Strategic Innovations and Performance of Insurance Firms in Kenya

Abstract

The dynamic nature of the insurance industry necessitates the adoption of strategic innovations to enhance organizational performance and maintain competitiveness. Despite the growing importance of innovation in organizational success, limited studies have explored its specific impact within the insurance sector in Kenya. This study aimed to establish the effect of strategic innovations on the organizational performance of insurance firms in Kenya. The study was anchored on the dynamic capabilities’ theory, supported by the disruptive innovation theory, which emphasize the critical role of adaptive and innovative capabilities in achieving competitive advantages. A cross-sectional descriptive research design was adopted, targeting all 57 insurance firms in Kenya, with data collected from 49 respondents using structured questionnaires. Descriptive statistics, Pearson correlation, and regression analysis were used to analyze the data. The findings revealed a strong positive relationship between strategic innovations and organizational performance, with a Pearson correlation coefficient of 0.772. The regression model indicated that strategic innovations explain 59.5% of the variation in organizational performance (R² = 0.595), and the standardized coefficient for strategic innovations was significant (β = 0.772, p < 0.05). These results confirm that innovations in processes, products, and technologies significantly enhance operational efficiency, market competitiveness, and customer satisfaction within the insurance sector. The study concludes that strategic innovations are pivotal to improving the performance of insurance firms, with process innovations, such as workflow optimization and productivity enhancements, emerging as a particularly strong contributor. However, areas such as leveraging advanced technologies for competitive advantage and enhancing product differentiation require further attention. These findings underscore the importance of embedding innovation as a core strategic focus for insurance firms to sustain growth and remain competitive in a dynamic market environment. The study recommends that insurance firms invest in research and development to design differentiated products, adopt advanced technologies to improve customer service, and enhance employee capabilities through targeted training on process improvements. Policymakers, including the Insurance Regulatory Authority, should foster an enabling environment by providing incentives for innovation and supporting digital transformation initiatives. Future research could adopt a longitudinal approach to capture the evolving impact of strategic innovations on organizational performance over time. Expanding the scope to include other sectors or regions could provide comparative insights into innovation strategies and their performance implications.