STRATEGIC INNOVATION AND ORGANISATIONAL PERFORMANCE: INSIGHTS FROM INSURANCE COMPANIES IN NAIROBI CITY COUNTY, KENYA
STRATEGIC INNOVATION AND ORGANISATIONAL PERFORMANCE: INSIGHTS FROM INSURANCE COMPANIES IN NAIROBI CITY COUNTY, KENYA
Michelle Ndunge Munguti - Master’s Student, Department of Business Administration, Kenyatta University, Kenya
Dr. Paul Waithaka (PhD) - Senior Lecturer, Department of Business Administration, Kenyatta University, Kenya
ABSTRACT
The insurance sector is vital for economic growth as it offers risk management options and financial protection to both individuals and companies. Insurance companies in Nairobi City County have experienced notable performance challenges over the past five years. The combined ratio (claims and expenses relative to premiums) has deteriorated from 85% in 2020 to 92% in 2024, indicating declining underwriting profitability. Thus, the current study aimed to explore the effect of strategic innovation on the performance of insurance companies in Nairobi City County, Kenya. The study's specific objectives were: to assess the effect of product innovation, market innovation, process innovation, and technological innovation on the performance of insurance companies in Nairobi City County, Kenya. The research was directed by Diffusion of Innovation Theory, Schumpeter's Theory of Entrepreneurial Innovation, and the Balanced Scorecard Model. The research utilized a descriptive research design. The population targeted was 42 insurance companies operating in Nairobi City County, where the unit of observation was 168 participants encompassing 42 chief executive officers, 42 innovation managers, 42 operations managers, and 42 ICT managers. Since the target population was small and manageable, the entire population was included in the sample size, resulting in a total of 168 participants. Primary and secondary data were collected. Questionnaires were utilized to gather primary data from the chosen participants through drop and pick methods. Secondary data were acquired from websites of Insurance Regulatory Authority (IRA) and company annual reports. The inferential statistics were utilized to analyze the gathered data. The findings showed that, with an R2 of 0.659, the strategic innovation components; product innovation, market innovation, process innovation, and technical innovation collectively account for 65.9 percent of the performance of insurance businesses in Nairobi City County, Kenya. Also, a significant positive correlation of R = 0.812 was observed, indicating that these strategic innovation characteristics had a substantial combined effect on performance. The study concluded that strategic innovation approaches, particularly those connected to technological, process, market, and product innovations, play a crucial role in enhancing the performance of insurance firms in Nairobi City County, Kenya. It recommended that managers in these companies should concentrate on continuously strengthening their innovation frameworks though establishing a favourable regulatory environment for implementing strategic innovation best practices within Kenya's insurance industry, as well as structured technology investment and staff capacity-building programs to enhance innovation capabilities.
