Effect of selected stake holder factors on persistency of ordinary life assurance policies in Kenya

Abstract

It is the expectations of good corporate governance that the managers take stock of the risks their respective businesses are exposed to so as to put in place both preventive and control measures. In light of this, there is a wide spread customer dissatisfaction in the life assurance subsector on account of persistency as brought to the fore by the persistency rates posted by the Insurance Regulatory Authority (IRA,2016). This is partly due to the fact that the reputation of the industry has been eroded over the years as a result of both perceived and actual malpractices. This study was anchored on the postulate that a critical understanding of factors that affect persistency is indispensable in life assurance subsector. These factors were grouped into three broad categories namely: underwriter factors; intermediary factors; and policyholder factors. Empirical analyses of how these factors individually and collectively affect persistency are useful not only in understanding the complex concept of persistency but also in predicting the likelihood of lapsation. The study focused on the life assurance companies since they are considered to be better placed to understand the causes of lapsation. A structured questionnaire for the collection of quantitative data was presented to 47 respondents being 24 underwriting managers and 23 marketing managers of life underwriters in Kenya. The main statistical procedures for the analysis of quantitative data were descriptive statistics such as frequency distribution and percentages and dispersions. Inferential analysis was carried out using correlation analysis and regression analysis. Correlation analysis was employed to establish the relationship that exists between independent variable and the dependent variable. The study found that that underwriter factors have no signficant effect on persistency of ordinary life assurance policies in Kenya. In addition, the study revealed that intermediary factors have no signficant effect on persistency of ordinary life assurance policies in Kenya. The study established that policyholders factors have a statistically positive effect on persistency of ordinary life assurance policies in Kenya. Also, the study found that underwriter, intermediary and policyholder factors jointly have a significant effect on persitency of ordinary life assurance policies. However, while policyholders factors significant affect persitency of ordinary life assurance policies, Underwriter and intermediary factors have no signficant effect. The study recomemnds that since customers for Individual life assurance policies come from different sectors of the economy and get income at different times of the year, insurance companies should provide monthly, quarterly, bi-annual and annual premiums for their customers. In addition, insurance companies should focus on professional certificates, experience, ethical conduct and customer service training in the selection and vetting of intermediaries. In addition, insurance companies should provide training on intermediaries, at least twice in a year, on customer service and ethical conduct. Further, insurance companies should categorize their customers as per their demographic characteristics and offer individual life assurance policies that are affordable and convenient. In addition, insurance companies should embark on campaigns to increase awareness on Individual life assurance policies among clients.