(LUẬN văn THẠC sĩ) improving service quality the case of united insurance company

56 CHAPTER V: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE SERVICE QUALITY OF UNITED INSURANCE COMPANY .... Therefore, improving service quality has become the goal of many insurance compan

NGUYEN CHIEN THANG

IMPROVING SERVICE QUALITY

THE CASE OF UNITED INSURNCE COMPANY

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisors: Dr Nguyen Viet Dung

Hanoi – 2013

1.1 I NTRODUCTION 1

1.2 O BJECTIVE OF SUBJECT 1

1.3 S COPE AND METHODOLOGY OF RESEARCH 2

1.3.1 Scope of research 2

1.3.2 Method of research 2

1.4 S TRUCTURE OF THESIS 3

CHAPTER II: THEORETICAL BASIS OF SERVICE QUALITY AND NON-LIFE INSURANCE BUSINESS 4

2.1 D EFINITION AND NATURE OF SERVICE 4

2.1.1 Definition of service 4

2.1.2 Nature of service 5

2.2 S ERVICE QUALITY AND FACTORS OF SERVICE QUALITY 6

2.2.1 Definition of service quality 6

2.2.2 Factors of service quality 8

2.3 S ERVICE QUALITY MEASUREMENT 11

2.4 C HARACTERISTICS OF NON - LIFE INSURANCE BUSINESS 15

2.4.1 Principle of insurance business 16

2.4.2 Characteristic of non-life insurance service 17

CHAPTER III: RESEARCH METHODOLOGY AND SOME PRELIMINARY RESULT 21

3.1 Q UALITATIVE RESEARCH 21

3.1.1 Design qualitative research 21

3.1.2 Research model and scale of measurement 25

3.2 Q UANTITATIVE RESEARCH 27

3.2.1 Design quantitative research 27

3.2.2 Method of data analysis 29

CHAPTER IV: ANALYSIS OF INSURANCE SERVICE QUALITY OF UNITED INSURANCE COMPANY 31

4.1 B USINESS OVERVIEW OF U NITE I NSURANCE C OMPANY 31

4.1.1 History 31

4.1.2 Business overview 32

4.2 S UMMARY OF QUANTITATIVE RESEARCH RESULT 37

4.2.1 Sample description 37

4.2.2 Result of measurement scale testing 39

4.3 A NALYSIS OF ACTUAL SERVICE QUALITY OF UIC 41

4.3.1 Reliability of insurance service 41

4.3.5 Convenient service access 53

4.3.6 Overview assessment of service quality of UIC 56

CHAPTER V: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE SERVICE QUALITY OF UNITED INSURANCE COMPANY 60

5.1 O BJECTIVE AND DIRECTIONS OF DEVELOPMENT OF UIC 60

5.2 S OLUTIONS TO IMPROVE SERVICE QUALITY OF UIC 61

5.2.1 Improving favorable service access for customer 61

5.2.2 Improving responsiveness 64

5.2.3 Improving service capacity 68

5.2.4 Improving customer care 70

5.3 R ECOMMENDATION 73

5.3.1 Recommendation for Insurance Supervisory Authority – Ministry of Finance 73

5.3.2 Recommendation for Vietnam Insurance Association (VIA) 73

CONCLUSION 76

APPENDIX 80

F IGURE 2.1: H IERARCHICAL OF SERVICE QUALITY BY B RAD AND C ONIN 9

F IGURE 2.2: A COMPREHENSIVE FRAMEWORK FOR SERVICE QUALITY BY D ABHOLKAR AND COAUTHORS 10

F IGURE 2.3: S ERVICE QUALITY MODEL BY P ARASURAMAN , Z EITHAML , AND B ERRY (1985) 12

F IGURE 2.4: D IMENSIONS OF SERVICE QUALITY PERCEIVED BY CUSTOMERS OF P ARASURAMAN AND C OAUTHORS 14

F IGURE 3.1: R ESEARCH MODEL OF I NSURANCE SERVICE QUALITY FACTORS 26

F IGURE 4.1: O RGANIZATIONAL STRUCTURE OF UIC 33

F IGURE 5.1: C OOPERATION MODEL WITH B ANKS 63

F IGURE 5.2: R ISK PREVENTION SUPPORT PROCESS 72

C HART 4.2: M ARKET SHARE OF UIC COMPARISON WITH THE MAIN COMPETITORS 35

C HART 4.3: P REMIUM REVENUE OF UIC COMPARED WITH DIRECT COMPETITORS 36

C HART 4.4: R EVENUE GROWTH RATE COMPARISON OF UIC AND AVERAGE OF MAKET 36

C HART 4.5: B USINESS TYPE OF SURVEYED CUSTOMER 38

C HART 4.6: H UMAN SCALE OF SURVEYED CUSTOMER 39

C HART 4.7: I NSURANCE CLASSES 39

C HART 4.8: E VALUATION RATIO OF RELIABILITY OF INSURANCE SERVICE 41

C HART 4.9: E VALUATION RATIO OF RESPONSIVENESS OF UIC 44

C HART 4.10: E VALUATION RATIO OF RESPONSIVENESS OF UIC 48

C HART 4.11: E VALUATION RATIO OF CUSTOMER CARE OF UIC 51

C HART 4.12: E VALUATION RATIO OF CONVENIENT SERVICE ACCESS OF UIC 54

C HART 4.13: E VALUATION RATIO OF SATISFACTION OF UIC INSURANCE SERVICE QUALITY 57

C HART 4.14: S ERVICE QUALITY EVALUATION CLASSIFIED BY HUMAN SCALE OF CUSTOMER 57

C HART 4.15: S ERVICE QUALITY EVALUATION CLASSIFIED BY INSURANCE CLASS 58

T ABLE 4.2: S UMMARY CUSTOMER EVALUATION OF R ELIABILITY OF UIC 42

T ABLE 4.3: S UMMARY CUSTOMER EVALUATION OF RESPONSIVENESS OF UIC 44

T ABLE 4.4: S UMMARY CUSTOMER EVALUATION OF SERVICE CAPACITY OF UIC 48

T ABLE 4.5: S UMMARY CUSTOMER EVALUATION OF CUSTOMER SERVICE OF UIC 51

T ABLE 4.6: S UMMARY CUSTOMER EVALUATION OF CONVENIENT SERVICE ACCESS OF UIC 54

NKSJ Nipponkoa –Sompo Japan

CHAPTER 1: OVERVIEW OF THESIS

1.1 Introduction

