Determinants of customer satisfaction in life insurance companies

ABSTRACT This paper aims to propose and analyze four dimensional quality instruments which is affecting on satisfaction of customers in life insurance companies as well as provide some s

ABSTRACT

This paper aims to propose and analyze four dimensional quality instruments which

is affecting on satisfaction of customers in life insurance companies as well as provide some solutions to satisfy the customer in this industry It is suggested to investigate the effects of the proposed service quality instruments on customer satisfaction (‘service quality’, ‘Brand quality, ‘Product quality’, and ‘Functional quality’) The proposed framework attempts to provide a blueprint for appropriate course of action (by life insurance service providers) to create a base of satisfied customers through quality services All mentioned-information from the paper is based on the expectation from 282 potential customers and some existing customers who have at least one policy with particular life insurance companies Key words: customer satisfaction, customer’s complaints, service, customers, life insurance companies

CHAPTER 1: INTRODUCTION

Customer behavior is changing rapidly Technology, and in particular the growth

of online and social media, is driving a fundamental shift in customer expectations

in terms of how products are marketed, priced, sold and serviced, and how companies are perceived Customer satisfaction is always a question mark in minds of sellers as it is very difficult to find that what exactly customer wants from the seller Customers have particular opinions on their purchase or consumption experience from a product or service they use Nowadays, many organizations are realizing that time have been passed to keep the customers only on price, but need

to fulfill their desires, expectations and needs in relation to the service Though customers are the main concern and precious asset that is why most of the companies are thinking their current and future needs by analyzing customer satisfaction Life insurance players have started realizing that their business depends on customer satisfaction

Moreover, in today’s competitive environment delivering high quality service is the key for a sustainable competitive advantage Customer satisfaction does have a positive effect on an organization’s profitability Success in business is strongly related to the customer satisfaction factor Customer is the life of a business, means

a business cannot be imagined without customer Therefore, it is really an important element to deal with a great care, otherwise failure in this challenging task can bring disaster which destroys the existence of a company in the market The more customers are satisfied with products or services offered, the more are chances for any successful business as customer satisfaction leads to repeat purchase, brand loyalty, and positive word of mouth marketing Customer satisfaction leads to repeat purchases, loyalty and to customer retention (Zairi, 2000)

1.1 Problem statement

When the business is much more challenging and competitive, companies benefit is relatively higher from customer satisfaction (Jobber, 2010) Most of the companies

are shifting from product oriented to service oriented to make their customers satisfied Companies are paying their attention on customers’ needs and desires to ensure better services to keep customers with them So, nowadays companies are much more concerned about customer´s expectations and what they are providing

to customers (Kotler and Armstrong 2008, p 218)

As many other financial services, the life insurance industry is facing a rapidly changing market, new technologies, economic uncertainties, fierce competition and more demanding customers and the changing climate has presented an unprecedented set of challenges Just like companies of other business domains, life insurance also considers their customers as the most important assets It is not like other fast-moving industry, insurance product is intangible one, this is one of the issues that these companies have to gain trust from the customers

Vietnam's insurance market with recent years has strong growth, increasing diversified products, improving service quality thanks to the political, economic stability, it includes open policy making Vietnam become an attractive market for investors Actually, life insurance is relatively young in Vietnam market – just for fifteen years This industry is very potential for exiting companies and new entrances, that’s the reason why many commercial and state banks start to look at this market, some of them has started the joint-venture entity by co-operating with multi-national and experienced financial institutes (e.g: BIDV with Metlife, Viet Tin Bank with Aviva with, etc…) Beside that, some potential new entrances start

to build their business by meeting with the Government for a discussion Life insurance providers increasingly recognize that today's customers who insist on improvements in quality of services have many alternatives and, therefore, may more readily change providers if not satisfied This is evident from the not so uncommon practice of ‘policy lapses’ readily embraced by dissatisfied policy holders Due to the intensive competition leading to improved service making customer satisfaction is the top concern of the life insurance companies Furthermore, a fit financial investment product to the customer’s needs is also very important This paper is also focused on agent forces, they are called Financial

Consultant (FC) in life insurance industry, this force is the first one to approach and build the company’s image with the customer as insurance product is invisible one, just based on the trust, relationship and company reputation Whatever good product, price, however, the representative for the firm and company’s capability are the most important factors that bring the customer to make decision or select the insurance products Beside the mentioned-factors, customer service staff from some big life insurance companies (e.g Prudential, Manulife, AIA, Dai-ichi Life) often receive lots of questions and complaints from customers that life insurance companies make very little effort to retain them at the point of lapse, no caring program such as small gifts or congratulation card on special days, level of repeat purchase is very low, and with a few exceptions Moreover, customers do not fully understand the product as well as policy they purchased as they tendency to build relationships with providers who they trust and make it convenient for them Therefore, some FCs have abused their existing relationship, not provided clearly consultation to the customers before signing the policy Customers do not have enough information about the product they select for themselves or their beloved ones as most of FCs has tendency to introduce positive points of the products/policy than clear mention the terms or conditions which the customer may lose if they do not commit to the policy They do not have good impression on FC’s behavior This leads to the disappointment from the customers with the insurance agent, creates difficult approach for agents with the customer at the first time for an appointment if they do not know each other before This study is to give a chance for life insurance companies listening to the voice of the customer as well as find out the factors affect on customer satisfaction

