Influence of Horizontal Alliance Strategy on Performance of Insurance Firms in Kenya

Abstract

The recurrent changes in the global economy, especially recession and general business environment dynamics, low market penetration of insurance products, especially in the African continent, has necessitated formation of horizontal alliance as a strategy to improve insurance firm’s performance. This makes it necessary for an insurer to engage in an alliance, owing to the need of enjoying synergies associated with economies of scale, shared technological infrastructure, increased financial strength, access to new markets and availability of a diversified pool of human capital. The problem that necessitated the study was performance of insurance firms in Kenya. The general objective of the study was to determine the influence of horizontal alliance strategy on the performance of insurance firms in Kenya. This study was anchored on resource based view theory, knowledge based view theory, and the theory of firm growth in international business. The study adopted a cross-sectional descriptive survey research design with mixed approaches. The target population consisted of employees of the 44 insurance firms registered and licensed in Kenya. The sample size was drawn from the top management employees of the 44 registered insurance firms in Kenya. Simple random sampling technique was used to obtain a sample population of 176 respondents composed of top managers of the insurance firms. The study collected both primary and secondary data. Data was collected using closed- ended structured questionnaires. Data analysis was conducted using Statistical Package for Social Sciences (SPSS). Descriptive statistics which included frequencies, percentages, mean and standard deviation and inferential statistics which comprised of correlation, regression and ANOVA were conducted. Results showed there was a strong positive and significant linear relationship between liquidity, underwriting capacity, co-insurance of large risks, diversification of risks and information sharing of alliance partners and the performance of insurance in Kenya. Moreover, there was a negative and significant moderating influence between insurance firm performance and moderated liquidity and co insurance of large risks while diversification had a positive significant moderating influence on insurance firm performance. Further, the findings on the beta coefficient of all the resulting models indicated constants that were significantly different from 0. The ANOVA test for all the linear models showed that the F values were significant with p values of 0.000 < 0.05. The study concluded that all the models were significant in the prediction of performance of insurance firms, therefore, all the null hypotheses were rejected and the alternative hypotheses accepted. The study recommended insurers seeking to be in a horizontal alliance strategy should determine the liquidity of their alliance partner, diversify their risks and through coinsurance adopt reinsurance programs to expand their underwriting capacity and gain technical risk management expertise. The study also recommended use of mobilization technology in information sharing among the alliance partners.