Evaluating customer satisfaction with motor vehicle insurance services in hung vuong assurance corporation

RESEARCH PROJECT
BMBR5103

EVALUATING CUSTOMER SATISFACTION
WITH MOTOR VEHICLE INSURANCE SERVICES
IN HUNG VUONG ASSURANCE CORPORATION

STUDENT’S FULL NAME

: DOAN THI NGUYET

STUDENT ID

: CGS00018501

INTAKE

: SEPTEMBER, 2014

ADVISOR’S NAME & TITLE : ASSOC.PROF.DR. PHAN DINH NGUYEN

December, 2015

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Advisor’s assessment

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Advisor’s signature

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Declaration
I hereby declare that this submission is my own work towards the MBA
and that, to the best of my knowledge, it contains no material previously
published by another person nor material which has been accepted for the award
of any other degree of the University, except where due acknowledgment has
been made in the text.

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ABSTRACT

This is a descriptive study that assessed the expectations of customers of
their insurers and the level of satisfaction that their insurers have been able to
provide them. The general objective of the study was to examine customer
satisfaction levels among clients’ of insurance companies and the strategies
companies have in place to achieve customer satisfaction.
The specific objectives of the study include the examination of customer
expectation, assessment of customer satisfaction levels, assessment of service
quality impact on satisfaction, evaluation of insurance companies’ customer
satisfaction strategies and identification of challenges confronting insurance
companies in their bid to satisfy their customers.
The study showed that customers’ expectations have not been adequately
met. Customers expect a high level of service delivery from insurance
companies. The challenges of internal bottlenecks and inadequate resources
have been identified by insurance companies as accounting for their inability to
deliver the kind of service that will satisfy their customers.
Recommendation offered by the study is that insurance companies should
aim at building durable teams. Various units and departments of the
organizations should work as a team with a focus to satisfy customers.
Companies should automate their processes to shorten the time that clients
spend trying to purchase insurance or make claims.

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ACKNOWLEDGEMENTS
At the first of my thesis, I would like to thank all those people who made
this thesis possible and an unforgettable experience for my studying.
Foremost, I would like to express my sincere gratitude to my supervisor,
Dr. Nguyen Phan, for the continuous support of my study, for her patience,
motivation, enthusiasm, and immense knowledge. Her guidance helped me in all

the time of research and writing of this thesis.
Besides my supervisor, I would like to thank Hung Vuong Assurance
Corporation for their encouragement, and their insightful comments. Moreover,
I also wish to acknowledge customers and respondents in who filled out the
questionnaire of this study. These findings made the research completely and
reliable.
Last but not the least; I also wish thank all those people who spent
through their time and generous support made this thesis project a dream come
true. Grateful thanks to them who have encouraged me, not only within this
dissertation but my entire academic life as well.

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Contents
ABBREVIATION ............................................................................................................................. 9
LIST OF FIGURES ........................................................................................................................ 10
LIST OF TABLES .......................................................................................................................... 11
CHAPTER ONE ............................................................................................................................. 12
INTRODUCTION........................................................................................................................... 12
1.1

Background of the study .................................................................................................... 12

1.2

Research Objectives ........................................................................................................... 13

1.2.1

General Objective ........................................................................................................ 13

1.2.2

Specific Objectives ....................................................................................................... 14

1.3

Research questions ............................................................................................................. 14

1.4

Scope of the study ............................................................................................................... 14

1.5

Implications of the study .................................................................................................... 15

LITERATURE REVIEW ............................................................................................................... 16
2.1

Overview of the Insurance Industry in Vietnam ............................................................... 16

2.2

Definition of relevant concepts ........................................................................................... 18

2.2.1

Customer ...................................................................................................................... 18

2.2.2

Insurance...................................................................................................................... 18

2.2.3

Customer expectations ................................................................................................. 19

2.3

Assessment of Customer Satisfaction Levels ..................................................................... 19

2.4

Customer satisfaction and service quality ......................................................................... 20