1.2 Research objectives

The main objective of this study was to identify the determinants of customer satisfaction as well as the key factors affecting the customer satisfaction when they decide to become a policy owner; and provide some solutions to improve the satisfaction of the customer Specifically, this study was conducted to achieve the

- Identifying the key factors affecting the customer satisfaction in life insurance companies;

- Determining level of satisfaction;

- Proposing some recommendations to improve the customer satisfaction

1.3 Research questions

The study focus on answering the following question:

- What are the key factors affecting the customer satisfaction in life insurance companies?

- How do we measure the customer satisfaction?

- What are the solutions to improve the satisfaction of customers?

1.4 Scope of the Research

The object and scope of research are existing and potential customers in Ho Chi Minh City The potential customers may or may not been a policyholder with any life insurance company The study focuses on aspects of customer satisfaction

x Time: conduct survey during one month from July 10th to August 15th,

2014

x Space: Expect having 282 respondents

CHAPTER 2: LITERATURE REVIEW AND HYPOTHESES

2.1 Framework of thesis

The thesis consists of five sections as the key sections briefing the theory to understand the definition of customer, types of customer, benefit of customer satisfaction; the factors affecting on satisfaction of the customers; measurement of customer satisfaction; and development of customer relationship This part is also shared some studies and models of customer satisfaction

Customer is a person or organization that a marketer believes will benefit from the goods and services offered by the marketer’s organization As this definition suggests, a customer is not necessarily someone who is currently purchasing from the marketer In fact, customers may fall into one of three customer groups: existing customers, current customers, potential customers

As a result of competitive market and more intensive nowadays in life insurance industry, customers are searching more information about the products and services The companies which are meeting up the expectations of the customers are being able to keep them in future business, ability of purchase repeat will be increased

2.2.2 Types of customers

There are lots of classification methods to differentiate types of customers For instance, the two principal categories are divided as external customers and internal customers (Grigoroudis & Siskos, 2010, 9)

2.2.2 External customers: refers to the customers in a marketplace who are paying for the final products and services

2.2.3 Internal customers: refers to the customers within the organization who get the output directly from the company or even from the suppliers

2.3 Definition of customer satisfaction

Customer satisfaction measures how well the expectations of a customer concerning a product or service provided by the company have been met When customers are satisfied, they will continue their business and will not try to find out another one This is the business strategic matter, is called customer satisfaction According to Chuck, customer satisfaction is the fulfillment of the customer’s enjoyment attained when products or services meet their needs and expectations (Chuck 1998, 3)

Tse and Wilton (1988) elaborated hunt definition where they said “customer satisfaction is a process of consumer’s response to the evaluation of the perceived discrepancy between prior expectations and the actual performance of the product

as perceived after its consumption”

According to Kotler, customer satisfaction is the response with pleasure or disappointment for the performance of certain product or service related to individual expectations (Kotler 2008, 36) “A customer is satisfied once his/her needs, real or perceived are met or exceeded” (Gerson 1993,13) Another author (Hunt, 1977) defines customer satisfaction as a process of evaluation rendered that the experience was at least as good as it was supposed to be

Customer satisfaction is the most important element of marketing In order to achieve, enhance and maximize customer satisfaction requires a lot of tangible and intangible resources Moreover, customer satisfaction is the key determinant of success in the service industry (Bigne JE, Sanchez, 2009 and Bruhn M Georgi D., 2011)

Satisfaction is only achieved when the needs and expectations of customers are met or exceed Obviously, customer is vital of the company, the growth of the life insurance companies depend on the number of customers called policy owners Focusing on the customer’s perceptions of service quality as it helps in developing strategies that lead to customer satisfaction, especially in the this industry where they are looking at the life time value of the customer base rather

than focusing on the cost of transactions Some researchers argued that service quality is the antecedent of customer satisfaction Everyone is trying to improve quality of its products Thus, an analysis of service quality perceptions from customers’ perspective is of paramount importance in the today’s competitive environment So, the present study is an attempt to identify the determinants of customer satisfaction in life insurance companies, determining affect factors and how to improve the level of satisfaction

