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ABSTRACT
Every society thrives on information. More especially in this age of globalization, information dictates the scheme of things including trade flows and commercial activities. Insurance companies are left out in the importance of information. In fact, an insurance company cannot thrive and contribute immensely into the development and growth of an economy without adequate flow of information among parties to insurance transaction. Among myriads of roles insurance companies are expected to play in any nation are to provide hope through adequate compensation system after a loss has been suffered. It is also expected to provide certainty in the time of uncertainty. It is within these expected roles insurance companies that this study is situated. The study basically interrogates the effects of asymmetric information in the nonlife Nigerian insurance market. To empirically test this, questionnaires were distributed to hundred insurance policy holders who are staff of University of Benin and fifty questionnaires shared to fifty members (twenty five to each company) of staff both AIICO and Regency Alliance Insurance Companies. The study utilised simple percentages and chi square to analyse the data gathered. After proper analysis, it was discovered that adverse selection; and moral hazard both existed in the Nigerian market. This study recommends amongst others that parties to insurance contract should disclose all necessary information to the contract. The policyholders should ensure proper knowledge on the condition of any insurance company and its risk coverage so that policyholders can be properly grouped according to their risk class. Meanwhile, government’s role in this regard cannot be ignored when it comes to ensuring that proper legislation that would allow parties to the contract access to critical information about the customers and the companies concerned.