2.4.1

Definition of Customer Satisfaction ............................................................................ 22

2.4.2

Definition of Service Quality ....................................................................................... 22

2.4.3

Relationship between service quality and customer satisfaction ................................ 24

6

2.5

Service Quality Models....................................................................................................... 25

2.6

Customer satisfaction challenges ....................................................................................... 28

2.7

Conceptual framework ....................................................................................................... 30

2.8

Elements of the service quality ........................................................................................... 31

2.8.1

Tangibles ...................................................................................................................... 32

2.8.2

Service reliability ......................................................................................................... 32

2.8.3

Responsiveness ............................................................................................................. 32

2.8.4

Assurance ..................................................................................................................... 32

2.8.5

Empathy ....................................................................................................................... 33

CHAPTER THREE ........................................................................................................................ 34
RESEARCH METHODOLOGY ................................................................................................... 34
3.1

The Study Area................................................................................................................... 34

3.2

Overview about Insurance ................................................................................................. 36

3.3

Research process ................................................................................................................ 39

3.4

Research model and hypotheses ......................................................................................... 41

3.5

Data sources........................................................................................................................ 42

3.5.1

Questionnaire Design ................................................................................................... 42

3.5.2

Sampling Method ......................................................................................................... 43

3.5.3

Sample and Sample Size .............................................................................................. 43

3.6

Research Method ................................................................................................................ 44

3.7

Data Processing and Analysis ............................................................................................ 45

CHAPTER FOUR........................................................................................................................... 46
DATA ANALYSIS AND RESULTS .............................................................................................. 46
4.1

Sample Demographic ......................................................................................................... 46

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4.2

Reliability Analysis ............................................................................................................. 48

4.3

Exploratory Factor Analysis .............................................................................................. 50

4.4

Descriptive Analysis ........................................................................................................... 57

4.4.1

Tangibles ...................................................................................................................... 57

4.4.2

Reliability ...................................................................................................................... 57

4.4.3

Responsiveness.............................................................................................................. 58

4.4.4

Assurance ..................................................................................................................... 59

4.4.5

Empathy ........................................................................................................................ 60

4.5

Correlation Analysis ........................................................................................................... 60

4.6

Multiple Regression Analysis ............................................................................................. 62

CHAPTER V ................................................................................................................................... 66
CONCLUSION AND RECOMMENDATIONS ............................................................................ 66
5.1

Main Findings ..................................................................................................................... 66

5.2

Recommendations .............................................................................................................. 67

5.2.1

Improve satisfaction through reliability of service provider .......................................... 67

5.2.2

Improve satisfaction through Responsiveness of service provider ................................. 68

5.2.3

Improve satisfaction through Assurance of service provider......................................... 69

5.2.4

Improve satisfaction through Tangibles of service provider .......................................... 70

5.2.5

Improve satisfaction through Empathy of service provider ........................................... 70

5.3

Limitations and Further Research..................................................................................... 70

APPENDICES................................................................................................................................. 74
APPENDIX 1: QUESTIONNAIRE ................................................................................................ 74
APPENDIX 2: RELIABILITY ANALYSIS .................................................................................. 78

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ABBREVIATION

HCMC

Ho Chi Minh City

BHV

Hung Vuong Assurance Corporation

TAN

Tangibles

REL

Reliability

RES

Responsiveness

ASS

Assurance

EMP

Empathy

GEN

The general satisfaction with service

MOF

Ministry of Finance

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LIST OF FIGURES
Figure 1: Model of e-service quality (Santos, 2003) ................................................ 26
Figure 2 - Model of perceived quality and satisfaction (Spreng and Mackoy, 1996)27
Figure 3 - Determinants of Service quality perceived by customer (Parasuraman et al.,
1990).......................................................................................................................... 28
Figure 4 : The relationship between service quality and customer satisfaction ....... 31
Figure 5: BHV’s operating structure ......................................................................... 35
Figure 6 : Research process in flow chart ................................................................. 39
Figure 7 : Research model......................................................................................... 41

