Influence of Marketing Strategies on Implementation of Weather Index in Insurance Companies in Kenya

Abstract

Weather Index Insurance is a financial product associated with weather index and correlated to local yields. The contracts for this product are founded on specific perils or events like flood and/or drought that are observed by the provider of the product, in most cases insurance companies, and recorded at regional weather stations. However, the farmers who purchase the premiums for this product are indemnified at the end of the season. Therefore, this study is geared towards investigating the influence of marketing strategies on implementation of weather index in insurance companies. The objectives studied were investigating how marketing strategies of pricing, awareness, and demand influence the implementation of Weather Index Insurance products in insurance companies in Kenya. Descriptive design was used to conduct the study. This study targeted the product development manager and the marketing manager from each of 17 insurance firms offering Weather Index the sample size was 34 respondents. Data was collected using questionnaires. Simple random sampling was used to select the respondents. Both descriptive and inferential statistics were used to analyze the findings. The study found that perception of premium prices significantly influenced the implementation of Weather Index Insurance products in insurance firms in Kenya. The study concludes that premium prices and compensation terms influence uptake of Weather Index Insurance to a high extent. High-risk tolerance, positive perception of Weather Index Insurance, increased income levels and high trust in Weather Index Insurance increases demand for Weather Index Insurance and that demand influences implementation of the Weather Index Insurance to an average extent. The study did not find any correlation between increased awareness and the implementation of Weather Index Insurance. The study recommends that insurance firms offering, or aiming to offer Weather Index Insurance, should market their products such that customers perceive the premium prices as affordable and offer highly competitive in terms of compensation so as to increase uptake. Insurance firms in partnership with IRA should publicize aggressively the Weather Index Insurance to arouse increased demand as well as create awareness for enhanced implementation of Weather Index Insurance products.