After 18 year of market opening, non-life insurance market of Vietnam has dramatically developed; average growth rate of premium for the period of 2006-2012 is about 23.6% In 2012, Premium of non-life insurance market is more than VND 22,316 billion accounted for 0.9% (compared with 0.6% in 2006) At the end of 2012, there are 29 non-life insurers on market including

16 joint-stock companies and 10 foreigner joint venture and foreigner owned companies The dynamic of foreigner companies helped to increase competitiveness of market

With increasingly severe competition in market, price-driven competition will not bring sustainable growth for insurance companies Therefore, improving service quality has become the goal of many insurance companies

on the market After 3 years working in United Insurance Company, I see that improving service quality is important and priority task of company Therefore, I chose

the subject “Improving service quality: the case of United Insurance

Company” as my master thesis

1.2 Objective of subject

UIC was established in 1997, with 16 years old UIC is one of most mature insurer in Vietnamese insurance market According to business characteristic

of company, UIC mainly focus on servicing Japanese client and most of them

is longtime client, hence for many years, service quality has not been assessed and negatively affected In result, company has become more dependent on client, passive in client service, slow adoption to change and competitiveness

of market UIC has very small market share and especially the growth rate of

Vietnamese client is rather low compared with competitors Therefore, company need to find the answer for the question “whether clients are satisfied with service quality of company or not? How much is satisfactory degree?” The objectives of subject are:

- Defining a model to measure and evaluate non-life insurance service quality

- Measure and evaluate insurance service quality of UIC

- Propose solutions and recommendations to improve service quality of UIC

1.3 Scope and methodology of research

Preliminary research: is implemented through qualitative methods with

technical discussions in group or duel This research will be used SERVQUAL model to establish preliminary scale of measurement of non-life insurance

Formal research: is done by quantitative methods I used a

questionnaire to investigate the assessment of client of insurance Service quality of UIC This study aims to adjust and test the draft scale to form official scale about insurance service quality Scale was assessed by Cronbach

alpha, EFA factor analysis, multi linear regression After this step, I can

explore what are factors of service quality

After testing, the scale will be used to analyze actual insurance service

quality of UIC through descriptive statistic After this step, I can explore

what is the current status of service quality of UIC

Based on study results, I propose solutions and recommendations to improve service quality in the near future This process can answer the questions: What solutions should be made to improve insurance service quality of UIC?

1.4 Structure of thesis

The thesis includes 05 chapters: Chapter 1: Overview of research subject; Chapter 2: Theoretical basis of service quality; Chapter 3: Research methodology and some preliminary result; Chapter 4: Analysis of the actual service quality of UIC; Chapter 5: The solutions and recommendations to improve the service quality of UIC in; and the conclusion outlined the major findings of the project

CHAPTER 2: THEORETICAL BASIS OF SERVICE QUALITY

AND NON-LIFE INSURANCE BUSINESS

2.1 Definition and nature of service

Practices from the developing countries and the world have demonstrated that: Along with the economic development the services sector is increasingly playing an important role and the contributing big proportion of GDP of each countries The services sector led the economy as the center of economic activity and it has a close relationship with many other areas of the economy

In Vietnam, at the end of 2012, service sector accounted for 43.5% of GDP

In despite of recession of overall economy, the growth rate of service sector reached 5.97%, which is still higher than GDP’s growth rate This shows that the potential to develop the services in the future in our country is very large The following part of this section will answer for some question, including What is service? What is the nature of the service? What is service quality? What factors determine the quality of service? How to measure the quality of service?

