Risk Management Practices and Performance of Insurance Companies in Kenya
Abstract
Risk management is at the core of all insurance firms, both locally and globally. To a
great extent, threats posed by poor risk management have led to massive insurance claims
towards insurers leading to a reduced performance by such firms. The study's objective
was to establish the influence of risk management practices on the performance of
insurance firms in Kenya. The study is anchored on the Contingency theory of enterprise
risk management, open systems theory, and institutional theory. A descriptive survey
design was embraced. All the fifty-six (56) registered insurers for the period ended 2019
were contacted for the study. The research adopted primary besides secondary data.
Preliminary data were obtained through structured questionnaires filled by underwriting
managers or the equivalent in each firm. Secondary data was sourced from IRA industry
annual reports designed for the last five years, 2015-2019. Data analysis was performed
through descriptive and inferential statistics, correlation analysis alongside multiple
regression.
The findings established a statistically significant correlation between Risk
Monitoring/Control and Performance (r=0.755, p-value=0.000). Risk mitigation was also
found to significantly influence the performance of Kenyan registered insurers (r=0.435,
p-value=0.001). A significant positive relationship was also established between Risk
Identification and the performance of insurance companies in Kenya (r=0.355, pvalue=
0.010). However, Risk Assessment was established to have an inconsequential
influence on Kenyan registered insurers' performance (r=0.207, p-value=0.140). The
collective influence of Risk Management techniques on the insurers' performance was
established to be positively significant. The study has contributed towards theory by
researchers, policy alongside management gaining a vibrant picture of the effect of Peril
Supervision techniques on Processes. Therefore, the study recommends underwriting
firms implement risk management practices through good data mining techniques and
enhanced artificial intelligence systems to help capture real-life information on risk
management practices. The research also recommends the implementation of risk
management practices since they have been established to influence performance. The
study was limited due to its adoption of a cross-sectional survey design and was
conducted in the insurance subsector, not the entire financial sector. Hence, the study
recommends that future research adopt a longitudinal study design on other financial
sectors.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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