Transient Advantage and Performance of Private Health Insurance Sector in Kenya: Dynamic Capabilities View

Abstract

The performance of the private health insurance sector in Kenya has continued to be below expectation with most of the companies reporting losses. Health insurance firms continue to compete for the same client base without registering any significant improvement in either penetration levels or performance. This study sought to establish the influence of transient advantage on performance specifically, the role of innovative products, distribution models, market sensing capability and strategic partnerships on performance. The dynamic capabilities view of the firm and institutional theory were used to anchor the study while a descriptive survey design was adopted in the study targeting a population comprising managers, assistant managers and supervisors. Four respondents were drawn from each of the five departments: sales, strategy, finance, operations and customer service. These are departments in the 19 private insurance companies where data was collected. The 380 targeted respondents, yielded a sample of 308. The data were analyzed and both descriptive and inferential results obtained and interpreted. It was found that while innovative products (β=0.52, exp (B) =1.683, p=0.046 <0.05) and distribution models (β=-0.77, exp (B)=0.563, p=0.036<0.05) significantly predicted performance, the practices of market sensing capability and strategic partnerships did not significantly (p >0.05 for both coefficients) predict performance of private health insurance sector in Kenya. Further, age and size of the firms, which were treated as control variables of the firm significantly influenced performance. From these findings it is recommended that the firms should strengthen product innovations including through the adoption of appropriate technology such a social media technology through which consumers of insurance can have easier access to information on the products and services. Similarly, the firms should effectively communicate to customers relating to changes in services in order to increase customer loyalty and eradicate uncertainties among them. Further, since the distribution models negatively predicted performance, it is recommended that these models be re-examined to determine their weaknesses with a view to improving them. Since market sensing and strategic partnerships had positive but insignificant predictive power on performance, the firms should strengthen these dynamic capabilities to a level where their influence on performance can be significant. For example, the health insurance firm should strategically partner with entities that share the same goals and objectives and are culturally compatible. As competitive advantages can no longer be guaranteed due to the dynamism of the current business environment, private health insurance firms in Kenya should explore how to ride the wave of transient advantages and realign their partnership so as to draw value while exploring profitable channels like digital distribution for their products. The insurance companies must invest in research and development with the aim of understanding relevant customer value proposition that would drive innovation.