Fitzsimmons said that the service is an intangible activity and storage, made to a customer and the customer is the creator of the product

2.1.2 Nature of service

To identify a service, it is often based on the following four specific characteristics:

Characteristic of intangibility is defined as a certain things that cannot

touch, see, taste, hear or be aware of other goods (Groth and Dye, 1999) Intangibility is the most important difference to distinguish between goods and services (Santos, 2002) Due to the intangible characteristics of services that now very difficult to determine the customer's perception of service, as well as their appreciation about service quality is how (Parasuraman, Zeithaml and Berry, 1985)

Characteristic of inseparability is shown that service provider perform service at the same time with the service consumption of customer Service

providers cannot hide any fault or deficiency of services (Ghobadian, Speller and Jones, 1994)

For services with high labor content, such as quality occurs during service delivery, service quality expressed in the process of interaction between customers and employees of service provider (Svensson, 2002) For those services that require the participated opinions of consumers as health care, less service companies perform quality control management because consumers influenced to this process In such cases, the opinion of the customer as patients describe the symptoms to the doctor, consulted by the customer becomes important for the quality of service activities

Characteristic of heterogeneity: This feature is also known as the

distinctiveness of the service Accordingly, the implementation of the service

varies depending on how the service is provided, location of service, targeted customer of service or time of service This feature is most recognized for service required high labor force Requirement for uniform quality of employees will be very difficult to ensure (Caruana & Pitt, 1997) The reason

is that what the company intends to serve can be completely different from what the consumer receives

Characteristic perish ability: Services are perishable; they cannot be

stored Therefore, an empty seat on a plane, for example, is a lost opportunity forever Restaurants are now charging for reservations, which are not kept, charges may be made for missed appointments at the dental clinic Perish ability does not pose too much of a problem when demand for a service is steady, but in cases of unusually high or low demand, service organizations can have severe difficulties The above characteristics are generally referred

to in many texts as being what makes services marketing so different However, this assumption should be queried on a number of grounds Like all sweeping generalizations, generalizations concerning services marketing do not always represent the full picture Consider the question of tangibility In the main, services can be broken down into three main classifications

2.2 Service quality and factors of service quality

2.2.1 Definition of service quality

Quality of service is a concept that attracted much attention and controversy in the literature because the researchers have found difficult to define and measure service quality in unity

Gronroos (1984) defined service quality perceived as a result of an evaluation process when customers compare their expectations with the service they actually received

Parasuraman, Zeithaml and Berry (1988) also views this as to that service quality as a form of attitude, related but not homologous to customer satisfaction, is the result from the comparison between the customer expectations with actual service that they are aware of their consumption Expectations is the desire, the desire of customers to service, as customers often feel that the service provider should offer something better than what they did Consumer expectations are formed based on their demand for goods and services; purchase from experiences in the past and from the information, they received from external vendors, friends or communication activities of the service provider

Cronin and Taylor (1992) suggested that, view concept service quality, as

a gap between expectations and outcomes of services, is not appropriate They point out the confusion related the relationship between service quality and customer satisfaction for services The concept of customer satisfaction is defined as a gap between expectations and results, or an inconsistent with expectations

To clarify this issue, it is necessary to distinguish the differences between the concept of service quality and customer satisfaction: According to Parasuraman, Zeithaml and Berry (1988), perceived service quality is an overall assessment or attitudes related to the characteristics of services Meanwhile, satisfaction is related to a particular transaction Service quality and satisfaction with the mutual relationship, service quality creates satisfaction, but cannot infer vice versus The satisfaction with the service, it

is not possible to conclude definitely that high-quality service because satisfaction is influenced by many other factors (product quality; prices;

situation factors; personal factors) There is only temporary satisfaction, customer always requires higher service quality

Moreover, the concept of customer expectations is different exposed in theory of service quality and theory of satisfaction theory: In the theory of satisfaction, expectations are considered as customer’ prediction what can happen in given transaction in the future Conversely, in theory of service quality, the expectations are desire of the customer, for example, they feel that businesses should provide something better than the current ones (Parasuraman, Zeithaml and Berry, 1988)

2.2.2 Factors of service quality

The traditional models of service quality that assess the client's awareness about service quality based on a number of factors or aspects, all view service

as a complex mixture of explicit and implicit attributes Service quality should not be viewed as a discrete structure but a combination of several factors or aspects that they have different content and nature

Gronroos (1984) argues that the process of awareness of customer service reflected in two aspects:

- Technical quality: Is aspect results, what is the results of the service provider giving customers?

