| dc.description.abstract | Risk can be defined as a hazard, chance or likelihood of loss or bad consequence. It is
closely associated with uncertainty where nobody can claim to be sure of what might
happen next whether as an individual, business enterprise, society or the state in
general. Risk can be classified as pure, speculative, fundamental or particular.
Generally, in practice, risk management is associated with insurance. Nevertheless,
risk management is much broader than insurance in that it deals with both insurable
and uninsurable risks. Insurance is indeed a subset of risk management and
strategically serves as one of the most important methods of risk financing which no
risk management programme can afford to ignore.
While it is true that insurance is one way of handling risk, the underwriting of
property and liability risks by insurers importantly need to be looked at from the
perspective of risk management. The need for insurers to be aware and consciously
manage the risks they have underwritten is of paramount importance. This is the crux
of this research project. Though most Kenyan insurers appreciate the potential benefit
of incorporating risk management in the running of their business, they have basically
remained as premium collectors and payers of claims ..
This research pr~e€t lias been written in four chapters. The first chapter contains a
general introduction of the subject of risk and insurance particularly how these two
relate to one anothes.in the realm of property and liability risks underwriting. It gives
the situation' of the Kenyan insurance industry in regard to the practice of risk
management thereby bringing out the research problem on which the research is
about. The rest of the chapter is taken up by a statement of the research objectives,
hypothesis, methodology, assumptions taken and a justification of the research work.
The objectives of this study are fourfold. First is to find out whether Kenyan insurers
are aware of and understand the concept of risk management and appreciate its
importance in the running of their businesses and if so to what extent they incorporate
the same in risk underwriting. Secondly the study has sought to find out whether the
existing insurance legislation in Kenya recognises the risk management aspect of
insurance practice and whether there is any particular legislation in regard to risk
management and risk managers in Kenya. Thirdly, it has strove to find out if Kenya
has any set qualification requirement( s) for practitioners of risk management whether
as employees of insurers or consultants. Fourthly, having found out the above, the
study has recommended ways and means of promoting risk management practice in
Kenya's insurance industry.
The second chapter is about review of related literature that forms the framework of
the study. In it, risk is defined and explained and thereafter related to the concept of
insurance following which the concept of risk management is introduced and
examined from the viewpoint of the underwriter. Various aspects of risk management
such as risk identification, measurement/analysis and control are looked into in detail.
Insurance and Risk Surveys as a major method of risk identification has been given
special attention. The role of risk management in underwriting property risks has been
looked at. As it engages in its normal business of underwriting risks, it is necessary
for an insurer to formulate and work under the guidance of a risk management policy.
The legislative environment in regard to insurance and risk management in the
Kenyan industry particularly in regard to the Insurance Act Cap 287 of the Laws of
Kenya has also been examined in this chapter as was the training and qualification
standards and requirements of the available risk managers/surveyors.
The third chapter is about data presentation and gathering with a preamble on the
current set up of the insurance industry in Kenya. The selection of data source and
sampling of the respondents has been defined and outlined. This is then followed by
the presentation of the various aspects of the gathered data including involvement of
insurers in management of risks, risk management policies by insurers, current
insurance legislation, risk identification, analysis, valuation of risks, risk control, e.t.c.
The study is basically an investigative study and as such the survey design is adopted.
Questionnaires were distributed to a sample of 18 insurance companies out of a total
of 36 while all registered 6 risk managers/surveyors. An interview was conducted
with the Commissioner of Insurance and the Honorary Secretary to the Institute of
Loss Adjusters and Risk Surveyors.
Due to the exploratory nature of the study, a qualitative analysis of the available data
has been adopted. Data from questionnaires and interviews has been coded and
frequency tables in simple percentages used to analyse responses to each question. A
descriptive approach has then been adopted in communicating the results
In summary the study finds that although risk management is consciously present in
Kenyan insurance business, there still lacks a clear understanding of the discipline in
the industry. Seventy two (72) percent of this research's respondents have been found
not to have a risk management policy in their operations and therefore do not practice
it. It has been found that the current legislation, the Insurance Act Cap 487 of the laws
of Kenya does not address the issue of the practice of risk management in the
underwriting of property risks. It only gives a general guideline on the investment of
insurance premium funds by the risk takers. It is recommended that a review of the
Act be carried out to give the industry the necessary legal framework of actively
incorporating risk management in their operations.
The involvement of risk surveyors/managers, where they are available, by insurers
has been found not comprehensive enough. They are not involved in risk control and
evaluation even after they have recommended appropriate risk control measures.
It has been found that although insurers have adequate information for any risk
management activity that lacks an efficient means of storage and retrieval of the
same. Computerization and general improvement of their information systems is
recommended.
Training, qualification and professional organisation of the locally available risk
managers/surveyors/assessors has been found wanting. The government has been
urged to streamline the available qualification channels or take the initiative to tailor
an appropriate curriculum for risk management training. A formal recognition of the
recently launched Institute of Loss Adjusters and Risk Managers as the self regulating
body for risk management in the country is also encouraged. | en |
