Effect of Financial Product Innovation on Cashflow Position of Insurance Companies in Kenya

Abstract

The study examined how financial product innovation affects Kenyan insurance companies' cash flow. This was a descriptive cross-sectional survey. This study targeted all AKI-registered insurance firms as of December 2022. They numbered 53. This study used primary and secondary data. The finance managers, who knew each insurance line's financial products, provided firsthand data on financial product innovation. We collected primary data using a standardized questionnaire. The corrected R2 of.404 showed that insurance companies' financial product innovation caused 40.4% operating cash flow changes. The study found that 59.6% of factors affecting insurance firms' operating cash flows were not examined. Insurance firms in Kenya saw considerable increases in operating cash flows from financial product innovation. Size, gross premiums, and leverage did not statistically affect Kenyan insurance firms' operating cash flows. Since the p-value is smaller than 0.05, financial product innovation affects insurance firms' operating cash flows, according to the research objectives. Thus, insurance company financial product innovation caused operating cash flow variations. Current research did not examine 59.6% of factors affecting insurance firms' operating cash flows. Financial product innovation also improves Kenyan insurance firms' operating cash flows. However, size, gross premiums, and leverage did not statistically affect Kenyan insurance firms' operating cash flows. Insurance firms' operating cash flows decreased as gross premiums and leverage increased. The study found that insurance businesses moderately adopted financial product innovation for general and life insurance. Additionally, insurance providers innovated health and corporate insurance products on average. According to the report, insurance companies should personalize their products to consumers' needs. Insurance companies should conduct market research to assess insurance needs and gaps since financial product innovation affects operational cash flows.