Digital Transformation Strategy and Competitive Advantage of Insurance Firms in Kenya: Case of Sanlam Kenya Plc

Abstract

In the contemporary business landscape, the pursuit and sustenance of competitive advantage have become central themes in strategic management and innovation. In Kenya, the insurance industry is a crucial component of the financial services sector, yet it continues to grapple with sluggish growth and low market penetration estimated at just 2.3% of GDP in 2022. Between 2015 and 2023, at least six insurance firms were placed under receivership due to solvency and inefficiency issues. In 2021 alone, the industry lost over KES 4 billion. As such, the purpose of this study was to evaluate the effect of digital transformation strategy on the competitive advantage of insurance firms in Kenya. The objectives of the study were; to examine the effect of business process automation on the competitive advantage of SANLAM Kenya PLC, to assess the effect of digital infrastructure adoption on the competitive advantage of SANLAM Kenya PLC, to investigate the effect of digital product innovation the competitive advantage of SANLAM Kenya PLC and to evaluate the moderating effect of Industry regulations on the relationship between digital transformation strategy and the competitive advantage of SANLAM Kenya PLC. The study was anchored on the Resource-Based View (RBV) as well as the Dynamic Capabilities Theory, Competitive Advantage Theory and Institutional Theory. The study employed an explanatory research design. The target population included 72 senior managers at SANLAM Kenya PLC. Primary data was collected using a structured questionnaire. A pretest was conducted on 8 respondents from Jubilee Insurance. Data was analysed descriptively using mean and standard deviation, and inferentially using correlation and regression analyses. The findings revealed that 58.4% of the variance in competitive advantage was as result of business process automation (p<0.05), 53.3% was as result of digital infrastructure adoption, and 37.8% was as result of digital product innovation. As such, process automation had the highest effect. However, industry regulations did not significantly moderate the relationship between digital transformation strategy and competitive advantage as the interaction term was not statistically at 5% level of significance (R²=0.782, p=0.993), suggesting that while compliance frameworks exist, they do not substantially alter digital transformation outcomes. The study concludes that digital transformation strategies, anchored in automation, digital infrastructure, and innovation are key drivers of competitive advantage in the insurance sector. These findings align with Sustainable Development Goal 9 (Industry, Innovation, and Infrastructure) and Goal 8 (Decent Work and Economic Growth) by promoting technological innovation and efficiency. The study recommends that insurance firms intensify investments in digital technologies, promote innovation-driven cultures, and collaborate with regulators to create adaptive digital policies.