The relationship between financial innovation and growth of insurance companies in Kenya
The objective of this study was to evaluate the relationship between financial innovation and growth of the insurance companies in Kenya. A descriptive survey design was used to achieve this objective. The target population was senior managers in marketing, underwriting, ICT, and finance from the 44 licensed insurance companies as at end of December 2009 (AKI report, 2009). From the 44 licensed insurance companies, one manager from each insurance company was selected purposively. A sample of 44 respondents consisting of one respondent from each insurance company was used for this study. A semi-structured questionnaire was used to collect data. Data was analyzed using descriptive statistics and regression analysis. Most insurance companies were found to review their products as and when need arises. Their products are both tailor made and new. New products were found to contribute to growth to a great extent. Information systems contribute to the growth of the company to a great extent also. New development in the market was found to influence a change in the company's operation system to a great extent and current system failure to a moderate extent. Insurance companies were found to favor affiliations with other financial institutions to increase sales, market share and for countrywide presence. The regression analysis showed that there is no significant relationship between financial innovation and growth in premium of the insurance companies in Kenya. New products and banc assurance were found to predict premium growth by a very small factor of .086 and .083 respectively. The statistical significance for the two variables were .687 (new products) and .696 (banc assurance). Innovations cannot be gauged by the kind of an operation system an insurance company has but the innovation of new products and banc assurance. The growth of the insurance companies can be enhanced by promotion of these partnerships. This study concluded that there may be other factors affecting growth in insurance companies to a great extent other than financial innovation. However there is need for a proactive approach in financial innovation to enhance growth. The study recommended that insurance companies in Kenya should take a proactive role in coming up with new products. The Association of Kenya Insurers should encourage innovation in the industry by carrying out studies to predict market situation. The government and other policy makers should make regulatory environment for banc assurance and strategic partnerships attractive. Further study should be conducted to establish how policy environment has affected insurance growth.