Abstract
Purpose: The objectives of the study were to establish of premium pricing strategy on the profitability of insurance firms in Kenya..Methodology:The descriptive research design was preferred to other research designs because it reports the status of study variables. The population of study was the 45 insurance companies operating in Kenya as at 31st December 2012. Data was drawn from a period of five (5) years that is 2008-2012. The sample of this study was 10% of the sales workforce which comprised of 900 employees from the 45 insurance companies. The sample was generated by purposively sampling two employees from each insurance company.The researcher collected primary data with the help of a questionnaire. The primary data obtained from the questionnaires was summarized and analyzed by use of descriptive and inferential statistical techniques.Results:The descriptive statistics indicated that majority of the respondents agreed that their firm positively influenced consumer’s perception through fair pricing in setting premium prices, when using premium pricing our firm tried to reduce operation costs as much as possible and ensured they are controlled, their firm had successfully adopted effective premium pricing strategies in the recent years, their premium pricing strategy had led to more sales in their insurance products and their firm engaged professional expertise in implementation of their premium pricing strategy. Regression and correlation results indicated that there was a statistically significant and positive relationship between premium pricing strategies and profitability. These results implied that premium pricing has a positive effect on the profitability of insurance companies.Policy recommendation: The study recommends that insurance companies put in place measures assess the most effective premium pricing strategy to reduce product costs and thus increase profitability whenever such a strategy is used.
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