The Mediating Effect of Service Innovation on Indonesian Insurance Industry

Abstract

The COVID-19 pandemic dramatically has changed the business environment at all levels. This study sheds light on the significance of technological capability and market orientation and how they affect service innovation and firm performance. A quantitative research methodology was used to collect data from 98 Indonesian life and P&C insurance companies. Relationship hypotheses were validated by applying structural equation modelling (SEM). The findings showed that service innovation has a significant impact on firm performance. The direct impact of technological capability and market orientation on insurance firm performance was not observed. Nonetheless, such factors helped achieve firm performance through service innovation. Consequently, service innovation plays a unique mediating role between market orientation and technological capability toward insurance firm performance. Developing innovative services is crucial to navigating turbulent times.