A Study Of Customer Perception Towards Service Quality - Global Journals

A Study of Customer Perception towards Service Quality if Life Insurance Companies in Delhi NCR RegionYear2014experience. Hence, there is a multiplier effect of poorservice hurting not just the bottom line of an insurancecompany but bringing additional costs of losingpotential customers in addition to existing ones.The purpose of the present study is to measurecustomer’s perception towards service quality of lifeinsurance companies. The framework developed byTsoukatos and Rand, (2006), Durvasula et al. (2004)and Mittal et al. (2013) has been used to find outcustomer’s perception towards service qualitydimensions of Life Insurance providers.Global Journal of Management and Business Research ( E ) Volume VII Issue IX Version I20II.Literature Reviewa) Service QualityExtensive research has been undertaken ondifferent aspects of service quality providing a soundconceptual foundation. Authors (Parasuraman et al.,1988; 1991; Carman, 1990) agree that service quality isan abstract and elusive concept, difficult to define andmeasure. Empirically, various service quality modelsand instruments have been developed for measuringservice quality. According to Gronroos (1982), there aretwo dimensions of customer’s perceptions of anyservice, namely technical quality (what is provided) andfunctional quality (how the service is provided). Sasseret al. (1978) suggested three different attributes (levelsof material, facilities, and personnel) all dealing with theprocess of service delivery. Subsequently, Gronroos(1990) identified six specific dimensions viz.,professionalism and skills, reliability and trustworthiness,attitudes and behavior, accessibility and flexibility,recovery, and reputation and credibility, on whichservice quality could be measured. Lehtinen andLehtinen (1982) discussed three dimensions viz.,physical quality, involving physical aspects; corporatequality, involving a service firm’s image and reputation;and interactive quality, involving interactions betweenservice personnel and customers. Perceived servicequality has been defined as a global judgment orattitude relating to the superiority of a service (Zeithamland Bitner, 2000).There are three types of customer expectationspredicted service, desired service, and adequate servicewhich presents a comparison between customerevaluation of service quality and customer satisfaction(Valerie A. Zeithaml, Lonard L. Berry, and A.Parasuraman, 1993). It has been found that investmentsin service quality, customer satisfaction and customerrelationships result in increased profitability and marketshare (Rust and Zahorik, 1993). High-quality service andcustomer satisfaction often lead to more repeatpurchases and market share improvements (Buzzell andGale, 1997). Service quality is one of the effective meansin building a competitive position in the service industry(Lewis, 1991). Customer satisfaction leads to customerloyalty and this leads to profitability (Hallowell, 1996). 20141 Global Journals Inc. (US)The most widely used service qualitymeasurement tools include SERVQUAL (Parasuramanet al.,1988; Boulding et al., 1993) and SERVPERF(Cronin and Taylor, 1992). The SERVQUAL modelsuggests that service quality can be measured byidentifying the gaps between customers' expectationand perceptions of the performance of the service using22 items and five-dimensions: reliability, assurance,tangible, empathy, and responsiveness. In theSERVPERF scale, service quality is measured throughperformance on score based on the same 22 items andfive dimensional structure of SERVQUAL. TheSERVQUAL have been used to measure service qualityin the insurance industry (Stafford et al., 1998; Leste andVittorio, 1997; Westbrook and Peterson, 1998; Mehta etal., 2002; Evangelos et al., 2004; Goswami, 2007;Gayathri et al., 2005; Siddiqui et al., 2010).Experts have claimed that the number of servicedimensions is dependent on the particular service beingoffered. According to Babakus and Boller (1992), thedomain of service quality may be factorially complex insome industries and very simple and uni-dimensional inothers. The SERVQUAL scale has been presented indifferent dimensions in various studies – singledimensional (Babakus et al., 1993; Lam, 1997), twodimensional (Babakus and Boller, 1992; Nadiri andHussain, 2005; Karatepe and Avci, 2002; Ekinci et al.,2003; Evangelos et al., 2004), three-dimensional(Bouman and Van Der Wiele, 1992; Mei et al., 1999),four-dimensional (Gagliano and Hathcote, 1994;Kilbourne et al., 2004), six-dimensional (Headley andMiller, 1993), seven-dimensional (Sasser et al., 1978;Freeman and Dart, 1993), nine-dimensional (Carman,1990), and nineteen-dimensional (Robinson and Pidd,1998) construct.Also, several scales have been replicated,adapted and developed to measure services by takingSERVQUAL as a base, viz., SERVPERF (Cronin andTaylor, 1992, 1994) for hotels, clubs and travel agencies;DINESERV (Stevens et al., 1995) for food and beverageestablishments; LODGSERV (Knutson et al., 1990) forhotels; SERVPERVAL (Petrick, 2002) for airlines;SITEQUAL (Yoo and Donthu, 2001) for Internetshopping; E-S-QUAL (Parasuraman et al., 2005) forelectronic services; SELEB (Toncar et al., 2006) foreducational services; HISTOQUAL (Frochot andHughes, 2000) for historic houses; LibQUAL (Cook etal., 2001) for library ; and ECOSERV (Khan, 2003) forecotourism.b) Service Quality in Life InsuranceLife insurance is a high credence service (Lynchand Mackay, 1985), very abstract, complex and focusedon future benefits that are difficult to prove (financialprotection etc.). Life insurance products provide verylittle signs to signal quality. It has been suggested thatconsumers usually rely on extrinsic signs like brand

20 14 Global Journals Inc. (US)Year1993; Crosby and Cowles, 1986). Customers are,therefore, likely to place a high value on their agent’sintegrity and advice (Zeithaml et al., 1993). Servicequality depends to a large extent on the informationgathering and processing activities of agents (Eckardtand Doppner, 2010). The quality of the agent’s serviceand strength of his relationship with the customer play amajor role in customer purchasing the life insuranceproduct. Putting the customer first, and, exhibiting trustand integrity have found to be essential in sellinginsurance (Slattery, 1989). According to Sherden (1987),high quality service (defined as exceeding “customers’expectations”) is rare in the life insurance industry butincreasingly demanded by customers.In Insurance Industry, high retention rates areclosely related to the economic performance ofcompanies (Diacon and O Brien, 2002). The insuranceindustry considers that understanding consumerbehaviour after the initial purchase will help insurers tomaintain longer customer-insurer relationship (Harrison,2003). Toran (1993) points out that quality should be atthe core of what the insurance industry does. Customersurveys by Prudential have identified that customer wantmore responsive agents with better contact,personalized communications from the insurer, accuratetransactions, and quickly solved problems (Pointek,1992). A different study by the National Association ofLife Underwriters highlighted other important factors likefinancial stability of the company, insurer’s reputation,integrity of agent and the quality of information andguidance from the agent (King, 1992). Clearly,understanding consumers’ expectations of life insuranceagent’s service is crucial as expectations serve asstandards or reference points against which serviceperformance is assessed (Walker and Baker, 2000). In astudy conducted in Germany, the duration of counselinginterviews is found to be the single most important factorthat has a positive effect both on the information qualityand on the total service quality provided (Eckardt andDoppener, 2010). Consumers tend to rate servicequality higher if they are aware of their right to complainto the regulator (Wells and Stafford, 1995). Technologyhas also become an important factor in how the agentoperates in the field including other functions such us, 2004). Communication, ICT, customer’sknowledge and prior experience influence the servicequality in insurance industry (Saad et al., 2014).Research has shown that the quality of serviceand the achievement of customer satisfaction andloyalty are fundamental for the survival of insurers. Thequality of after sales services, in particular, can lead tovery positive results through customer loyalty, positiveword-of-mouth, repetitive sales and cross-selling(Taylor, 2001). However, many insurers appear unwillingto take the necessary actions to improve their image.This creates problems for them as the market is21Global Journal of Management and Business Research ( E ) Volume VII Issue IX Version Iimage to ascertain and perceive service quality(Gronroos, 1982). Customer satisfaction in insurance isboth difficult to measure and ascertain. The futurebenefits of the “product” purchased are difficult toforesee and take a long time to “prove” its effects(Crosby and Stephens, 1987). An extended period oftime may be required in this