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1.1 BACKGROUND
Insurance is the pooling of risks by policyholders with the aim of indemnifying them from unforeseen risks. The primary function of insurance is to act as a risk transfer mechanism. The basic principle of insurance is that the losses of the few are paid by the many. Its underlying purpose is to provide protection against the risk of financial loss, thus giving peace of mind to the policyholders. Life insurance is also a means of creating an immediate estate fro one's dependants.
According to Sneyd, (1996) life insurance is a pooling plan; an economic device through which the risk of premature death is transferred from the individual to the group. Sneyd, (1996) asserts that, the contingency insured against has certain characteristics that make it unique. Sneyd, (1996) further states that, security and protection against losses or contingencies have existed in most societies. Life insurance has existed in most societies. Furthermore, various forms of insurance products have been included over time to serve as some of the principle means of providing protection and security. Life insurance has been in existence in Britain for more than 400 years. As early as 300 BC It is recorded that Chinese merchants utilized the technique of sharing risk. Furthermore about the year 2500BC the great code of Hammurabi provided for the transfer of the risks of loss from the merchants to the moneylenders. (Vaughan, 1982)
However, according to Skipper, (1998) the insurance business has historically divided itself between companies that sell insurance on the person, known as life insurance, and those that sell insurance to protect property referred to as non life insurance. Nonetheless, l ...