The Influence of Regulatory Framework on Insurance Penetration in Kenya. A Case Study of the Registered Insurance Companies in Nairobi County.

Abstract

Insurance is the business of undertaking liability, and as such, liability to pay for damage or to make reimbursement in regard to loss, damage and or injury involving life(s), or property arising from the occurrence of a particular event. Despite the growth in number of companies and insurance agencies, the insurance penetration level has stagnated at 3.01%. Development of the county both on the economic and social dimensions is significantly challenged by the low insurance penetration. The main purpose of the research study was to assess the effect of regulatory frame work on insurance penetration. How regulation of insurance prices affects insurance penetration in the county. The effect of price regulation on the penetration of insurance in Kenya. How regulation of claims settlement enhances penetration of insurance. The effect of insurance product approvals on insurance penetration, and how regulations of distribution channels affect insurance penetration in Kenya. The study was based on stakeholder’s theory, utility theory, claims settlement theory and the theory of distribution channels. The study employed census method since all the managers were interviewed. All ethical issues pertaining to data collection were observed. Authorization letter from the university and a research permit from National Commission for Science, technology & innovation (NACOSTI) was obtained. Data was analyzed using descriptive statistics and inferential statistics. Descriptive statistics involved the use of frequencies, percentages, means and standard deviation. Inferential statistics involved the use of logistic regression. The results of the analysis indicated that, price regulations, insurance claims settlement process, insurance distribution channels and regulations on insurance products are all significantly associated with the odds of insurance penetration in Kenya. Recommendations were drawn from the findings of the study as follows; the government needs to regulate prices on insurance products. Second, the insurance claims settlement process needs to be regulated. Third, the insurance distribution channels need to be regulated to increase efficiency. Lastly, there is need to regulate insurance products as a way of enhancing insurance penetration. The study recommends that further assessment of regulations of other insurance aspects such as customer care, consumer education, and enhanced regulatory framework be investigated.