Information and Communications Technology Capabilities and Performance of Insurance Companies in Kenya

Abstract

Performance of insurance companies in Kenya is lagging in terms of insurance penetration, which is below three percent compared to the world's average of seven percent. The low penetration has led to decline in net profits and eroding of shareholders' returns; there is also fear among the insurance companies that they may exit the Kenyan market. The research investigated the relationship between Information and Communications Technology capabilities and performance of insurance companies in Kenya. Aspects of ICT capabilities studied include information technology innovation, artificial intelligence, big data analytics, and digital communications. Measures of insurance companies’ performance examined were insurance penetration, insurance density, and claims ratio. The study environment was insurance firms in Kenya. The theories included were diffusion of innovation, theory of mind, and utility theory. The research design for this study was correlational. Questionnaire was developed with google form and administered through an email to the respondents. Respondents of this study were IT managers of insurance companies. The target population was 56 IT managers from registered insurance companies in Kenya. Study was conducted from all the registered insurance companies. The collected data was analysed to get descriptive and inferential statistics. R statistical software was used for the analysis of data collected. Multiple regression analysis was conducted to determine relationship among variables. Data was presented in frequency tables and graphs. The study findings revealed that ICT capabilities contributed positively to performance of insurance companies. On IT innovation variable, it has been revealed that majority of the insurance companies have not partnered with the insurance technology start-ups. About artificial intelligence it was found that most insurance firms are not using machine learning techniques to analyse historical data and make predictive decisions from it, similarly they have not incorporated chatbot advisors and facial recognition in their processes. The study revealed that majority of insurance firms embrace big data analytics by gathering customers data from various sources when underwriting or processing a claim, data is securely stored and analysed to produce dashboard reports. Lastly about digital communications the research revealed that insurance companies undertake digital marketing of products on social media, use email with customers, their websites are credible having optimised search engine and secured hypertext transfer protocol. Based on results from regression analysis the study concluded that independent variables IT innovation and artificial intelligence significantly contributed to insurance companies’ performance while big data analytics and digital communications were insignificant. The study recommends that to improve performance, the insurance industry should consider IT innovations such as partnership with insurance technology start-ups. The study further recommends the insurance companies to consider artificial intelligence capabilities such as machine learning, chat bot advisors and telematics. The outcome of this study enables insurance companies, policymakers, and academicians to have more knowledge and skills on how to harness the ICT capabilities to address the challenges faced by lagging performance of insurance firms in Kenya.