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LIST OF TABLES
Table 1 : Customer Satisfaction Scale ...................................................................... 20
Table 2 - Customer characteristics ............................................................................ 47
Table 3 - Reliability Analysis of each factor ............................................................ 48
Table 4 - KMO and Bartlett's Test ............................................................................ 51
Table 5 - Total Variance Explained .......................................................................... 52
Table 6 - Rotated Component Matrixa ...................................................................... 54
Table 7 - KMO and Bartlett's Test ............................................................................ 55
Table 8 - Total Variance Explained .......................................................................... 56
Table 9 - Component Matrixa.................................................................................... 56
Table 10 - Descriptive Statistics of Tangibles .......................................................... 57
Table 11 - Descriptive Statistics of Reliability ......................................................... 58
Table 12 - Descriptive Statistics of Responsiveness ................................................. 59
Table 13 - Descriptive Statistics of Assurance ......................................................... 59
Table 14 - Descriptive Statistics of Empathy............................................................ 60
Table 15 - Correlations.............................................................................................. 61

Table 16 - Model Summary ...................................................................................... 63
Table 17 - ANOVAa .................................................................................................. 64
Table 18 - Coefficientsa............................................................................................. 64

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CHAPTER ONE
INTRODUCTION

1.1 Background of the study
Customer satisfaction is of utmost importance for any product or service
provider. In today’s age, consumers have become more demanding and are
well-aware of various facts as compared to before. Consumers want both
quality and quantity oriented products and services. Many organizations
target customer satisfaction to stay in business and more importantly attain a
competitive edge over their competitors. For this purpose, exceptional
customer services results not only in customer retention but also attracts
other prospective customers.
Customer satisfaction arising from customer service is a business priority
today and is vital to future growth and success (Smith, 1991). According to
Hofstee (2006), the importance of customer satisfaction in the insurance
industry includes: survival of businesses in a competitive environment,
meeting the ever-increasing demands made by the customers, contributing to
the robust growth of the businesses which in turn contributes to the GDP
(Gross Domestic Product) of the economy, and increased competitiveness.
Customer service is dependent on three things: customer-friendly policies
set by the organization's executives, training offered to the staff, and the
attitude of the staff about their own organization as generated by the way
their company treats them (Smith, 1994). Good customer service is the

lifeblood of any business. A company can offer promotions and slash prices
to bring in as many new customers as it wants, but unless it can get some of
those customers to come back, the business would not be profitable for long.

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Customer satisfaction is perhaps more crucial in the service sector and
more so in the insurance industry where the insurer does not offer any
tangible item but just a promise.
Customer satisfaction is a key and valued outcome of good marketing
practice. According to Drucker (1954), the principal purpose of a business is
to create satisfied customers. Winning and retaining satisfied customers has
immense benefits. Increasing customer satisfaction has been found to lead to
higher future profitability, lower costs related to non-defective goods and
services, increased buyer willingness to pay premium prices, provide
referrals, and use more of the product, and higher levels of customer
retention and loyalty.
In view of the increasing competition, this research attempts to make an
assessment of customer satisfaction in one selected insurance companies and
help understand the dimensions of service quality which assist in ensuring
maximum customer satisfaction.
1.2 Research Objectives
1.2.1 General Objective
In recent years when competitiveness is increasing, Hung Vuong’s
performance has faced many problems: decrease in market share, revenue
growth rate is not high. Therefore, today whether customer satisfy with
Hung Vuong’s quality service or not and the degree of that satisfaction are
the problems and need solutions through which Company can have
appropriate reactions.

The General objective of the study is to examine customer expectations
and satisfaction levels among customers thereby give solutions for
improving service quality and efficiency for Hung Vuong Assurance
Corporation (BHV).

