STRATEGIC LEADERSHIP, DIGITAL TRANSFORMATION, GOVERNMENT REGULATIONS AND INSURANCE PENETRATION BY LICENSED INSURANCE COMPANIES IN KENYA

Abstract

The insurance system is essential for economic stability and growth by offering financial protection, yet Kenya's low insurance penetration rate of 2.3% as of FY 2022 poses significant challenges for individuals, businesses, and the broader economy. The main objective of this study was to, “examine the effects of strategic leadership, digital transformation, and government regulations on insurance penetration, specifically focusing on the relationships between these factors and their moderated and mediated interactions.” The study will be guided by four theories: Strategic Leadership Theory, Resource-Based Theory, New Public Management (NPM), and Diffusion of Innovations (DOI), with a primary focus on Strategic Leadership Theory. Utilizing a positivist research philosophy and a cross-sectional survey design, the research will target 58 licensed insurance companies in Kenya, employing a census sampling method to survey 275 participants, and will analyse data through descriptive and inferential statistics following a pilot study to refine the questionnaire. The analysis indicates that approximately 40.8% of the variance in insurance penetration is attributed to strategic leadership, highlighting its moderate explanatory power while suggesting that other factors also influence penetration. Additionally, the combined effect of strategic leadership and digital transformation accounts for approximately 43.2% of the variance, and digital transformation significantly mediates the relationship between strategic leadership and insurance penetration in Kenya. Change statistics confirmed that, “government regulations significantly moderate the relationship between strategic leadership and insurance penetration (R² change = 0.531, p<0.001), and the significant moderated mediation index (0.020, CI [0.010, 0.090]) indicating that regulations also influence the indirect effect of strategic leadership on insurance penetration via digital transformation.” Practitioners in the Kenyan insurance sector should prioritize the continuous development of their organizational missions and visions as part of their strategic leadership initiatives, while also investing in comprehensive leadership development programs to cultivate effective leadership skills. Additionally, organizations must address concerns related to data privacy and cybersecurity to enhance the use of digital tools, adopt innovative technologies for digital transformation, and policymakers should focus on creating an inclusive consultation process and improving the clarity of regulations regarding digital insurance products and services.