Practitioners in the Nigerian insurance sector concentrate on premium generation and profitability while the interests and concerns of other stakeholders are largely ignored. As a result, the industry is plagued by pervasive lack of trust, deep-seethed stakeholders’ discontent and poor insurance uptake, etc, resulting in Nigeria having an abysmally low insurance demand and rate of insurance penetration. This exposes Nigerians to high vulnerability levels, extreme dependence on ad-hoc assistance and severe economic uncertainties as well as inhibits the Nigerian insurance industry from effectively performing its role in the national economy. Nigeria’s low rate of insurance penetration is legendary and the need for stakeholder management by the sector has been vaguely emphasized by some scholars.
This study evaluated the hypothesized beneficial effect of the adoption of the stakeholder approach on insurance uptake in Nigeria. The study was hinged on Freeman (1984)’s conceptual framework of the stakeholder approach which postulated that effective management of firm’s relationships with all its stakeholders would result in superior financial performance of the organizations (Chakravarthy, 1986; Prahalad, 1997; Hillman & Keim, 2001; Jones, 1995; Pfeffer, 1998). This research posited that the adoption of the stakeholder approach by the insurance sector would instate positive relationships and endear the sector to its stakeholders, culminating in improved insurance penetration in Nigeria.
The study was an empirical investigation which utilized the quantitative research approach. Data was gathered through closed-ended 5-Likert-Scale type survey questionnaire administered online using Google Forms, from 2,000 randomly selected representative samples derived from a population of 1.5million stakeholders which yielded 1,232 respondents in Abuja and Lagos. Data analysis was done using descriptive statistic, regression and correlation coefficient.
The result indicated that shareholder primacy norm, unethical claims management practices, stakeholders’ discontent and negative perception of the industry were strongly associated with low insurance penetration rate in Nigeria, while the stakeholder approach and positive perception of the industry were moderately associated with high insurance penetration in Nigeria. These findings were consistent with the hypothesized effects of the variables.