industry for a fully informedevaluation (Devlin, 2001).As the premium amount typically invested in aninsurance policy is high, customers seek long-termrelationships with their insurance companies andrespective agents in order to reduce risks anduncertainties (Berry, 1995). Research have indicatedthat the key parameters, e.g. past experience, personalneeds, external communication, word of mouth, andactive clients significantly influence service quality of theinsurance sector (Barkur et al., 2007).In Indian context, measuring service quality onsix dimensions, namely assurance, competence,personalized financial planning, corporate image,tangibles and technology dimensions, it was found thatthe priority areas of service were assurance followed bycompetence and personalized financial planning(Siddique & Sharma, 2010). Perceived service quality oflife insurance services is a multi-dimensional secondorder construct consisting of the primary dimensions ofService Delivery, Sales Agent Quality, Tangibles, Valueand Core Service (Mittal et al. 2013). Cultural factorswere found to have significant influence on theexpectation on service quality in Indian Insurancemarket (Meharajan and Vanniarajan, 2011). Threefactors namely, proficiency; physical and ethicalexcellence; and functionality were found to havesignificant impact on the overall service quality of LifeInsurance Corporation of India in a study based onseven-factor construct (Sandhu and Bala, 2011).Strong relationship isfound betweensatisfaction level and the service quality dimensions(Gayathri et al., 2005). Perceived service quality andcustomer satisfaction are dependent on informationtechnology (Choudhuri, 2014). SERVQUAL constructcannot be applied to Indian Life Insurance sector andfurther research is needed to understand and improvelife insurance service quality within Indian context (Balaet al., 2011). Demographic variables are related to eightservice service quality factors namely, employeecompetence, creditability, timeliness and promptness,convenience, accessibility, communication, customerorientation and responsiveness (Bishnoi and Bishnoi,2013). Product innovation, increased interaction levelbetween agents and customers and technologicalupgradation affect the service quality perceptions of LifeInsurance policyholders in Northern India (Chawla andSingh, 2008).An insurance policy is almost always sold by anagent who, in most cases, is the customer’s onlycontact (Richard and Allaway, 1993; Clow and Vorhies,2014A Study of Customer Perception towards Service Quality if Life Insurance Companies in Delhi NCR Region

Year2014A Study of Customer Perception towards Service Quality if Life Insurance Companies in Delhi NCR RegionGlobal Journal of Management and Business Research ( E ) Volume VII Issue IX Version I22modified as per the service in consideration. Thus, thedimensions issue of service quality requiresreexamination in context of life insurance services.extremely competitive and continuously becomes moreso (Taylor, 2001).Previous studies, notably those of Wells andStafford (1995), the Quality Insurance Congress (QIC)and the Risk and Insurance Management Society(RIMS) (Friedman, 2001a, 2001b), and the CharteredProperty Casualty Underwriters (CPCU) longitudinalstudies (Cooper and Frank, 2001), have confirmedwidespread customer dissatisfaction in the insuranceindustry, stemming from poor service design anddelivery. Ignorance of customers’ insurance needs (theinability to match customers perceptions withexpectations), and inferior quality of services largelyaccount for this. The American Customer SatisfactionIndex shows that, between 1994 and 2009, the averagecustomer satisfaction had gone down by 2.5% for lifeinsurance. However, post 2010 till 2014 there have beencontinuous improvement in the index as Insurers arenow realizing the importance of service quality and itsimpact on customer satisfaction (www.theacsi.org,2014).It is therefore not surprising that measurementof service quality has generated, and continues togenerate, a lot of interest in the industry (Wells andStafford, 1995). Several metrics have been used togauge service quality. In the United States, for example,the industry and state regulators have used "complaintratios" in this respect (www.dfs.ny.gov, 2014). The“Quality Score Card”, developed by QIC and RIMS, hasalso been used. However, both the complaints ratiosand the quality scorecards have been found to bedeficient in measuring service quality and need for amore robust metric is strongly felt.Although service quality structure is found richin