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1.2.2 Specific Objectives
This study has the following specific objectives:
(1) The system of theoretical basis and practical customer satisfaction for
insurance services.
(2) Assess the level of customer satisfaction for motor vehicles insurance
services of BHV, measure the degree of influence of the factors to customer
satisfaction for motor vehicles insurance services of BHV.
(3) Proposed solutions to enhance customer satisfaction with motor
vehicles insurance services of BHV.
1.3 Research questions
The main research question in this study is defined as follows:
(1) What is the satisfaction of customers, methods of assessment of
customer satisfaction with the quality of insurance services?
(2) The situation assessment of the quality of customer service in motor
vehicle insurance of BHV? What factors affect customer satisfaction for
motor vehicle insurance service of BHV?
(3) How to improve customer satisfaction for service quality of motor
vehicles insurance of BHV?
1.4 Scope of the study
Study subjects were identified as: customer satisfaction for service motor
vehicle insurance in BHV.
Scope of the study: The thesis studies the satisfaction of customers used

the services of motor vehicle insurance of BHV from 6 months and older.
Because of these customers have enough time to feel the quality of service of
BHV and their assessments will be more accurate than new customers to
join. Also, due to the time, the thesis focuses on assessing the level of

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customer satisfaction for the quality of motor vehicles insurance services of
BHV.
1.5 Implications of the study
By researching about the service in Hung Vuong Assurance, this study
can investigate factors significantly affecting on the service offered to
customers in terms of quality dimension to enable the company to develop
strategies to improve the quality of service delivery. This will in turn
enhance Hung Vuong Company’s competitive position in the insurance
industry and ensure survival of the company, especially in this period of
extreme competition. Investigating what customers’ awareness and thinking
about the services offering, Hung Vuong can redesign, modify or revise the
products providing to its users.
Doing this Hung Vuong can bring the satisfaction to the customers and
make them stay with company while attracting new ones. Nowadays
customers have more chances approaching many information so becoming
quality conscious, they will compare the offerings and then choose what they
perceive the better quality services. Therefore, it is necessary to conduct this
study to find out the problems in service delivery and then enhance customer
satisfaction.
The findings of this study can help the managers in other Insurance
Companies operating in Ho Chi Minh City in general catching the main
dimensions affecting on Insurance service quality. Bringing about that they

can conduct other researches about the awareness of customers in the service
quality of the services they provided and find out solutions for better
offering to customers.

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CHAPTER TWO
LITERATURE REVIEW
In order to have a fair idea on the issues pertaining to customer
satisfaction in the ever changing business environment, to identify the
expectations of customers of their insurers and the extent to which insurance
companies are responding to these expectations, there is need to review
existing relevant literature and models.
2.1 Overview of the Insurance Industry in Vietnam
The insurance industry provides protection against financial losses
resulting from a variety of perils. By purchasing insurance policies,
individuals and businesses can receive reimbursement for accidental losses.
Vietnam started liberalising its insurance market by allowing foreign
insurers to participate in the domestic market almost 20 years ago. Since
then, its insurance market has grown exponentially. Before the 1990s,
Vietnam’s insurance market was dominated by state-owned insurance
enterprises. As at the end of 2014, there were a total of 30 non-life players
from the state and the private sector, the latter including both domestic and
foreign-invested companies.
According to the figures in Vietnam’s Insurance Market report issued by
the Ministry of Finance (MOF) annually, insurance business revenue
increased by an average annualised rate of 13% to 15% a year. Growth is
likely to continue for the years to come.
Non-life insurance products include:

(i)

Property and damage insurance,

(ii)

Insurance for goods in transit by road, sea, waterway, rail and air,

(iii)

Aviation insurance,

(iv)

Motor vehicle insurance,

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(v)

Fire and explosion insurance,

(vi)

Marine hull insurance and ship-owners’ civil liability insurance,

(vii)

Liability insurance,

(viii) Credit and financial risks insurance,
(ix)

Business loss insurance, and

(x)

Agriculture insurance.

