The Effect Of Micro-Insurance On The Financial Performance Of Insurance Companies In Kenya
Abstract
Performance is paramount to any business and the insurance business is not an
exception. The overall performance of the insurance industry has declined from 2014
to 2015, with poor macroeconomic conditions liked to the decline in performance
(AKI, 2016). The increasing competition in the insurance sector has led to the
development of micro insurance a deviation from the traditional standard insurance
products. A number of insurance firms have developed agriculture micro insurance
products and these include jubilee insurance, CIC insurance, Britam insurance among
others. Micro insurance in Kenya has gained traction over the past few years given the
fact that Kenya is an agricultural country, with the majority being small scale holders
(Cytonn, 2016). This study sought to determine the effect of micro-insurance on
financial performance of insurance companies in Kenya. The independent variables
were total premiums, total claims and total costs all on an annual basis. Financial
performance of insurance companies was the dependent variable which the study
sought to explain and it was measured by annual Return on Assets (ROA). Secondary
data was collected for a period of 5 years (2012 to 2016) on an annual basis. The
study employed an explanatory cross-sectional research design and a multiple linear
regression model was used to analyze the relationship between the variables.
Statistical package for social sciences version 21 was used for data analysis purposes.
The results of the study produced R-square value of 0.051 which means that about 5.1
percent of the variation in financial performance of insurance companies in Kenya can
be explained by the three selected independent variables while 94.9 percent in the
variation was associated with other factors not covered in this research. The study also
found that the independent variables had a weak correlation with financial
performance of insurance companies (R=0.227). ANOVA results show that the F
statistic was insignificant at 5% level with an F statistic of 0.830. Therefore, the
model was not fit to explain financial performance of insurance companies in Kenya.
The results further revealed that individually, all the three selected independent
variables were not statistically significant determiners of financial performance of
insurance companies in Kenya as they all had p-values greater than 0.05. This study
recommends that the management and policy makers in the insurance industry should
come with a way of increasing total premiums collected by firms as they ultimately
influence financial performance of insurance companies. Other factors that not
covered in this study but positively influences financial performance of insurance
firms should also be addressed.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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