Insurance business modelling: a comparison of the Takaful insurance and conventional insurance models in Kenya
The objectives of this study were to establish whether the Islamic Insurance model is viable in the Kenyan Insurance market and if it can compete with conventional insurance companies in the market. Also, the project aimed to fmd out if and how Takaful Insurance of Africa, as representing the Islamic Insurance model in Kenya iscoping with the disadvantages it faces and how these affect its financial perfonnance. The research project took the fonn of an in depth look at Takaful Insurance of Africa company and its principles, models, methods of operation and financial results from inception in 2008 to starting operations in 2011 to the most current period. The financial ratios were compared with a group of selected conventional insurance companies with a similar market share measured in terms of gross written premiums. A student's T-test was used to test whether there is a significant difference between each of the financial ratios of Takaful insurance and the selected conventional insurance companies for each of the three years when Takaful Insurance of Africa has been in operations. The null hypothesis was that there is no difference in the fmancial ratios meaning that Takaful insurance can compete favorably with the conventional insurers in the market. The findings were that Takaful insurance can indeed compete at par with its conventional counterparts in the Kenyan Insurance market despite the drawbacks it faces due to the strict application of the Islamic principles underlying its operations. This was established from the comparison of ratios as well as the analysis of Takaful 's financial aspects in isolation over the period. The Islamic insurance model is therefore viable in the Kenyan insurance market and can be adopted by more companies since it can compete with the conventional insurance model and perform favorably. Any further research into the area may want to consider other countries with similar economic conditions as Kenya where the Islamic insurance model has been adopted.