empirical studies on different service sectors, servicequality modeling in life insurance services is notadequately investigated. Further, for service qualitymodeling, a set of dimensions is required, but thereseems to be no universal dimension; it needs to beObjectives of the StudyIII.The objective of the study was to find out thefactors that affect the service quality of Life Insuranceproviders. It also studied the effect of demographicfactors on customer perception and service delivery. Inorder to achieve these objectives, the followinghypotheses have been formulated:Ho1 – There is no relationship between the age ofrespondents and perception of service quality of LifeInsurance providersHo2 – There is no relationship between the gender ofrespondents and perception of service quality of LifeInsurance providersHo3 – There is no relationship between the educationlevel of respondents and perception of service quality ofLife Insurance providersHo4 – There is no relationship between the income ofrespondents and perception of service quality of LifeInsurance providersResearch MethodologyIV.a) Data Collection MethodThe main instrument used for data collection inthis research was the questionnaire. The responseshave been collected through online survey using googledocs and email.b) Development of Research InstrumentIn order to develop a questionnaire, in depthliterature review on service quality dimension in LifeInsurance sector was carried out. The constructs of thequestionnaire are based on the framework developed byTsoukatos and Rand, (2006), Durvasula et al. (2004)and Mittal et al. (2013).Table 1 : Life Insurance Service Quality FactorsItemMy Life Insurer hascustomers at heartCodebestinterestSQ1My Life Insurer’s employees are available forassistanceSQ2My Life Insurer provides services in timelymannerSQ3My Life Insurer’s employees are trustworthySQ4My Life Insurer’s agents recommend policyas per customer needsSQ5My Life Insurer’s agentscommunication skillsSQ6haveMy Life Insurer’s agents are trustworthy 20141 Global Journals Inc. (US)ofgoodSQ7

My Life Insurer’s offices are modernSQ8My Life Insurer’s offices are visually attractiveSQ9My Life Insurer’s employees are well dressedSQ10Premium rate structure of my Life Insurer iscompetitiveSQ11Location of branches of my Life Insurer areconvenientSQ12My Life Insurer have convenient workinghours for customersSQ13My Life Insurer fulfills promises in a timelymanner towards claim settlementSQ14My Life Insurer iscustomer’s problemSQ15withSQ16My Life Insurer’s employeesindividual attention to the customerSQ1723provideMy Life Insurer’s employees understandcustomer needsSQ18My Life Insurer has wide range of services toofferSQ19My Life Insurer has adequate informationavailable on products and servicesSQ20Prior to the final survey, the questionnaire waspre tested using a sample of respondents similar innature to the final sample. The goal of pilot survey wasto ensure readability and logical arrangements ofquestions. The questionnaire was sent to 25respondents having a life insurance policy throughemail.The responses of pilot study were thoroughlyanalyzed. The questionnaire was reviewed in light ofcomments and shortcomings and then it was revisedaccordingly. The final questionnaire was uploaded onGoogle docs and the link was sent to 200 customersand 139 usable responses were received, therebymaking a response rate of 69.5%.The perception of the respondents towards theservice delivery quality was gauged using aquestionnaire containing close-ended questions, whichwere designed to ascertain perception of therespondents using a five point Likert scale with followingoptions: Highly Agree, Agree, Neutral, Disagree andHighly Disagree.V.Data Analysis and InterpretationThe analysis of this data was divided intofollowing section:a) Demographic profile of RespondentsThe respondent profile as displayed in table 2indicates the current scenario of life insurance sectorand its user’s profile. Most of the respondents (75.5%)were males and post-graduate (89.2%). Majority ofrespondents are in the age group of 25-35 years(42.4%) and between 35-50 years (43.2%). Most of therespondents have income above 5 laksh (5-10 lakhs at25.2% and above 10 lakhs at 30.9%). The profile ofrespondents indicates they are young, urban, educatedand have high income which is a right demographiccomposition from life insurance provider’s context.c) Research and Statistical Tools EmployedThe research and statistical tools employed inthis study are factor analysis and correlation. SPSS 16was used to perform statistical analysis. The reliability ofthe data was carried out by using Cronbach’s AlphaValue. The factor analysis was used to examine theunderlying or latent dimensions within variables ofoverall customer perception (Hair et al, 1998). BothBartlett’s test of spherecity and measure of samplingadequacy (MSA) were also carried out to ensure that therequirements of factor analysis were met. 20 14 Global Journals Inc. (US)Global Journal of Management and Business Research ( E ) Volume VII Issue IX Version IMy Life Insurer’s employees are courteousYearsympathetic2014A Study of Customer Perception towards Service Quality if Life Insurance Companies in Delhi NCR Region

