Strategic Responses and Financial Performance of Insurance Firms in Kenya

Abstract

The purpose of this study was to examine the relationship between strategic responses and performance of insurance firms in Kenya. The study independent variables were expansion strategy, product and technology innovation strategy, cost and differentiation strategy, strategic alliance and mergers and acquisition strategy, while the dependent variable was firm performance, measured by return on assets and net profits over a period of five years. The study adopted a descriptive cross-sectional survey design. A census of all the 51 insurance companies was undertaken. Out of the 51 questionnaires that were distributed to the respondents, 31 were returned completed (61%) response rate. Data was obtained from both primary and secondary data. Primary data was collected using a semistructured questionnaire guided by closed and open-ended questions aimed at collecting general information and specific information about the strategic responses and financial performance of insurance firms respectively. In the study, descriptive statistics (mean and standard deviation) and inferential statistics (Pearson correlation and multiple regression) were used to describe and analyze the variables numerically. A Multivariate regression model was used to analyze the relationship between strategic responses and the financial performance of insurance firms in Kenya. Findings show that product and technology innovation strategy and expansion strategy were statistically significant. Limitations of the study included the following: despite the researcher’s assurance the information provided would only be used for academic purposes, some of the selected respondents still did not return the questionnaires, citing doubts on confidentiality of the information sought, and some of the targeted respondents declined to participate in the study, citing their organizational policies which stipulate that only the Chief Executive Officer was authorized to divulge information regarding their respective organizations. The following areas are recommended for further study: A similar study could be carried out in other organizations to find out whether the same results will be obtained. The study focused on insurance firms thus the same study should be carried out in other industries such as the banking sector. In addition, similar studies should be undertaken in the insurance sector in other countries for comparison purposes.