- Functional quality: A process perspective, how were service functions realized?

Customer aware service quality in the two aspects of this: What do they receive? How do they receive? How are form and manner of service like? Depending on the evaluation of customers for service is good, average or bad Lehtinen and Lehtinen (1991) suggested that it is necessary to consider service quality in the three aspects The three aspects are:

- Material quality: Includes equipment and physical environment

- Transactional quality: is mainly derived from the matching between communication styles of delivered service and the customer's style

- Company quality: is mainly assessment of company’ exterior form Brady and Cronin (2001) also viewed service quality composed of three dimensions, which has two dimensions same as Gronroos opinion of the technical quality (the results of the service) and functional quality (quality of transaction) The third dimension is the physical environment of the service Each of these dimensions (communication, environment and results) has three sub-elements and customers conjunct with their assessment from additional factors to form their perception of the quality of each the first main dimension Combination of that assessment will give the final result of overall service quality

Figure 2.1: Hierarchical of service quality by Brad and Conin

Source: Brady, Cronin (2001), ―Some new thoughts on conceptualizing perceived service quality: A hierarchical approach‖, Journal of Marketing, Vol 65, pp 37

Dabholkar, Shepherd and Thorpe (2000) said that service quality is the customer's overall evaluation, which based on different elements / attributes

related to service, thereby forming the overall assessment about service quality, rather than a simple sum of the component elements Multi-level model is as follows:

Figure 2.2: A comprehensive framework for service quality by Dabholkar and coauthors

Source: Brady, Cronin (2001), ―Some new thoughts on conceptualizing perceived service quality: A hierarchical approach‖, Journal of Marketing, Vol 65, pp 37

Different researches of service quality provide different complex model, which express factors influencing and forming service quality In scope of this thesis, I would like to use the model SERVQUAL by Parasuraman, Zeithaml

và Berry (1985) to apply for my analysis This model has been proven as effective model not only in marketing but also various sector such as:

healthcare, banking service, retail… The content of this model and measurement scale of this theory are introduced in next section

2.3 Service quality measurement

Parasuraman, Zeithaml and Berry (1985) are those who pioneered in research on service quality and provide a comprehensive, feasible model to measure service quality The authors said that there are five different gaps affecting the assessment of customers about service quality, which includes:

The Gap 1: this is the gap between customer expectations and perceptions of

the business about those expectations The basic point of this gap is due to companies do not understand all the characteristics that make up the quality of their services and how to transfer them to customers to satisfy their needs

The Gap 2: this is the gap between the perceptions of the business about

customer expectation and the business characteristics of the service design In many cases, companies can realize the expectations of customers but company cannot always convert these expectations into specific criteria for quality and transfer exactly characteristics of services that customer expected

The Gap 3:this is the gap between the business characteristics of service

contact with customers, play an important role in the process of creating quality However, not always the staff can complete tasks according to the criteria set out

The Gap 4: this is the gap between the service delivery process and the

implementation of promises to customers through external communication activities The promises in the advertising and promotion programs can increase the expectations of customers but also will reduce the quality In such cases, customers feel when service providers do not comply with what was promised

The Gap 5: this is the gap between customer expectations of service and their

perception of the results after the service consumer Service quality depends

on this gap Once customers see no difference between their quality expectations and quality they feel when using a service, the quality of service

Parasuraman, Zeithaml, and Berry (1985) suggested that service quality is

a function of the gap no five, so service providers must find ways to narrow this gap In order to archive this, the enterprise must narrow the gap 04 listed

before (1,2,3 and 4 gap) because it is likely to affect the service quality Therefore, it is necessary to perform a sequence of action to measure customer perceptions of service after consumption to check if service met their expectations or not, that is the measurement of service quality

According to service quality measurement model by the theory of asymmetric customer expectations initiated by Parasuraman and coauthors (1985), service quality includes 10 dimensions that customers use to form their expectations about services, as well as evaluating their awareness about service quality after their consumption Ten dimensions of service quality are: Reliability;

Figure 2.4: Dimensions of service quality perceived by customers of Parasuraman and Coauthors

Source: Parasuraman, A., Zeithaml, V A., and Berry, L L (1985), ―A conceptual model of service quality and its implications for future research‖, Journal of Marketing, Vol 49, Issue 4, pp 8

