Innovation Practices and Performance of Insurance Companies in Kenya

Abstract

The purpose of this study was to establish the effect of innovation practices on performance of insurance companies in Kenya. The study first explored the extent to which innovation practices were used. The link between innovation practices (IP) and firm performance was tested. IP variables included PIP, process innovation practices and market innovation practices. Firm performance was measured using BSC perspectives (financial, internal business process, customer, growth and learning).The population comprised of all the 52 insurance firms of which a survey was conducted. A structured questionnaire was utilized for collection of data and analysis was achieved through descriptive and inferential analysis. It was established that there was a significant link between IP and firm performance with process innovation practices being a performance predictor. Product innovation practices and market innovation practices were not significant predictors, probably due to price undercutting where some insurance firms charge less premiums as compared to market rates. The research findings obtained in this study contribute to theory and knowledge and makes significant contribution to policy and practice in the field of insurance innovation particularly in the formulation of insurance innovation framework to the industry. This will promote fair competition among insurance firms and improve consumer protection. The results may inform practitioners, while innovating for improved performance, on innovation decisions; best practices effective ways to minimize losses from innovations. Performance of insurance firms play a vital role in steering economic growth by addressing evolving customer needs and improving efficiency of service delivery. Thus, IP is key in enhancing overall performance of insurance firms.