| dc.description.abstract | A number of insurance firms in Kenya have been facing several challenges. The competition has been
stiff in the sector which has occasioned price undercutting. This has resulted in reduced revenue, mergers of
insurance firms, down-sizing, and even collapse of these firms. In this light, tackling uncompetitive practices
such as premium undercutting is a critical issue to the sector which needs to be focused on. The study aims to
determine the factors influencing price undercutting in the insurance sector in Nakuru County, Kenya. The study
was delimited to establishing the effect of competition, cost of operations, profit margin goals, and product
value on price undercutting in the insurance sector. The theory of competition, theories of cost, arbitrage
pricing theory, and Bertrand price undercutting theory guided the study. A descriptive survey research design
was adopted. The study targeted all employees working with insurance firms in Kenya where the accessible
population will constitute 187 accounts and finance employees working with the 11 insurance firms in Nakuru
County. Stratified random sampling was employed to draw 64 sampled respondents from the accessible
population. The study used a structured questionnaire to collect data from the sampled respondents. The
questionnaires were first pilot tested in order to ensure it was both valid and reliable for use in collecting data
for the main study. The researcher first obtained the necessary permits and consents from relevant authorities.
The collected data was analyzed with the aid of the Statistical Package for Social Sciences (SPSS) Version 21
analytical tool. The analysis was in form of both descriptive and inferential statistics. Descriptive statistics
comprised means, modes, variance and standard deviations. On the other hand, inferential statistics was in form
of Pearson’s correlation and multiple regression analysis. The results of the analysis was presented in form of
statistical tables, charts and graphs. The study will be significant particularly to policy makers, practioners and
scholars in the insurance sector in Kenya and beyond. From the findings the researcher concluded that huge
costs go to marketing insurance products. Insurance firms also incur massive costs in terms of commissions to
insurance agents. High labour costs in insurance sector leads to price undercutting. The study also concluded
that insurance firms have different product lines, product value is factored in when pricing and finally different
products are priced differently. The study recommended that there is need for insurance firms to use competitive
strategy like timely introduction of a product and service, depending on the season and the target customers.
Since majority of insurance offer similar products, Insurance should diversify their products. This will help them
to have an advantage of their competitors. | en_US |