Ten dimensions of service quality model mentioned above have the advantage of covering most aspects of the service However, this model has the disadvantage of complexity in measurement Moreover this is theoretical model, there may be many dimensions of service quality model not achieve value distinction Therefore, in later researches Parasuraman, Zeithaml and Berry (1988, 1991 and1993) adjust the model to be more particular to five dimensions of service quality, which are:

Word of mouth communication

Personal need Past experience

Reliability Responsiveness Competence Access Courtesy Communication Credibility Security Understanding/

knowing the customer Tangibles

Expected service

Perceived service

Perceived service quality

1 Reliability: demonstrate the ability to perform appropriate and timely

service from the very first time

2 Responsiveness: express the desire, willingness of Service Company to

provide prompt service to customers

3 Assurance: represented by professional and polite service manner It can

be knowledge and courtesy of employees and their ability to convey trust and confidence

4 Empathy: is the attention and carefulness to each individual customer

interested in their personal identity and regular customers

5 Tangible: is the appearance of physical facilities, equipment, personnel,

and communication materials

2.4 Characteristics of non-life insurance business

In daily life and business activities despite of always paying attention prevention and precaution, people still have to encounter unpredictable risk The risks due to many reasons, such as risks of the natural environment, risks due to the progress and development of science and technology, social environmental risk

Whatever the reasons, the risks often bring people difficulties in life such

as job loss, income reduction, destruction of property, shut down production and business organizations, business, personal, etc This would affect the social and economic life in general

To cope with these risks, people have many different measures to control and overcome the consequences caused by the risk At present, in view of the risk management, there are two groups of measures to deal with risks - which are a group of risk control measures and group of financing risk measures

Group risk control measures including measures of avoiding risks, preventing losses, mitigating risks These measures are often used to prevent

or minimize the possibility of risk

Group of risk financing measures include risk accepting and insurance These are the measures used before the risks with the aim of overcoming the consequences of the loss caused by the risks, if any

Insurance is an important part of the risk management program of the organization as well as individuals In view of the risk management, insurance

is risk transferring on a contractual basis On social point of view, insurance is not only the transferring of insurance risk but also reducing risk by focusing

on a large number of predictive risk can allow for losses when they occur Non-life insurance is a commitment between the insured and the insurer in which the insurer will pay for the participant or beneficiary a certain amount when events predetermined happen, but participants must pay the full premium on time

2.4.1 Principle of insurance business

- Insurance business based on majority rule: insurance fund was formed

based on the contributions of the many participants in insurance; this fund is used to pay for a small number of participants as unfortunate loss of lives and property The greater number of insurance participants, the greater the ability

to compensate and business activities of the insurance companies more efficient

- Principles for risk diversification: In insurance business, insurance

company normally calculates premium based on majority rule However, this

is only predictable possibility of risk; in fact, it is possible that the real possibility exceed predictable possibility In this case, premium is not enough

for claim compensation, so this is now the risk for insurance company To ensure the payment of compensation, the insurance companies diversify risks

through reinsurance and co-insurance

- Financial investment: The insurance industry is quite different from

other industry, when an insurance contract was signed; insurance companies collect the premium from customer and realize liability for customer by the contractual commitment Therefore, there is a period of waiting time between receiving premium and compensation to the customer That is why the insurance companies usually have a large idle and stable capital Insurance companies can invest in many different areas of the economy to increase the profitability of capital As a general trend, the profit of insurance company not only comes from original insurance activities but also mainly comes from financial investment activities In the increasingly competitive market, insurance companies those use funds effectively and achieve the highest level

of profitability will have a positive impact on business performance of the company

- Utmost good faith: In insurance business, insurance company

absolutely trusts insurance buyer about the information provided such as insured object If any dishonesty was found, the insurance will be whole or partly invalid In contrast, insurance service is only a contractual commitment

of insurance company for their customer, so customer can only experience service in case of claim happened Quality of insurance service, assurance of rights, rationality of premium… are all depended on honesty of insurance company

2.4.2 Characteristic of non-life insurance service

- Product: The product is basically an insurance contract recorded a

binding agreement between two parties and legal requirement for each other

A party makes the proposal and the other party accepts terms A party pay premium and the other commit to compensate in the case agreed Insurance products are characterized by:

 Unstable profit: profitability of insurance product is depended on level of risk of insured object

 The product is easy to imitate: an insurance contract, even if the original cannot be patented, can not be protected

 In terms of mentality: buying a insurance services is similar to buying a commodity, but the buyers just want to prevent and limit risk and do not want to receive insurance compensation

- Insurance premium: Price of insurance is insurance premium

Accordingly, insurance buyers pay for insurance companies to sell their risk and take commitment of compensation if the risks that occur in the future Insurance cost depends on many factors such as: business insurance, risky level, limit of liability, insurance coverage