Unlike life insurance products, the rules, terms and premium scales of
non-life insurance products do not have to be approved by the MOF before
they may be sold. However, the MOF may request an insurer to suspend
selling certain non-life insurance products where the MOF considers that the
rules, terms and premium scales of such products fail to ensure the financial
safety of the insurer and may affect the rights of policyholders. In such case,
the rules, terms and premium scales of the insurance products must be
amended, and the amendments must be approved by the MOF before the
insurer may resume selling them.
Certain non-life insurance products are compulsory under Vietnamese
laws, and for which the MOF sets the terms and premium scales and
minimum sum insured. Those products are:
(a) Civil liability insurance for motor vehicle owners
(b) Civil liability insurance for aviation carriers to the passengers
(c) Professional liability insurance for providing legal services
(d) Professional liability insurance for insurance brokers
(e) Fire and explosion insurance.

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2.2 Definition of relevant concepts
2.2.1 Customer
A customer may be defined as someone who has a direct relationship
with, or is directly affected by an agency and receives or relies on one or
more of that agency’s services or products.
Customers in human services are commonly referred to as service users,
consumers or clients and they can be individuals or groups (Fornell et al,
1992). An organization with a strong customer satisfaction culture places the
customer at the centre of service design, planning and service delivery
(Healy, 1999). Customer centric organizations will determine the customers’
expectations when they plan, listen to the customer as they design, focus on
the delivery of customer satisfaction activities, value customer feedback
when they measure performance (Ohmae, 1982).
2.2.2 Insurance
Agreeing to the terms of an insurance policy create a contract between
the insured and the insurer. In exchange for premium payments from the
insured, the insurer agrees to pay the policyholder compensation upon the
occurrence of a specific event (Gart, 1990).
Insurance is a pooling of risks. It is based on the premise that whereas
many people will pay premiums to the insurance company, probably only a
few will make claims. Part of the payment of the many is used to pay
compensation to the few who suffer losses (Troxel et al, 1983).
Conceptually, insurance is a devise whereby many individuals facing the
same risk form a pool into which each individual contributes premiums, and
out of which the few who actually suffer unforeseen and unexpected losses
are compensated.

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2.2.3 Customer expectations
Customers have some expectations of their insurers. That is the level of
services that they expect their insurers to deliver. Understanding customer
expectations is an important and essential element in service delivery.
Generally, customers of insurance companies expect to be taken serious,
receive prompt and reliable information, simplified and short processes,
prompt payment of insurance claims, empathy and respect, honesty and
dedicated attention, full disclosure of policy terms and conditions at the
point of sales, quick and reliable feedback.
2.3 Assessment of Customer Satisfaction Levels
Organizations need to retain existing customers while targeting
prospective customers. Measuring customer satisfaction provides an
indicator of how successful the organization is at providing products and/or
services to the market place. Customer satisfaction is measured at the
individual level, but it is almost always reported at an aggregate level. It can
be, and often is measured along various dimensions (Gerard, 1971).
Customer satisfaction is an abstract concept and the actual manifestation
of the state of satisfaction will vary from person to person and
service/product to service/product. The state of satisfaction depends on a
number of both psychological and physical variables which correlate with
satisfaction behavior such as return and recommend rate. The level of
satisfaction can also vary depending on other factors such as other products
against which the consumer can compare the organization’s products
(Marks, 1985).
Work done by Parasuraman, Zeithaml and Berry between 1985 and 1988
delivered the SERVQUAL which provides the basis for the measurement of
customer satisfaction with a service by using the gap between the customer’s

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expectation and their perceived experience of performance (Parasuraman et
al, 1985 and 1988). The usual measures of customer satisfaction involve a
survey with a set of statements using a scale, generally measured on sevenpoint scale as indicate below.
Table 1 : Customer Satisfaction Scale
Strongly

