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The objective of this chapter is to formulate the research question and develop the conceptual framework for the study. A detailed overview of how the research was conducted, the operation of the variables, hypothesis formulation and the research methodology used which covers data collection methods used, sample selection and method used for data analysis are discussed.
3.2 Research Question
Based on the review of literature and the research problem, the following question has been formulated in order to determine the relationship that exists between the various dimensions of customer expectation and the service quality by the insurance companies for motor insurance policy holders
The following research questions were derived from the research problem and the review of the literature.
What are the Service Quality Dimensions that affect customer satisfaction in the Motor Insurance industry in Sri Lanka?
What is the extent to which customers are satisfied with the services received from the Motor Insurance Industry?
What are the gaps between customer Service Quality and Customer Satisfaction of Motor Insurance policy holders?
3.3 Conceptual Framework
Service Quality Dimensions
[Source: Developed by the Researcher]
3.3.1 Rationalization of the conceptual framework
Conceptual framework was replicated based on Zeithaml, Parasuraman & Berry (1991), to test this study in the Motor Insurance Industry in Sri Lanka.
On the detailed literature review, the research identified five factors that impact value delivery to customer of Motor Insurance services. These five service quality dimensions of SERVQUAL Model by Parasuraman and Berry et el (1985), have been derived as independent variables. These variables fall under "Service providers Perspective" in the conceptual framework. The dependent variable was identified as "Customer satisfaction".
The gaps in quality of service will be identified by using these five dimensions. This is the gap between the Customer's expectation and experience of the Motor Insurance service delivery, which will subsequently have an impact on customer satisfaction.
Rust & Oliver (1994) and the Nordic Model (Gronoos, 1992) too has been used.
3.3.2 Definitions for Variables
Tangibles - Modern Equipment and Technology, Visually appealing physical facilities neat appearing employees and agents, visually appealing materials associated with services. (Parasurman et.al,1998 and 1990).
Reliability - Keeping promises when promises to do something by a certain time , offering products and services of utmost quality, issuing contracts with clear, transparent and non ambiguous terms, settling customers claims with no unnecessary delays, ,showing sincere interest when solving customers problems, offering services right the first time. (Parasurman et.al,1998 and 1990).
Responsiveness - telling customers exactly when the services will be performed, doing their best to give prompt service to customers, always willing to help customers. never being too busy to respond to customer's requests . Willing to help customer and provide prompt service (Parasurman et.al,1998 and 1990).
Assurance - Customers feeling safe in their transactions, behavior instilling confidence in customers, being consistently courteous with customers, having employees and agents with the necessary knowledge to give professional services to customers. (Parasurman et.al,1998 and 1990).
Empathy - Giving customers individual services, operating hours convenient to all customers, giving customers personal attention, by understanding the special features with particular customer and give him a fully customized service rather that common way. (Parasurman et.al,1998 and 1990).
As presented in the above conceptual model, the independent variable of dimensions of service quality will be studied. Price is also a relevant variable. However, the focus of this study is on service quality attributes and therefore is not within the scope of this study. The SERVQUAL model developed by Parasuraman et al.(1998), is therefore used for this study.
The development of hypothesis was categorized into two sections based on insurance companies' customers. Accordingly five hypotheses were developed. The source for all hypothesis development was based on the conceptual framework. Furthermore, the hypotheses based on insurance companies were primarily related to the importance of each expectation. The hypotheses developed for customers were based on the service quality of obtaining Motor insurance policies. When developing hypothesis, Literature review under section 2.17, according to the study carried out in Greece and Kenya by Rand, (2006),
3.5 Hypothesis Rationalization
Expected & Experienced Service Quality in relation to Reliability dimension in motor insurance
According to Parasuraman et al in 1985, Reliability dimension can be measure the require ability to perform the agreed/promised service by accurately & dependably. As per the research carried out by Rand (2006) , it says that the Reliability has a huge impact on the service quality in service industry. Especially in a industry like Motor insurance it has a huge effect. Consumer's satisfaction choice of service provider and service quality evaluation are influenced by the expectations of the consumer, (Trinh et al.2000).
As mentioned above in the research carried out in Kenyan Insurance industry by Rand (2006), it is noted that most of the researchers (Rand, 2006; Trinh, 2000) have identified that Reliable service always has a positive impact on the service quality provided by the company. Therefore it could be hypothesized that,
H 1 0 - There is no relationship between Expected & Experienced Service Quality in relation to Reliability dimension in motor insurance
H 1 - There is a relationship between Expected & Experienced Service Quality in relation to Reliability dimension in motor insurance
Expected & Experienced Service Quality in relation to Responsiveness dimension in motor insurance
The Dimension Responsiveness explains about willingness to help their customers & to provide a prompt service to the customer. Responsiveness factor significantly has a positive effect on Customer satisfaction.