- Claim: Claim is an accurate compensation for the loss of insured

object, which is compatible and reasonable with liability specified in insurance contract Concept of claim applies only in the property insurance business In the personal insurance, this concept is called compensation since people is priceless

In addition to above characteristics, a non-life insurance contract should contain below characteristics:

 Contract of adhesion: All non-life insurance policies are contracts

of adhesion This means that one party (the insurance company)

writes the contract, and you agree to it The contract does not result from any negotiation

 Conditional contract: the conditional nature of non-life insurance is that the insurance company will not pay unless the conditions are met for a claim This is normally spelled out in the contract

 Indemnity Contract: while life insurance contracts are valued contracts, non-life insurance contracts are indemnity contracts This means that, when a claim is filed, the insurance company works to restore you to the financial position you were in prior to the incident that caused the claim

CHAPTER SUMMARY

This chapter systematizes the theories regarding services and the nature of the service; points out the different views about service quality, service quality factors and measurement of service quality, stated the particulars non- life insurance business Analysis showed that:

Due to tangibility of service, the determining of service quality is very difficult and complex Customers define their own standards for service; these standards are affected by the surrounding environment that changes continuously In the field of insurance business, too, insurance buyers want to

be safe and not expect to receive compensation from insurance companies Moreover, customers have the risk compensation always account for a small proportion of the total number of customers of insurance companies Therefore, customers are difficultly able to aware quality of delivered service There is a difference in determining the factors of service quality between the different authors That’s why it is necessary to consider the providing service to determine appropriate factors

Models of service quality of the Parasuraman and coauthors are highly generalized model, widely recognized and applied to evaluate service quality

in many different areas of service, including insurance services However, applying SERVQUAL scale to measure service quality need to be thoroughly considered based on particulars of insurance service

CHAPTER 3: RESEARCH METHODOLOGY AND SOME

PRELIMINARY RESULT

3.1 Qualitative research

3.1.1 Design qualitative research

In this part of research, I will have 3 steps of research:

 Based on particulars of insurance business and insurance service, I will list out factors that form insurance service of company As a

result, those factors are (1) insurance product; (2) insurance

premium; (3) claim and indemnity activities; (4) quality of staff/agent; (5) distributing insurance product; (6) customer care; (7) Communication and advertising

 After determined above factors, I discuss with 10 persons (5 persons are high experienced management in insurance companies, 5

persons are insurance expert of UIC) From those discussions, I found main factors, which are used to evaluate quality of each above

service quality aspects (The content of discussion is presented in

3.1.1.1 Evaluating quality of insurance product

Result of discussion showed that customers evaluate the quality of

products based on four key elements: (1) The diversity of insurance class

(product), (2) Content of insurance terms, (3) form and design of insurance contract

Participants discussed that insurance service quality is initially aware by diversity of insurance products, which can meet various need of customer; insurance term should be tight, understood, unambiguous; insurance contract form should be clear and nice to make satisfaction of client

3.1.1.2 Evaluating quality of insurance premium

Participants see that there is only one factor influencing quality of

The participants discussed that insurance premium is an important factor affecting insurance purchasing tendency of customer but not the deciding factor Customers may decide to choose insurance for a higher premium after considering the other elements of the enterprise such as the reliability of claim settlement, good service attitude of staff, and reputation of insurance company Customer normally expect Insurance companies to offer a flexible premium which can be adjusted according to competition of market, level of risk of insurance object, insurance coverage or financial condition of customer

3.1.1.3 Evaluating quality of claim and indemnity activities

Discussions showed that there are three factors determining the quality of

the claim and indemnity: (1) the procedures regulated, (2) handling time of

request/claim, and (3) implementation of commitments

The payment of compensation is made at difficult time of customer (financial loss, personal loss…), so these activities specially affect customer’s satisfaction If insurance companies have reason to doubt the truth of claim

and delayed payment, the customer may be very angry When claim unexpectedly happens to customer, what they want is to quickly overcome consequences to maintain normal daily activities Therefore, claim activities should be carried out quickly and accurately; simple procedure; along with supporting attitude, transparency of staff performing this work

3.1.1.4 Evaluating quality of staff/ agent of insurance company

This is the most debated aspects, finally came to the agreement that there are five factors affecting the quality of staff / agents of insurance companies:

(1) qualified staff, (2) working experience, (3) working behavior, (4) spirit of service (5) ethic

In the course of discussion, participants clarified the content of the above factors As follows:

- Staff / agents must have qualifications and work experience to carry out all process in a scientific and professional manner, such as: risk assessment before insurance agreement; issuing insurance contract; implement claim and indemnity activities

