Innovation Strategies and Financial Performance of Insurance Firms in Kenya: A Case of Sanlam Kenya PLC.

Abstract

Globally, insurance companies that embrace innovation strategies, such as AI and digital platforms, experience significant financial gains. However, the Kenyan insurance industry grew more slowly, with insurance penetration at just 2.3% compared to the global average of 7.3%. Sanlam Kenya PLC has experienced an upward financial trend, including a 35% increase in gross written premiums between 2019 and 2023. However, its growth pace remained slow compared to global benchmarks, primarily due to limited adoption of advanced innovations such as automated claims processing. This study explored how innovation strategies affect financial performance at Sanlam Kenya PLC, evaluating the effects of product, process, and market innovations on key financial indicators, including return on investment, return on assets, and revenue growth. It also assesses the moderating role of organizational culture in the relationship between innovation strategies and financial performance. The study was anchored by the resource-based view, open innovation, and dynamic capabilities theories. Additionally, it incorporated institutional theory to examine the moderating role of organizational culture. Pragmatic research philosophy was employed, using quantitative and qualitative data from questionnaires and financial data on ROA and ROI from document analysis. A mixed-methods research design systematically analyzed the characteristics of innovation strategies and their financial effect. The target population comprised employees at Sanlam Kenya PLC in finance, marketing, innovation, and ICT departments. Using the Krejcie and Morgan table, a sample of 242 respondents was selected through stratified sampling followed by purposive sampling. Data collection tools were pre-tested on 24 respondents at Britam for reliability and validity. The study adopted construct validity and internal consistency reliability, using Cronbach's Alpha with a threshold of 0.7. The statistical package for the social sciences (SPSS), version 28, was used for descriptive and inferential statistics. Ethical considerations, such as informed consent, participant anonymity, and data confidentiality, were prioritized throughout the research. Financial performance improved steadily, with ROI rising from 8.2% in 2019 to 12.5% in 2023. Product innovation contributed 13.7% (R² = 0.137) to financial performance, while process innovation accounted for 12.3% (R² = 0.123), enhancing efficiency and cost control. Market innovation had the greatest impact at 36.7% (R² = 0.367), driving customer acquisition and retention. Innovation strategies significantly impact financial performance (R² = 0.745), and the inclusion of organizational culture increases this effect (R² = 0.812). The significant moderating effect of organizational culture (R² = 0.846) confirms that it strengthens the relationship between innovation strategies and financial performance. Overall, innovation strategies collectively explained 91.3% (R² = 0.913) of financial performance variation, highlighting the value of continued investment in AI, automation, digital platforms, and regulatory compliance. The study concludes that Sanlam Kenya PLC should prioritize innovation-driven strategies, particularly in product diversification, digital transformation, and market expansion to strengthen financial sustainability, profitability, and competitiveness. These findings align with Kenya’s Vision 2030 and Sustainable Development Goals by promoting inclusive financial access, technological advancement, and institutional resilience in the insurance sector.