with the existing book of poliCies. Because underwriting new policies adds volatility to the company’s overall value, the insurer should consider this added volatility as well as the risks inherent in new poliCies. The risk load charged for the increased volatility in its value can be viewed as the insurer’s compensation for its reluctance to underwrite new poliCies.






In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.


Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.


According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.

This study was carried to examine relevance of insurance policy in distribution and transportation. Nigeria bottling plc form the population of the study.




This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.




It is important to ascertain that the objective of this study was to ascertain relevance of insurance policy in distribution and transportation. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of relevance of insurance policy in distribution and transportation


This study was on relevance of insurance policy in distribution and transportation. Three objectives were raised which included:  To ascertain the effect of insurance in the operation of the organization, to find out the type of contracts or goods insured by the Nigeria Bottling Company, Owerri, to find out the extent to which the Nigeria Bottling Company insures its distribution and transportation, to ascertain the extent of losses, if any, the Nigeria Bottling Company Owerri incurs through damages, losses, thefts etc and to ascertain how best to reduce high losses through good documentations. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from Nigeria bottling company. Hypothesis was tested using Chi-Square statistical tool (SPSS).


 For the insurance industry to provide a valued service to the transportation industry, we will see changes in how insurance coverage responds to the expectation of shippers, who are not likely to go back to accepting “traditional” limitations. We will need coverage to address the changing way goods are moved, recognizing that the brokerage of services to a network of independent contractors, similar to the ridesharing model of creating a network of independent drivers, is going to continue to grow until it is disrupted by the wider acceptance of autonomous vehicles. We will also need to see changes in the way insurance interacts with new technologies, including concepts around continually adjusting coverage based on AI, and improved contract certainty through smart contracts and blockchain


Trends prevalent in the insurance industry today should run in parallel with the confluence of the financial services as banks, capital markets, and insurance combine distribution channels.


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