A Study of Customer Perception towards Service Quality if Life Insurance Companies in Delhi NCR RegionTable 2 : Demographic Profile of ationalQualificationAnnual IncomeGlobal Journal of Management and Business Research ( E ) Volume VII Issue IX Version I24CharacteristicsFreq.%25-35 years35-50 years&50yearsaboveMaleFemaleGraduatePost GraduateUpto 2 lakhs2-5 lakhs5-10 lakhsAbove 10 .510.889.214.429.525.230.9100Totalb) Respondent’s Share of Life InsurersThe study highlighted that majority ofrespondents hold a policy by Life Insurance Company(49.6%) followed by ICICI Pru (10.8%). This is in line withmarket share position of major insurers in India with LICleading at 72.7% share followed by ICICI Pru at 4.7%market share. The lowest number of respondents had apolicy from Kotak Mahindra (1.4%) followed by AegonReligare (2.2%).Table 3 : Respondent’s Share of Life InsurersFrequencyPercentLICInsurer6949.6ICICI Pru1510.8HDFC Life64.3Birla Sun life42.9SBI Life107.2Reliance Life42.9Tata AIA42.9Max Life42.9Bajaj Allianz85.8Kotak Mahindra21.4Aegon Religare32.2Others107.2Total139100.0d) Factor Analysisc) Reliability and ValidityTable 4 shows the result of reliability analysisCronbach’s Alpha Value. This test measured theconsistency between the survey scales. The Cronbach’sAlpha score of 1.0 indicate 100 percent reliability.Cronbach’s Alpha scores were all greater than theNunnaly’s (1978) generally accepted score of 0.7. In thisstudy, the score was 0.871 for the service qualityprovided by the life insurance companies.Table 4 : Reliability StatisticsCronbach's AlphaN of Items.87120 20141 Global Journals Inc. (US)Overall, the set of data meets the fundamentalrequirements of factor analysis satisfactorily (Hair et al,1998). In analyzing the data given, the 20 responseitems were subjected to a factor analysis using theprincipal component method. Using the criteria of anEigen value greater than one, four clear factors emergedaccounting for 73.71% of the total variance. As incommon practice, a Varimax rotation with KaiserNormalization was performed to achieve a simpler andtheoretically more meaningful factor solution. TheCronbach’s alphas score for all the factors was 0.871(Table 4).

A Study of Customer Perception towards Service Quality if Life Insurance Companies in Delhi NCR RegionTable 5 : KMO and Bartlett’s Test of SphericityKaiser-Meyer-Olkin Measure ofSampling Adequacy.830Bartlett's Test of SphericityApprox. Chi-Square2556.710dfSig.190.000Table 6 : Rotated Component MatrixRotated Component 1.201Year225Extraction Method: Principal ComponentAnalysis.Rotation Method: Varimax with KaiserNormalization.a. Rotation converged in 6 iterations.b. four components extractedIt is clear from the factor loadings as highlightedin Table 6 that clear four factors have emergedrepresenting 73.71% of total variance. These four factorsrepresent different elements of services quality that formthe underlying factors from the original 20 scaleresponse items. Referring to the Table 6 above, firstfactor represents elements of the service quality directlyrelated to responsiveness and assurance; it is thereforelabeled “Responsiveness and Assurance Factors”.These elements are timely service, agent’srecommendation, timely claim, sympathy, courteousbehavior of employees, individual attention tocustomers, wide range service and availability ofadequate information. Second factor is directly relatedto convenience provided to customers, it is thereforelabeled as “Convenience Factors”. These elements areagent’s communication skills, agent’s trust, premiumrates, convenient location

Life Insurance Companies in Delhi NCR Region . By Abstract-Economic performance of insurance companies is the outcome of customer's satisfaction and their perception on service quality of the insurance service provider. The present study has focused on finding customer perception towards service quality as provided by the Life Insurance .