OUTSOURCING OF HUMAN RESOURCES (HR) FUNCTIONS AND PERFORMANCE OF INSURANCE COMPANIES IN KENYA

Abstract

The performance of insurance companies in Kenya has faced several challenges in recent years. Reports indicate that the sector has struggled with issues such as low penetration rates, which stood at approximately 2.9% of GDP as of 2021, well below the global average of 7%. The general objective of the study was to assess the influence of outsourcing of human resources functions and performance of insurance companies in Kenya. Specifically, the study sought to assess the influence of benefits administration outsourcing on performance of insurance companies in Kenya and to determine the influence of legal compliance outsourcing on performance of insurance companies in Kenya. This study was guided by: Human Capital Theory and Institutional Theory. The descriptive research design was employed in this study. This study targeted management employees working in 56 insurance companies in Nairobi City County, Kenya. This implies that the unit of observation was insurance companies in Nairobi City County, Kenya while the unit of observation included 336 management employees working in these companies, top managers, middle level managers and lower level managers. The study’s sample size was reached at using Krejcie and Morgan sample size determination formula. Therefore, using the formula, the sample size for the study was 179 respondents. The respondents were chosen with the help of simple random sampling technique. The study used questionnaires as the tool for data collection. The questionnaire was self-administered using drop-and-pick-up later technique. The questionnaire was piloted to a group of 18 managers who were excluded in the actual study. SPSS (version 22) was applied in analysing quantitative data where descriptive statistics was computed and presentations done in percentages, means, SD and frequencies. Displaying of the information was done in table and figures. Pearson R correlation was used to measure strength and the direction of linear relationship between variables. Multiple regression models were fitted to establish the effect of outsourcing of human resources functions on performance of insurance companies in Kenya. The study concludes that benefits administration outsourcing has a positive and significant effect on performance of insurance companies in Kenya. The study also concludes that legal compliance outsourcing has a positive and significant effect on performance of insurance companies in Kenya. Based on the findings, the study recommends that the management of insurance companies in Kenya should embrace benefits administration outsourcing as a means to enhance employee engagement and retention, ultimately boosting organizational performance. By partnering with specialized benefits administration providers, these companies can offer a comprehensive and competitive benefits package that caters to the diverse needs of their workforce.

Key Words: Outsourcing Of Human Resources (Hr) Functions, Benefits Administration Outsourcing, Legal Compliance Outsourcing