Disagree

Disagree
1

Disagree

Undecided

somewhat
2

Agree

Agree

Agree

somewhat

3

4

5

Strongly

6

7

The objective is to measure customers’ perceived satisfaction with their
experience of a firm’s offerings.
Managers in service sectors are under increasing pressure to demonstrate
that their companies are customer-focused. Given the financial and resource
constraints under which service organizations must manage, it is essential
that customer expectations are properly understood and measured and that,
from the customers’ perspective any gaps in the service quality are
identified. This information then assists a manager in identifying costeffective ways of closing service quality gaps and of prioritizing which gaps
to focus on. All of the effort is aimed to get customer satisfaction (Solomon,
1993). In order to achieve customer satisfaction the company has to
understand the factors or dimensions of customer satisfaction (Parasurama,
Zeithaml and Berry, 1985).
2.4 Customer satisfaction and service quality
Service quality and customer satisfaction are inarguably the two core
concepts that are at the crux of the marketing theory and practice. In today’s

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world of intense competition, the key to sustainable competitive advantage

lies in delivering high quality service that will in turn result in satisfied
customers. These writers are positive that a higher quality leads to higher
customer satisfaction. There is therefore, no doubt that, service quality and
customer satisfaction is the ultimate goal of service providers desirous of
maintaining a competitive edge. The quality of service is very critical in the
assessment of customer satisfaction levels.
The tool to each customer satisfaction namely ‘service quality’
(SERQUAL) consists of dimensions such as reliability, responsiveness,
competence, courtesy, credibility, security, accessibility, communication and
understanding the customer (Parasurama et al, 1990). All of the dimensions
need to be fulfilled to make the customer satisfied.
Fitzsimmons and Fitzsimmons (1997) expanded further these two
dimensions of service quality, and summarised four aspects of quality which
affect customers’ perceptions: technical quality, integrative quality,
functional quality and outcome quality. Technical quality refers to the skills
of the personnel and design of the service system. In insurance this is very
important as the customer uses the personnel and efficiency of the systems to
judge the provider. Integrative quality is concerned with how the different
parts of the service delivery system work together. This is crucial in
insurance as the different department have to work together to deliver
comprehensive service to clients in a timely manner. Functional quality
relates to the manner in which the service is delivered. Outcome quality is
when the actual service meets the promised service and the customer’s needs
and expectations. This is true in the case of insurance. If a customer is
dissatisfied, he or she is unlikely to do business with that company again.

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2.4.1 Definition of Customer Satisfaction

Customer satisfaction is a widely used term in business to measure the
kind of products and services provided by a company to meet its customer’s
expectation. In reality, it is difficult to define the satisfaction as it belongs to
the context and this concept often differs according to the particular setting
and purposes of the study.
According to Oliver (1997), customer satisfaction is the customer’s
judgment that a product provided a pleasurable level of consumption-related
fulfillment. Therefore, in intensive competitive environment like insurance
market, customer satisfaction is seen as a key performance indicator to
measure an operation of company. As Zeithaml and Bitner (2000) stated that
the satisfaction of customer state their satisfaction when they buy service,
while service quality is consider by service dimensions. Moreover, service
quality nowadays has affected to customer satisfaction (Oliver, 1993). To
protect or gain market shares, organizations need to outperform competitors
by offering high quality product or service to ensure satisfaction of
customers.
With insurance industry, customer longevity is achieved through the
delivery of high quality services especially under competitiveness and
volatile market conditions. Insurers need to understand customers’ service
requirements and how it impact on service delivery and customers’ attitudes,
for a small increase of customer satisfaction can to customer loyalty and
retention (Bowen & Chen, 2001).
2.4.2 Definition of Service Quality
Service quality is a field of many ambiguities and complicated to define.
What makes it more complicated is a different customer finds different
features important as their awareness in the same service. It is also true for

