Effect of Automated Internal Control Systems on Financial Performance of Insurance Companies in Kenya
DOI:
https://doi.org/10.53819/81018102t3141Abstract
The purpose of this study was to examine the effect of automated internal control systems on financial performance of insurance companies in Kenya. A descriptive correlational research design was adopted for this study. The target population for the study was all 186 department heads from 62 insurance companies operating in Kenya. A sample of 157 respondents was selected from heads of Internal Audit, ICT, and Accounts departments. Data were collected using structured questionnaires and secondary financial data from audited statements. Both inferential and descriptive statistical analyses were conducted, including regression and correlation analyses. The study found that automated internal control systems significantly influenced financial performance (R² = 0.518, F = 166.535, β = 0.598, t = 12.905, p < 0.001). A total of 95% of respondents reported that automated internal control systems provided sufficient transparency in electronically processed cash receipt data, while 90% confirmed enhanced scalability through automation. The study found that 82% considered automated information and communication systems very important for operational efficiency, with insurance management confirming that automated controls including fraud detection, real-time monitoring, and regulatory compliance had specific roles in promoting financial sustainability. The study concluded that automated internal control systems substantially influence financial performance in Kenya's insurance sector. Companies actively implementing comprehensive automated controls demonstrate stronger fraud prevention capabilities and superior financial outcomes. The study recommends that insurance companies should strengthen automated internal control implementation through investing in pattern recognition systems, establishing real-time monitoring capabilities, and developing comprehensive digital audit trails. The study recommends enhancing automated controls by implementing advanced fraud detection algorithms, establishing centralized control dashboards, and creating automated compliance monitoring systems. Insurance regulatory authorities should create policies mandating minimum standards for automated internal control systems in financial reporting.
Keywords: Automated Internal Controls, Financial Performance, Insurance Companies, Risk Management, Fraud Detection, Regulatory Compliance
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