Quality service provision, customer satisfaction and customer loyalty has recently been emerging as important parameters for both researchers and practitioners in turkey. This has been proved through a research carried by Yale University in Turkey (2009) on Service Quality in healthcare. Especially in an industry such as insurance it is a very decisive factor since the customer is expecting a prompt action for their problems. So responsiveness factor effectively contributes to reduce the gaps between the Expected & Experienced Service quality by the motor insurance policy holders. Therefore to identify the relation between service qty & relation to responsiveness.
So it could be hypothesized that,
H 2 0 - There is no relationship between Expected & Experienced Service Quality in relation to Responsiveness dimension in motor insurance
H 2 - There is a relationship between Expected & Experienced Service Quality in relation to Responsiveness dimension in motor insurance
Expected & Experienced Service Quality in relation to Assurance dimension in motor insurance
Assurance dimension is all about, the knowledge, competence, and courtesy of service employees & their skills to make trust with the company. Service science literature often relies on SERVUQAL as an instrument to measure quality of service provided. It is very important to keep the assurance on the agreement made the company to their customers. Specially in the insurance industry, it is crucial factor to offer the assurance of the services provided. Therefore to identify whether there is a relationship it is hypothesis;
H 3 0 - There is no relationship between Expected & Experienced Service Quality in relation to Assurance dimension in motor insurance
H 3 - There is a relationship between Expected & Experienced Service Quality in relation to Assurance dimension in motor insurance
Expected & Experienced Service Quality in relation to Empathy dimension in motor insurance
Empathy dimension is about caring individualized attention provided to customers. According to the expectancy disconfirmation model, customer's satisfaction is a function between his/her service performance perception and expectation (Pizam and Ellis, 1999), It is very important to offer individual attention to the customer's specially in the service industry. Therefore it is worthy to identify the relationship between the Expected & Experienced Service Quality in relation to Empathy dimension in motor insurance. So it could be hypothesized that,
H 4 0 - There is no relationship between Expected & Experienced Service Quality in relation to Empathy dimension in motor insurance
H 4 - There is a relationship between Expected & Experienced Service Quality in relation to Empathy dimension in motor insurance
Expected & Experienced Service Quality in relation to Tangibility dimension in motor insurance
Tangibility is all about appearance of physical facilities, equipment, ambience, personnel and communication materials. In general, increased loyalty leads to lower cost of servicing the firms customers, reduced marketing expenditure, increased business from the existing customer base and greater profits. The internal appearance and the facilities is also affecting the service quality.. Therefore it is worthy to identify the relationship between the Expected & Experienced Service Quality in relation to Tangibility dimension in motor insurance. So it could be hypothesized that,
H 5 0 - There is no relationship between Expected & Experienced Service Quality in relation to Tangibility dimension in motor insurance
H 5 - There is a relationship between Expected & Experienced Service Quality in relation to Tangibility dimension in motor insurance
Based on the SERVQUAL scale and using five service quality dimensions.
Reasonable Premium rates
In order to evaluate customer expectation and experience , a 5 point scale was used.
To measure customer perception the rating scale , for 1 Not important and 5 Very Important .
And to measure customer experience the rating scale, for 1 Not Experienced at all , to 5 Experienced at a high level
Range of products offered, to suit individual requirements
Availability and convenience of facilities and branch network
Availability of Telephone and online facilities
Level of service as expected/promised
Average time taken to process a claim after an accident
In order to obtain data on average time spent with the Insurance providing company to get an service rating scale from 1 to 5 was used . for 1 Not Experienced at all , to 5 Experienced at a high level .
In order to evaluate customer expectation and experience , a 5 point likert scale was used.
Level of responsiveness of the Insurance staff
Time taken to respond to an issue
The guarantee of safety when making a claim
In order to evaluate customer expectation and experience, a 5 point likert scale was used.
Safety of the investment
Making the actual cost
Convenience to the holder
Maintenance of confidentiality
The knowledge of the product/features by the staff members
Special benefits and features for the customer
In order to evaluate customer expectation and experience, a 5 point likert scale was used.
Personal attention to customers and recognizing regular customers
Helping customers in a pleasant and caring manner
Easy to approach staff members
Pleasant ambiance inside the company
In order to evaluate customer expectation and experience, a 5 point likert scale was used.
Facilities provided to the policy holders
Availability of adequate parking at the Insurance company
Number of repair centers in Sri Lanka
Directional signs and information
Availability of adequate instructions and directions of counters and procedures and easy directions when filling forma and other documents
Appearance of Staff members
Staff members are dresses appropriately
Convenient layout of the company interior
Level of satisfaction of the insurance company in relation to each service quality dimension
A 5 point likert scale was used to measure the likelihood of these indicators ranging from Very Likely to Highly Unlikely.
In Order to measure the time length of the relationship the respondent has with the Insurance provider , 5 time slots were presented where by the respondent could select his/her most relevant time slot.
Study was carried out to ascertain the validity and Reliability of the Questionnaire. This was done as the instrument to use collected data was not tested previously.
3.7 Research Methodology
The Research methodology is the way research is conducted. Research methodology refers to the theory of how research should be undertaken (Saunders, et al 2005).
