Comparison between modern insurance and traditional social insurance.

The contrast between modern insurance and traditional social insurance can be presented in a number of factors as follows.

Modern insurance	Traditional social insurance.
Have tested principles guiding its practice such as insurable interest, utmost good faith, proximate cause, indemnity, subrogation and contribution.	Mainly based on oral tradition and customs, and often by a self-made byelaw usually over-burden and not tested.
Set out to pay the sum insured or indemnity and advice on risk management measures.	Promotion of mutual helpfulness and assistance to members in need with respect to various hazards of life, not just insured event.
The price payable is actuarially	Usually inform of periodic contributions, levies, fines and donations.
More rigorous rules and documentations are applied to establish and pay benefits/claims.	Prompt payments of benefits are common.
Creates employment opportunities, pays taxes and invests in the economic sectors of the economy (money and capital markets plus other real sectors).	Raises fund to support community developments like water projects, market expansions and hospital/clinic projects.
Usually, a limited liability organization or corporate by government laws for defined functions	Rarely organized as limited liability company and in some instances not even registered with known government agencies.
Government the laws enacted by the government and supervised by government agencies.	Little or non-existent of government control apart from enforcement of social justice and equity.
Rarely promotes social interactions or fraternizes with unfortunate insured by visiting or attending funeral ceremonies. Contributes or donates towards social responsibility.	Promotions of social interactions are high, as participation in social entertainments organized for/by members are encouraged. Also, it contributes towards social responsibility

 

 

The Operational Problems of the Traditional Social Insurance.

The traditional social insurances reflect the insurance model the predominant African community and Nigerian in particular. The systems used to be the only methods of providing insurance functions to our primitive society until the introduction of the modern insurance business by the European traders in Nigeria in 1800’s. These two models now work hand in glove to actualize the insurance needs of individual households, societies, profit and non-profit oriented organizations and government agencies.

However, there are numbers of associated problems with the traditional social insurance schemes in Nigeria, especially as it concerns town unions, age-grades, social clubs, and clan unions.  The prime problem has remained the relative difficulty and seeming inabilities to apply actuarial practice in determining the contribution each member should bring into the common fund. Thus, members do not pay commensurate contributions in relation to the risks they introduced individually to the scheme.

The non-actuarial contributions evident in the traditional social insurance schemes have confederated problems. These include the various forms of graduated levies on members depending on one’s assumed class in the community, compulsory levies and donations, constant levies and many instances of mandatory directives from the executives or influential members of the scheme. Many of such mandatory directives are at variance to natural justice and equity and often over-burden members.

There is also the problem of over zealousness for self-help projects. Many of the traditional social insurance schemes especially the town unions, age-grades and social clubs are noted for eating more than they can chew. There are cases of over-spirited and militant drive for self-help projects say construction of bus stop, electricity projects, water projects as well as road construction and maintenance without due consideration to the dynamic and ever-increasing economic and social predicaments and implications involved. The resultant outcomes are disenchantments, impoverishment of members, and disintegration of the traditional social insurance scheme.

Another serious thing in the traditional social insurance schemes is the problem of leadership. Many of the executives of these schemes are made of stark illiterate people and people with half-education. In such instances, the obvious consequences includes breaches of freedom of religion and association, excommunication or even exertion of force on members who cannot meet up with the compulsory demands of the executives or agree with the opinions and dictates of the influential members of the association. Annex problems to poor leadership are mistrust, cases of misappropriation of funds and favoritisms.

There is no-gain mentioning the negative effects of the urbanization and industrialization on the traditional social insurance schemes. With the over-increasing advancement in technology inducing urbanization and industrialization, the prominent features of the traditional social insurance schemes including primitive setting, communality and mutuality are losing luster. Honestly, many of the insurance functions of these social insurance schemes have been taken over by the modern insurance business.

 There are obvious cases of adulteration of the traditional social insurances with the western models (modern insurance business, national social security, labor unions and other suitable schemes) for survival in technologically and monetized economy. Think of the increasing economic and social obligations; education, residential accommodation, taxations and demands of office jobs and factory jobs. And religious obligations say Christianity or Muslim.  Cases of disowning one’s unbelieving family members on the ground of religious beliefs abound. There are also, conflicts and antagonistic attitudes blocking say Christian funeral ceremony on excuses of indebtedness or non-adherence to traditional religion or non-membership of age-grade association.

In conclusion, traditional social insurances have existed and will thrive side by side with the modern insurance system. Synthesis of the two systems for the benefit of citizens’ is needed since both are essential for our economic and social development. An endearing integration of modern insurance into the traditional social insurance can be achieved if the enabling environment is created through guided self-regulations, enactment and enforcement of adequate laws and frameworks to control and regulate the operation of the systems. 

However, in connection with the traditional social insurance scheme, the following submission will go a long way to redress the operational problems. Firstly, government agencies should scrutinize the rules and regulations of recognized town unions, age-grades, social clubs and other influential traditional social insurance schemes. Thus, adequate laws should be enacted and enforced by government agency should be created for this purpose.

In addition to that, the government and local government councils should encourage the traditional social insurance schemes by lending assistance to them through maintenance of a bureau for traditional social insurance schemes.