Role of Innovation Strategy on Insurance Penetration in Kenya

Abstract

Insurance companies provide unique financial services to the growth and development of every economy. Such specialized financial services range from the underwriting of risks inherent in economic entities and the mobilization of funds through premiums for long-term investments. The insurance industry in Kenya faces low insurance penetration in terms of market share, product diversification among other measures. Only 6.8% of Kenya’s population has purchased insurance cover with an overwhelming 93.2% never having embraced insurance cover either in life or property. The penetration of insurance in Kenya is estimated at 3.44% which is very low compared to other countries like South Africa with the highest penetration rate of 14%, Namibia 8%, and Mauritius 5.94%. This study was designed to assess the role of innovation strategy on insurance penetration in Kenya by reviewing four study variables namely product innovation strategy, market innovation strategy, technological innovation strategy, and scenario plan strategy. The study focused on the licensed insurance companies in Kenya. To enhance better understanding of the study variables, several theories were used in the study. The theories included: Marketing theory, resource based theory, diffusion theory of innovation, evolutionary theory and scenario thinking theory. This study employed a descriptive research design because it involves describing a phenomenon. The population of the study was 51 Insurance Companies licensed to underwrite insurance services. The sample of the study was 34 insurance companies licensed to underwrite insurance services from which 146 managers drawn from marketing, underwriting, finance and claims department were studied. Data was collected using both primary and secondary sources. Linear and Multiple regression analysis was used to show the relationship between independent and dependent variables. The data collected was presented using tables, bar charts, and pie charts. The result of the study may benefit several stakeholders among them the insurance firms, investors, the government of Kenya, the insurance industry and researchers. From the study findings, majority of the respondents thought product innovation analyzes and identifies what customers want. On the Contribution of Market Innovation to Insurance Penetration, the study found out that majority of the respondents were in agreement that market innovation contributes to insurance penetration. Results of the study indicated that all the respondents were of the opinion that technological innovations and process innovation contribute to Insurance Penetration in Kenya.The study also concluded that all the independent variables (Product innovation strategy, market innovation strategy, technological innovation strategy and scenerio planning contribute significantly to insurance penetration. . Based on the findings, study recommended that insurance companies should lay out procedures and strategies such as product innovation, market innovation, technological innovation and process innovation so as to enhance their penentration in the market.The Insurance Regulatory Authority (IRA) should formulate a well defined regulatory framework to ensure that all the new products are registered and patented to encourage innovation. In addition, Insurance firms in Kenya should allocate adequate resources for research on product innovation in their budgets which may enhance insurancece penetration in Kenya. Insurance firms should internally engage their staff in the process innovation process and also engage expert consultants to ensure that the scenario process planning becomes a success.