The first step of the study is to assess the service quality gaps in relation to the customer expectations and experience among five leading Insurance Companies which deals with Motor insurance in Sri Lanka and with each of the five SERVQUAL dimensions
This is to examine the differences within each insurance company when providing services to the customers and to compare the differences of the overall satisfaction of customers in each insurance company. Stage three measured the level of satisfaction of the customers and the fourth stage examines the relationship between the expected and experienced service quality gaps by the customers for each dimensions. The final Stage integrates the data obtained from the five insurance companies and conclusions were prepared in accordance to the findings. Based on research problem, preliminary data was the main source of data used in this research. The deductive method refers to the use of a theory to generate prepositions or hypothesis that can be tested. Thus, the research method has been chosen for this study is based on deductive method.
3.7.1 Method of Data Collection
In this study the primary data was collected through a self completion questionnaire from customers of the selected five Insurance companies. The secondary data was collected from secondary source such Government publications (IBSL Annual Report 2010 & Central Bank Annual Report 2010), Company Annual reports and from other publications.
3.7.2 Selection of Sample
For the purpose of gathering data on customer expectation and customer experience, a total number of 60 questionnaires were distributed, from which a total of 53 valid Reponses were received and selected for data analysis.
The sample was spread across Motor insurance policy holders of Five different Motor insurance providing companies in Colombo area. A brief description of selected five companies are given below,
Aviva NDB Insurance PLCPLC
Aviva NDB Insurance PLC took wing as a leading player within Sri Lanka's insurance landscape in the late 1980s. The dynamism and creativity of the Aviva NDB Family has been the engine of its evolution into a superior entity in the insurance and financial services sector. The Company has recorded a Consolidated Revenue of Rs. 7, 265 million with an impressive growth rate of 23.7% over the 2009. The Revenue reported for the 2010 includes Rs. 171.2 million being the gross-up of tax withheld at source on Government Securities. Excluding this, the growth for 2010 stands at 20.8%.
Union Assurance PLC
This is in operation since 1987. Union Assurance includes both life & general. Is a public quoted company. UA is backed by one of blue chip company John Keels & Carson Cumberbatch. UA's reinsurers are world leaders.
The company has Rs. 1.6 Bn as net assets and also they have paid up capital Rs. 250 Mn as at 31 Dec 2009. And also UA shows very good in finance stability & strength in insurance sector. and currently operates in firmly in private insurance providers in Sri Lanka.
Asian Alliance Insurance PLC
This company has reached in to a good position within a very short time period. They reaches to the heart of their customers with outstanding levels of some area.
They starts their operations in December 1999 with a staff of 50 employees. they grow and grow very fast in insurance industry. It can say that the story behind their growth is that they are very talent in introducing tailor-made insurance solutions to their customers. they also having good co operate customers apart from individuals.
Sri Lanka Insurance Cooperation
Sri Lanka Insurance Cooperation(SIC) was established in 1962 as state owned cooperation. And it has converted as Limited liability company after 6 years & it was again re-instilled in state sector on 4th June in2011. At present SIC is having their operation in more than 120 branches all over the country. They have more than 64.8 Bn Assets base management including with a over 39 Bn life funds. With these they have more than 1 Mn policies with them.
Ceylinco Insurance PLC
Ceylinco Insurance company has registered as Ceylinco Insurance company limited in 1987. Was done well up to last economic crisis in the country/ World. And after that also they perform very well.
No drought at all to they have become as the leading Insurance company in the country. They are the owners of the largest branches network in the sector. Their goal is to becom the leading provider of protection and also the leading financial security in SL & some selected international markets.
3.7.3 Structure of the Questionnaire
Part one of the questionnaire focuses on demographic features of the respondents. Part two focuses on the dimensions.
Questions from 1.14 entail in "Reliability" dimension and thereafter, based on Operationalisation, 10 questions focus on "Responsiveness" dimension 16 questions represents the "Assurance" dimension and 9 questions on "Empathy" dimension. Final dimension which is "Tangibility" has 10 questions. Each dimension has 2 columns to rate expected and experienced using a likert scale of 1.5, not important at all being No.1 and Very important being No.05.
For the study, questionnaire was designed in accordance with the research objectives.
The Questionnaire is based on the five SERVQUAL dimensions presented by Parasuraman et al (1985) and the "Gap 5" which is also known as the " Customer gap (the gap between customer expectation and experience) of the SERVQUAL model..
Table 2: Structure of the Questionnaire
Measure Service quality perceptions of five insurance companies in general from individuals
Measure Service Quality dimensions separately to find out Expected & Experienced service quality by each customer.
3.1 - Reliability
3.2 - Responsiveness
3.4 - Empathy
3.7.4 Method of Data Analysis
The Data was collected through a Questionnaire. The study was carried out using Descriptive statistics as well as Inferential Statistics. Under Inferential statistics an ANOVA analysis and paired sample two test were carried out. The data obtaining from the study were analysis with Gap technique, Comparative analysis and Relationship analysis
3.7.5 Pilot Study
Pilot study was carried out to ascertain the reliability and validity of the questionnaire. The instrument used to gather data in a research should be valid and reliable (Page & Meyer, 2000).