dc.description.abstract | Organisation's survival is dependent on the ability of the organizstion to adapt to changes in the
environment. The type of industry that the firm finds itself in will influence the way it compete
and the strategies it will adopt. The modified Porter's model has been used to study the perceived
attractiveness of PSV insurance business by managers in the insurance industry. The study
focused on thirty five insurance companies licenced to underwrite motor insurance business in
Kenya. Data was obtained from managers of the various insurance companies using a
questionnaire. The data was coded and analysed using SPSS.
The level of attractiveness depends on the strength of the six sources of competitive pressure. It
is important for managers to understand the competitive pressure associated with each force to
enable them respond strategically, so as to become relevant in the market place. The findings
indicate that the level of competition in PSV insurance is quite high. This is the major factor in
determining the level of attractiveness. The bargaining power of customers is high as the
industry is dominated by two major customers. This is the second strongest factor in
determining the level of attractiveness. The power of suppliers is moderate, with lawyers and
doctors leading, followed by reinsurers. The government also has an effect on profitability. PSV
insurance business became attractive upon the introduction of Michuki rules as this was said to
decrease the number of accidents and their severity. This is a critical factor for making the
industry attractive. However the power of the government can only be described as moderate.
Most of the managers do not find PSV class of insurance being unattractive. The main reasons
cited are heavy claims and poor driving habits of matatu drivers.
From the analysis, we note that the level of competition IS high, the bargaining power of
customers is strong, the suppliers and the government have a moderate power over the
underwriters but the substitutes have no major effect. The combination of these two strong
forces makes the business unattractive and therefore, only a few underwriters venture into this
class of business. | en |