- Staff/agents should have spirit of enthusiasm, ready to meet the requirements of customers They also need to serve politely and attentively, give and explain customer clearly about terms of responsibilities and rights of insurance

- Working style must be neat and serious Moreover, ethic of staff /agent must be always assured

3.1.1.5 Evaluating quality of distributing insurance product

Through discussion, the quality of the insurance distribution channel is

shown in the following aspects: (1) offices and service network; (2) size and

facilities of office; (4) number of staff/agent network

- If company has huge service network, it can make good impression to customer the company can provide products quickly and conveniently based networks, representative offices throughout and making a good impression in order to provide a quick and conveniently; shorten transaction time or solving insurance right for customer

- Staff and agent network must ensured quantity and quality They are represented for company to contact customer, provide information of insurance company to customer

- The application of modern technology and equipment to provide products to customers is necessary Along with the rapid development of science and technology, new distribution channels have been created for insurance companies such as sales by phone, fax, the internet, etc Since then, the insurance companies can provide its products to customers quickly and smoothly

3.1.1.6 Evaluating quality of customer care

Customer care policies for insurance companies are generally very various The following customer care policies were discussed as important roles in the

customer service: (1) Risk prevention support for client and (2) promotions

- Risk prevention support for client: can be expressed through measures, such

as advising, warnings or equipping customers with necessary tools to prevent risks; co-operating with the authorities to promote and disseminate the provisions

of State as: sanitary environment; regulations on fire safety; traffic safety laws; labor safety; safety of using electricity Thereby insurance company can help to

raise awareness of risk prevention of insurance buyer Well make this, insurance company will not only limited business risk may lead to compensation, but also create confidence, peace of mind for customers

- The promotions: as reduction premium when customers do good risk

prevention for many years of using insurance; Gift for large customers, loyalty client or special event; financial support to customers in special circumstances (but not within the scope of insurance)

3.1.1.7 Evaluating quality of communication and advertising

The results of the discussions showed that the quality of the

communication and advertising represented by two factors: (1) Brand

reputation, (2) Information and advice on insurance products

Due to particulars that client buy insurance just for preventing and reducing risks but did not want to received insurance compensation (purchase but do not want to use; selling or buying insurance risk), so the communication and advertising in insurance has its own unique characteristics, and cannot be done as tangible products The main purpose of promotional activities, advertising of insurance companies is to make the customer feel secure and confident to choose the insurance companies as a place to entrust and transfer risk in life and business Therefore, communication advertising of insurance companies should emphasize factors such as brand reputation; give valuable, accurate and attractive advises to customer

3.1.2 Research model and scale of measurement

3.1.2.1 Research model

Based on the characteristics of insurance business compared SERVQUAL model of Parasuraman and coauthors including reliability, responsiveness,

assurance, empathy, tangible combined with information collected from the preliminary study, from which I build the model of insurance service quality

as follow:

Figure 3.1: Research model of Insurance service quality factors

3.1.2.2 Scale of insurance service measurement

Through step 2 of preliminary qualitative research, I determined 19 factors

of five dimensions as:

 Reliability of insurance service

 Responsiveness of insurance company

Reliability of insurance service

Responsiveness of insurance company

Service capacity of insurance company

Customer care of insurance company

Convenient service access for customer

Insurance service quality

5 Content of insurance terms

 Convenient service access for customer

Research subjects are representative of customer (corporate customer only)

in four city/provinces in the north market: Hanoi, Bac Ninh, Hai Duong, Hung Yen

3.2.1.2 Sample

Sample was selected by the following method: Firstly, I make a list of customers of UIC of the North market and divided into three insurance product class groups: property insurance, personal insurance and car insurance Then, I randomly selected 50 customers in each group Total number of samples is 150

3.2.1.3 Questionnaire design

Questionnaire contains two parts:

Part 1: includes common evaluation questions to collect general information of customer

Part 2: includes questions related to 19 factors affecting insurance service quality In this part, I apply theory of Likert scale to design questions A Likert scale measures the extent to which a person agrees or disagrees with the question The most common scale is 1 to 5 Often the scale will be 1=strongly disagree, 2=disagree, 3=not sure, 4=agree, and 5=strongly agree The questionnaire was designed through the following stages:

Phase 1: Creating a questionnaire based on five dimensions (regroup by 19 factors) of insurance service quality

Phase 2: After designing the questionnaire, I took comments of colleagues and then try direct interview 05 customers to check on the form as well as content of the questionnaire

Phase 3: Editing and completing the questionnaire, then starting to conduct

customer survey (Detailed content of the questionnaire is presented in

appendix 4)

3.2.2 Method of data analysis

I use software SPSS 16.0 and Excel 2007 for data processing and analysis

To make it easier for data input, analysis and presentation, variables were

encoded (as presented in appendix 5)

