Diversification As A Strategic Orientation By Insurance Companies In Kenya

Abstract

In today’s business environment, products and services can be rendered obsolete within months and corporate market shares at risk almost on a daily basis, hence the reason why strategic management and diversification are topics of great interest in the insurance industry today. The insurance industry experiences various challenges in its operating environment especially in the developing countries like Kenya. There is widespread customer dissatisfaction in the insurance industry, stemming from insurers’ failure to provide diversified product and service portfolio to satisfy customers’ ever changing needs and wants. In an effort to cope with such challenges the insurance companies use different diversification strategies to not only remain profitable but also become stable financially. This study utilized a descriptive survey design on the diversification strategies which insurance companies in Kenya use to remain profitable and stable. This study, therefore, sought to find out diversification strategies which the insurance companies use to attain their targets. Data was collected from a sample of fifteen insurance companies selected from a total of forty six firms operating in Kenya. The researcher used convenient random sampling technique to obtain the required data. The researcher collected data using a structured questionnaire which were sent using either electronic mail or hand delivered to the respondents who filled the questionnaire for later collection. The collected data was analyzed using descriptive statistics which included the arithmetic mean, median and mode and this was used to answer the research questions. The study found out that concentration on the core business of selling insurance is the most popular diversification strategy among insurance companies operating in Kenya. However some other insurance companies have done unrelated diversification in other areas like real estate management, property management, warehousing, agriculture, banking, stock market, and other areas of the economy. It is recommended that insurance companies should concentrate on their core activities as they diversify into other areas to supplement their income