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the unique service like insurance industry. Some customers are likely to
appreciate if the service is rendered in an esthetical room, by employees
having a decent appearance, proper skills and capable of providing adequate
and useful information about policies, premiums, benefits and obligations on
the insurance coverage they considered. However, other customers will be
satisfied only when the agents discount the premiums and perceive this
service is qualified.
The research results of Gronoos (1984) has found that service quality is
perceived as the result of an evaluation process when customers compare
their expectations and the real service after they received from service
providers and from that indicate their satisfaction or dissatisfaction with the
products or services purchased. Parasuraman, Zeithaml and Berry (1988)
also share this vision when thinking service quality is a form of attitude,
related but not homologous to customer satisfaction, result of the comparison
between customer expectations with the actual services they are provided.
The expectation is a desire, wish of customer about service offerings,
customers often expect that the providers should offer something with better
service than they have provided to customers. Customer expectations are
formed based on their needs for goods and services, on purchasing
experiences in the past and on the information they receive from outside
such as retailers, friends, company’s communication activities.
If sellers too exaggerated features of goods and services, the consumer
will have too high expectations and the expectations will finally turn into
disappointment. The greater the gap between the expectations and actual
usage attributes, the higher the degree of consumer dissatisfaction.
Conversely, if the actual usage attributes consistent with the expectations of
consumers, the user will be satisfied, and if its actual attribute is higher than

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customer expectations, the user will be very satisfied (Kotler, 2005).
However, Cronin and Taylor (1992) stated that considering definition about
service quality is the gap between the expectation and the result received is
not appropriate. They have indicated the mistakes related to the correlation
between service quality and customer expectations in terms of services. They
considered whether the concept of customer satisfaction is defined as the gap
between the expectation and result or the mismatch with expectation.
In order to clarify this problem, it is necessary to distinguish the different
between definition of service quality and customer satisfaction. According to
Parasuraman, Zeithaml and Berry (1988), service quality is considered as the
general evaluation or the attitude related to attributes of service. Meanwhile,
satisfaction is related to a unique transaction. Service quality and satisfaction
have relationship with each other, service quality can create satisfaction but
cannot be understood in reverse direction. Satisfied with one service offering
cannot be concluded that service has high quality because satisfaction is
influenced by many other impacts such as prices, situation, personal factor
and so forth. Satisfaction is temporary; customer always requires higher
service quality.
2.4.3 Relationship between service quality and customer
satisfaction
In the period of economic crisis and tough competition, it is necessary for
all sectors in economy and also for insurance service as well to achieve
customer longevity through providing excellence service. Service quality is
recognized as potential factor for ensuring customer satisfaction and
retention, operational efficiency and profitability of an organization. File and
Prince (1992) argue that satisfied customers are comfortable repeating
engaging in business with the firm and even recommend it to others. The

24

customers sell the company to other customers by using word-of-mouth
when they feel satisfied with the services and thus increase the positive
image for company. Similarly, Martins and Toledo (2000) suggested that
service quality increases market shares by maintaining current customers as
well as soliciting new ones.
This paper establishes that customer satisfaction has a strong positive
correlation with customer retention and from then on the current customers
will recommend insurance offerings of insurers to their acquaintances and
friends. As a result, the insurers will gain more confidence with repeated and
stable. Reichheld (2006) states that companies with higher customer loyalty
experience growth in revenue twice as much as their competitor.
2.5 Service Quality Models
There are several models have been identified in the literature for
measuring service quality, namely: e-service quality model, perceived
service

quality

and

satisfaction

model,

Performance

only

model

(SERVPERF), Three components service quality, Service Quality model
(SERVQUAL), Hierarchy Model about Service Quality
Model of e-service quality (Santos, 2003): Service quality is one of the
key factors in determining the success or failure of electronic commerce. Eservice can be defined as the role of service in cyberspace (Rust and Lemon,
2001). This study proposes a conceptual model of e-service quality with its
determinants. It is proposed that e-service quality have incubative (proper
design of a web site, how technology is used to provide consumers with easy
access, understanding and attractions of a web site) and active dimensions
(good support, fast speed, and attentive maintenance that a web site can
provide to its customers) for increasing hit rates, stickiness, and customer
retention.

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