EFFECT OF INDUSTRY DYNAMICS ON INSURANCE PENETRATION RATE IN NAIROBI, KENYA
EFFECT OF INDUSTRY DYNAMICS ON INSURANCE PENETRATION RATE IN NAIROBI, KENYA
Mesfin Abebe Damtew - Masters of Business Administration, United States International University, Kenya
Dr. Charity Muraguri - Lecturer, United States International University, Kenya
ABSTRACT
Kenya’s insurance penetration rate had been volatile in the last decade, with the year-on-year insurance penetration rate dropping from 2.88% in 2015 to 2.37% in 2019. This sharp drop-in insurance penetration rate presented a key challenge in the industry's growth hence is vital for more conclusive research to be conducted examining explanatory factors to this trend. The current research sought to examine the effect of industry dynamics on the insurance penetration rate in Kenya. The first objective reviewed the effect of price undercutting strategies (premium, penetration, and skimming pricing) on the insurance penetration rate. The second objective sought to establish government intervention (regulations, subsidies, and price controls) on the insurance penetration rate. each insurance firms. The sample size has determined by the Yamane formula was 144 senior managers. The study used primary research data, with a structured questionnaire being the main tool for data collection. The research relied on Google forms and physical questionnaires in the data collection. The collected research data was edited and coded for quantitative statistical analysis involving descriptive techniques, correlation analysis, and multiple regression analysis. The research indicated that premium pricing had a negative and insignificant influence on the insurance penetration rate. In contrast, penetration pricing and skimming pricing had a positive and significant effect on the insurance penetration rate in Kenya. The analysis established that government interventions had a positive and significant influence on the insurance penetration rate. The results also showed that pricing controls had no significant effect while regulations and government subsidies positively and significantly affected the insurance penetration rate. The study also recommends that insurance firms collaborate with the regulatory body to develop support programs such as an effective tax policy, subsidies, incentives, and tax reliefs that can improve the industry competitiveness. Further, insurance firms should routinely review their pricing strategies to ensure consistent regulations and the business landscape. This will ensure that pricing strategies meet the competitive goals of the firms.
