Effect Of Expansion Strategies On Performance Of Insurance Industry In Kenya

ABSTRACT

According to Insurance Industry of Kenya Report of 2017, in 2017, world insurance

premiums in nominal USD terms increased by 4.0% to USD 4,892 billion, up from USD

4,703 billion recorded in 2016. Further, the report indicates Africa’s insurance industry

premium grew by 0.5% in real terms to USD 66.7 billion in 2017, representing 1.4% of

World’s insurance market share. In Kenya, insurance growth was 2.8 % in year 2016

compared to 2.63% in previous year while South Africa growth was 12.9%. The comparative

growth rate of Kenya’s insurance industry is still low. In 2017 Life and non-life insurance

recorded a penetration ratio of 1.02% and 2.00% respectively. The penetration of Insurance

among the Kenyan population is low compared to other countries outside Africa. A good

example is Malaysia which has an estimated 41% of the population covered. There is

therefore need for establishing why expansion of insurance in Kenya remains low. This may

be rooted in the insurance industry expansion strategies. However studies in the past on the

subject of expansion strategies in financial and non-financial establishments have yielded

conflicting outcomes with some studies have recommended further studies. These

inconsistent results point to the fact that the effect of expansion strategies is still not clear and

needs further investigation. Therefore clear knowledge is lacking on effect of expansion

strategies on organizational performance. The general objective of the study was to analyze

the effect of expansion strategies (ES) on performance of insurance industry in Kenya.

Specific objectives of the study was to: establish the effect of diversification strategy (DS) on

performance, establish the effect of product development strategy (PDS) on performance and

to ascertain the effect of penetration strategy (PS) on performance of insurance industry in

Kenya. The study was anchored on resource-based theory and Porter's competitive strategy

theory. A correlational survey design was adopted with a study population of 52 Chief

Executive Officers of the 52 insurers across the country. A census study was conducted.

Reliability of the research instrument was ascertained at Cronbach’s Alpha of .790, .802, .823

and .794 for DS, PD, PS and Performance respectively. Validity of the instrument was

achieved through expert opinion. Regression coefficients were; (B = 0.215, p< 0.05), (B =

0.353, p< 0.05), (B = 0.449, p< 0.05) for DS, PD, and PS respectively. R2 = .637. These

results show that DS, PD and PS have each a positive significant effect on performance while

ES accounts for 63.7% variation in performance of the insurance firms. It is concluded that

DS, PD and PS predict performance and that ES as a unit contributes to performance. The

study recommends enhancement of DS, PD and PS efforts. The government at both levels

may find the results useful in policy development. The insurance industry is expected to

benefit since the practitioners may use the results for firm level policy making. The study

may contribute to theory building thereby contributing to body of knowledge in strategic

management. Future research endeavors may be based on this.