The relationship between economic growth and insurance penetration in Kenya
The study was set out to examine the relationship between economic growth and insurance penetration in Kenya. The study employed a causal study design. Since there is published information on economic growth and insurance penetration by the government agencies, primary data collection methods were not employed. Secondary data was obtained from published reports of Insurance Regulatory Authority (IRA) and Central Bureau of Statistics (CBS) specifically the Annual Insurance Reports and Economic Surveys respectively. The target population was all the 45 Insurance companies registered for operation in Kenya. The study covered six years from 2003 to 2008. The study used simple regression analysis to examine the association between economic growth and insurance penetration in Kenya. Forecasting model was developed and tested for accuracy in obtaining predictions. From the study it was established that insurance companies in Kenya transact two types of businesses namely Long term and general business. Insurance penetration ratio increased by 0.10% to stand at 2.7% in 2008. The long term business accounted for 0.9% and general business accounted for 1.8%. GDPI under general insurance business amounted to Kshs 35.65 billion in the year 2008 as compared to the previous year's Kshs 30.96 billion representing 15.08% increase. Enacting a modern legal framework and .designating a special judicial authority to handle insurance-related cases are key requirements to enable market development by protecting the rights of policyholders and regulating the activities of market participants. Also fostering a competitive environment drives innovation, competitive pricing, and the adoption of best practices, and is a key enabler for the development and growth of insurance markets.