Competitive Strategies and Performance of Insurance Companies in Kenya

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Odhiambo, Austine Otieno
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Kenyatta University
Due to globalization and technological developments, global insurance industry is in upward trend. However, insurance penetration is still low in Kenya. Limited studies have been conducted on significant influence of competitive strategies on performance of insurance companies in Kenya. The general objective of this study was to evaluate influence of competitive strategies on performance of insurance firms in Kenya. The specific objectives were to determine the influence of differentiation, cost leadership and market development on performance of insurance firms in Kenya. The performance determinants were profitability measured by net profit and market share evaluated by total annual gross premium. This study was guided by balanced scorecard model, contingency theory, Ansoff growth matrix model and Porter’s generic competitive theory. This study used descriptive research design. Target population was 55 registered firms as at 2017 provided by Insurance Regulatory Authority 2017 annual report. Stratified proportionate random sampling was used in selecting the respondents and Yamane Formula in determining the number of 110 target respondents. This study used structured questionnaire to collect primary data. The questionnaire was tested for face validity through expert judgment by the supervisor. Further pretest of questionnaire was done on 10 respondents where there views were incorporated. For external and internal reliability, test-retest and Cronbach’s Alpha was applied respectively. This study adopted Cronbach’s Alpha value of 0.78 as cut off. Both inferential and descriptive data analysis was used then results were illustrated on tables. Pearson’s correlation and multiple regression analyses were employed for inferential analysis. To establish the level of variation in the dependent variable in relation to independent variables variation, this study used analysis of variance. The study also utilized scientific package for social science seventeen as the analysis tool. The study findings indicate that independent variables had a positive significant correlation with the dependent variable. Differentiation had the highest correlation then cost leadership and finally market development. The findings further established that 50.2% (R2 = .0502) of the change in the firm’s performance was influenced by change in competitive strategies. This study thus concluded that: differentiation, cost leadership and market development strategies had a positive and significant influence on organizational performance of insurance companies in Kenya at 95% confidence level. In addition, the study concluded that the regression model applied was suitable at 95% confidence level with analysis of variance of F value of (P<0.05). This study recommends that the management of Kenyan insurance companies to continue applying competitive strategies to improve performance. The government through insurance regulatory authority should formulate favorable policies that support the insurance industry as a way of increasing their contribution to the gross domestic product (GDP). Insurance regulatory should also formulate regulations and standard to promote healthy competition and practices in the insurance industry. This study suggests future studies that incorporate business environmental factors as a moderating variable. The findings of this study provided valuable insight to the government on insurance policies formulation and regulation of insurance industry. The companies’ management can utilize the findings of this study as a guideline on formulation and execution of competitive strategies
A Research Project Submitted to School of Business in Partial Fulfilment for the Requirement of the Award of Master of Business Administration Degree (Strategic Management Option) Of Kenyatta University, February, 2020
Competitive, Strategies, Performance, Insurance Companies, Kenya