Effects of demographic factors on insurance pricing in Kenya

Abstract

In recent years, insurance premiums in Kenya have risen significantly, driven by a combination of inflation, increased medical costs, and higher claims frequency. The demographics accessing insurance in Kenya reveal a complex interplay of socioeconomic factors, education levels, and cultural attitudes towards risk. Research that systematically evaluates insurance rates across a range of demographic variables remains limited, suggesting a need for more comprehensive studies to understand how demographic traits influence insurance accessibility and affordability. The general objective of the study was to investigate the effect of demographic factors on insurance pricing in Kenya. The study was guided by the following specific research objectives: to analyze the impact of age on insurance premiums in Kenya, to assess the effect of gender on insurance pricing in Kenya and to examine the influence of geographic location on insurance costs in Kenya. The target group for this study will encompasses insurance companies registered in Kenya. The audited reports of the insurance firms for the five-year period between 2019 and 2023 served as the study's secondary data source (both years inclusive). Descriptive statistics including mean and standard deviation were used to describe the data over the years. Multiple linear regression analysis and correlation analysis were used to determine the relationship between the research variables. Tables and figures were used in data presentation. The study established that the demographic factors studied accounted for 68.4 percent of the variation in the insurance pricing. The study concludes that demographic factors such as age, gender, and geographic location significantly impact insurance pricing in Kenya. It is recommended that insurance companies conduct detailed demographic analyses to tailor their pricing strategies effectively. Through understanding how these factors influence risk assessment, insurers can create more accurate and equitable pricing models.