Role of Effective Internal Control Systems on Insurance Business Performance in Nigeria

Abstract

This study assessed, in empirical terms, the roles that effective internal control systems play on the performance of insurance business in Nigeria, using selected insurance companies in Adamawa State in the North Eastern part of the country, as case study.  The population consists of all insurance companies in Nigeria, random sampling was used to select five of the existing sixteen active insurance companies in Adamawa State and primary data were used to elicit responses on seven structured questionnaire administered. Pilot survey was adopted for the reliability test and it yielded correlation coefficient of 0.82. Pearson Product Moment Correlation Coefficient was used to analyze the relationship between internal control system and performance of insurance companies. The study found a positive relationship between the independent and dependent variables, indicative of the fact that effective and efficient internal control system plays major roles on performance of insurance business. The study therefore recommends that a well established internal control system should be mandatory for all companies in the insurance industry.  It was also recommended that they should all engage the services of well qualified accountants to manage their internal control functions so as to reduce the incidence of frauds and malpractices in the economy.

Keywords: internal control; insurance; performance; frauds; malpractices.