An assessment of the effect of micro-insurance on the financial performance of insurance companies in Kenya
The principles of Micro insurance are not new. Risk pooling and risk transfer can be traced back to some of the precursors of insurance, such as the Roman burial guilds. The products are not new as small policies, such as industrial life, and mutual protection schemes were offered in the 19th and early 20th century. Micro insurance is the protection of low-income people against specific perils in exchange for regular premium payment proportionate to the likelihood and cost of the risks involved. The need for enhanced access to insurance at affordable rates to the poor and low end market has been a major topic of discussion in our continent Africa. The study sought to establish the effect of micro insurance on financial performance of insurance companies in Kenya. This study research design was an analytical survey as well as correlation study which helped in establishing the associations between variables. The targeted population comprised the 10 firms underwriting micro medical and property businesses. The study used published secondary data on net profits which are readily available from the insurance industry annual reports, insurer‟s annual financial statements and journals from the Chartered Insurance Institute .Primary data on premiums, claims and reinsurance costs for the period 2009 to 2013 was obtained by the use of the data forms administered to the head of underwriting and finance departments. The study used both descriptive and inferential statistics in analyzing the data. Analysis was done with the help of Statistical package for social sciences (SPSS version 21). The multiple linear regression equation used took into consideration three independent variables for the 10 companies from 2009 to 2013 period. From the regression model, the study found out that there were micro insurance variables influencing the financial performance of insurance companies in Kenya, namely; micro-insurance premiums, micro-insurance claims and micro -insurance cost. They either influenced it positively or negatively. The study found out that the intercept was 0.903 for all years. The three independent variables that were studied (micro-insurance premiums, micro-insurance claims and micro re-insurance cost) explain a substantial 70.6% of financial performance of insurance companies in Kenya as represented by adjusted R2 (0.706). The study recommends that all insurers should find an area they excel and capitalize on it to get a competitive edge while trying to upgrade on the areas in which they are weak. The study also recommends that Insurers should invest in financial analysts to help them gauge when re-insurance costs work in or against their favour to increase their income. The study concludes that micro insurance has a significant effect on the financial performance of insurance companies in Kenya.