The determinants of growth and development of kenya's insurance industry(1974-2004)

Abstract

Kenya's insurance industry has been undergoing extremcly List growth since independence. This research paper examines the determinants of Kenya's insurance development measured by total premium volume. Several independent variables such as per capita GDP. the total population. per capita wage. per capita education expenditure and inflation rate have been examined. Others arc private sector credit b) non-bank financial institutions. imports. nominal interest rate and imestment in tied assets (gross fixed capital formation). Empirical studies indicate that some of these factors have determined the development and growth of insurance in other countries and therefore it is prudent to examine their eflect in our economy as regards insurance development. Ordinary Least Square estimation is used to estimate the effect of these variables on the growth and development of insurance in Kenya. This research used secondary data sourced from various statistical reports available from the Central Bureau of Statistics. and the Commissioner of Insurance's office. The sample period runs from 1974 to 2004. Kenya's extremely fast development of insurance definitely mirrors the characteristics of the national economy as a whole. The study finds some significant results. PCI'capita GDP, as a measure of wealth for a given region. proves more significant to the development of insurance. Besides, the variables such as fixed assets investment (capital formation) and the number of telephones, which are for the first time incorporated as explanatory variables in empirical investigation, have a significant influcnce on Kenya's insurance growth and developmcnt. Kenya's insurance sector will keep growing for thc near future mainly owing to her economic development.