Before conducting the analysis and evaluation customer’s assessment, reliability of measurement scale was tested by the main tool –Cronbach’s alpha, EFA factor analysis, Multi linear regression:

Cronbach’s alpha reliability coefficient was used to remove the wasted variable and test the internal consistency of variable in measurement scale Variables with correlation coefficients and the total are less than 0.3 will be disqualified Close degree of the scale variable can be rated as good to alpha coefficient of 0.6 or higher (Nunnally & Burnstein, 1994)

Multi linear regression is used to examine importance of factor (dimensions) to customer satisfaction of insurance service quality

After processing entry data, input data in SPSS software I will use the following analysis method to present result of research: descriptive statistic, frequency chart, and other charts The result is presented on the next chapter

CHAPTER SUMMARY

In this chapter, I present methodology of thesis, in order to build the measurement scale of insurance service quality, which is basis for service quality evaluation of UIC

Results of preliminary research step through qualitative methods group and duel discussion based on 7 main aspects that impact insurance service quality: (1) insurance product; (2) insurance premium; (3) claim and indemnity activities, (4) quality of staff/agent; (5) distributing insurance product; (6) customer care policy; (7) Communication and advertising After discussion, I extracted 19 factors that are most important for client to evaluate service of insurance company Based on SERVQUAL model of Parasuraman and Coauthor, I regrouped 19 factors in to five dimensions: reliability of insurance service, responsiveness of insurance company, service capacity of insurance company, customer care of insurance company, convenient service access for customer This is also defined as official measurement scale of insurance service

Formal research is done through quantitative methods, using the questionnaire survey to assess the scale, test the model Questionnaire is designed based on Linkert 5 method to measure the evaluations of customer regarding each variable According to result of survey, Cronbach alpha coefficient, EFA factor analysis, Multi linear Regression were used to test measurement scale

CHAPTER 4: ANALYSIS OF INSURANCE SERVICE QUALITY

OF UNITED INSURANCE COMPANY

4.1 Business overview of Unite Insurance Company

4.1.1 History

Basis information:

Specializing in non-life insurance, United Insurance Company (UIC)

company’s charter capital has now increased to VND 300 billion, jointly contributed by three Members:

- Sompo Japan Insurance (Japan): Sompo Japan Insurance is second biggest

insurance providers, with a history stretching back to 188 Sompo Japan has offices and subsidiaries in 28 countries and regions (164 cities) outside of Japan, and provides a comprehensive range of risk and asset management solutions under a strict customer-first policy with good international financial strength rating “AA-“by Standard & Poor

- Bao Minh Insurance Corporation (Vietnam): Bao Minh is a leading insurer

with good reputation in Vietnam Currently Bao Minh is able to support UIC on local expertise through nation-wide network branches and offices

- LIG Insurance (Korea): establish in 1959, LIG Insurance Co, Ltd (formerly

known as LG Insurance) specializes in non-life insurance LIG Insurance provides all types of insurance including property and casualty insurance,

marine and aviation insurance, automobile insurance and long – term insurance to individuals and corporations Since its establishment, LIG has maintained good international financial strength of “BBB+” by Standard & Poor’s in 2010

Some milestones in history of United Insurance Company:

and Marine Insurance Co., Ltd ( Currently Sompo Japan Insurance Inc) + Mitsui Fire and Marine Insurance Co., Ltd ( currently Mitsui Sumitomo Insurance) + Hochiminh City Insurance Company ( Currently Baominh Insurance Corporation)

 In 2002, UIC was allowed to expand the scope of activities to provide insurance products for some kinds of non-state owned enterprises in Vietnam

serve Korean Clients in Vietnam

Mitsui Sumitomo’ share in UIC

a new brand in Haiphong city in where many Japanese and Korean customers located

4.1.2 Business overview

UIC have Head Office in Hanoi and two branches Office in Hochiminh city, Haiphong city Since the date of operation, UIC has achieved sustainable growth in the Vietnam’s non-life insurance market, especially in Japanese and Korean business community UIC has now become a reliable and professional insurance brand in Vietnam

4.1.2.1 Organizational structure

Different from most of non-life domestic insurers, UIC has a quite compact structure The head is Members of council who decides and gives company strategy, business target to Board of Director UIC’s Board of Director has three members including one General Directors and two Deputy General Directors Head office has all functional department – back office, and front office, however branches only have department of client servicing:

Figure 4.1: Organizational structure of UIC

Members’ Council

Broad of Directors

Internal audit

Corporate planning committee

Risk management committee

Compliance committee

Mkt/sale

dept 1

Mkt/sale dept 2 UW&RI

processing

Mkt/sale dept 1

Mkt/sale dept 2 Claim&

survey dept

Policy processing Supporting section