Many empirical studies have shown that customer satisfaction secures future revenues (Bolton, 1998; Fornell, 1992), reduces future transactions costs (Reichheld and Sasser, 1990), decreases price elasticity (Anderson, 1996), and minimizes the likelihood of customers defecting if quality falters (Anderson and Sullivan, 1993) Customer satisfaction is regarded as customers can get more benefits than their cost (Liu and Yen, 2010) Shamsuzzaman, Md (2012) to determined the customer satisfaction levels of National life Insurance Company limited (NLICL), Khulna branch and to recommend suggestions Shahzan Khan (March 2013) emphasized the role of relation base marketing contribution towards customer value which leads customer satisfaction Relation base marketing is social process between seller and buyer The value added services can further be enriched with help of relation base marketing Norsk Kundebarometer showed in the automobile industry, out of 76% customers who were satisfied, 78% were also loyal (Kristensen et al., 1998) Thus since the cost of attracting new customers are higher than the cost of keeping the current customers, satisfaction and loyalty Timm (1990) stated that an average company loses 20% of its customers annually due to the dissatisfaction Reichheld and Sasser (1990) found that as customer loss decreased by 5%, profitability increased by 35% to 85% depending on the industry Previous researchers have given significant importance to customer satisfaction Satisfaction can be defined as a features or characteristics that can full the either a need or want of a consumer in better way than competitors Kamal Gulati, Arvind Kumar, V Ravi (2012) measured the difference between customers’ perceptions and expectations based on five generic dimensions Parasuraman et al According

to Hansemark and Albinson (2004) “satisfaction is an overall customer attitude towards a service provider, or an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfillment of some needs, goals or desire“ Customer loyalty on the other hand refers to a deeply held commitment to re-buy a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior (Oliver, 1997)

There are many definition of customer satisfaction, however, the satisfaction always link with following elements:

x Attitude toward the service providers;

x Customer’s expectation of the ability to meet its expectation;

x Value of service and results of the service implementation

x Intent of willing to continue using the service

2.4 Benefits of customer satisfaction

Customer satisfaction will keep company business growing as they are buying more products at a time Along with these activities they are also referring the company to their family members, friends and others When the customers satisfy, then the referrals are increased, and switching to competitor is reduced, the company’s revenue and profit are increased In life insurance companies, the first policy is just to start the journey of building relationship, there are many potential customers who are their relatives, friends or colleagues These potential customers will evaluate the company’s service before they join as a policy owner When the customer are satisfied, the opportunities of further relationships are increased in the future Forrester (2014) once again found a high correlation between customer experience and consumers’ loyalty to a company Firms with high Customer Experience Index (CXi) scores have more customers who purchase again, don’t switch to competitors, and recommend the company

Customer satisfaction will bring the company to achieve the target Customer satisfaction has a positive effect on an organization’s profitability Customer satisfaction leads to repeat purchases, loyalty and to customer retention (Zairi, 2000)

Figure 1: The benefits of customer satisfaction 2.5 The factors affecting on satisfaction of the customers

From literature review, there are many factors that affect customer satisfaction Such factors include friendly employees, courteous employees, knowledgeable employees, helpful employees, service quality, (Hokanson, 1995)

From the studies carried out in many countries, factors like: service quality, and perceived value, are the key constructs affecting the customer’s satisfaction with mobile services Studies also point out that customer satisfaction results ultimately

in trust, price tolerance, and customer loyalty Therefore, building customer relationship is a backbone for all organizations in general, and companies in life insurance industries in particular Issues like: customer satisfaction, service quality, customer perception, customer loyalty, are the main concerns of the nowadays in

Reduced price sensitivityReduced switching to competitors Increased repeat purchase Increased referrals

Increased profits

service companies, which improves organization’s performance and translates into more profits

2.5.1 SERVQUAL model

Figure 2: Relationship between service quality and customer satisfaction Model

(SERVQUAL, Parasuraman, 1998) 2.5.2 Perceive service quality model

Process / Functional Quality

Figure 3: Perceive Service Quality Model (Gronroos, 2000)

2.6 Level of satisfaction measurement

2.6.1 Measuring customer satisfaction

Any company can measure the level of customer satisfaction by using the Philip Kotler’s (2003, 64) four methods for tracking and measuring customer satisfaction According to Kotler that there are different reasons those can satisfy customers but each and every improvement of service and product does not necessarily satisfy the customers or increase company’s profit

Firsly, suggestions and complaints to the company are to register and store including the complimentary customer service numbers and emails through some specific system so that they can be used in the future for a betterment of communication between customers and the company Secondly, a customer satisfaction survey is to implement which carries out the satisfaction level whenever customers are satisfied or not Based on the customer’s feedback through conducting survey, the companies can change their business strategy or make any improvement Thirdly, manager can hire some people to buy the products or services so that latter on the company can evaluate the people’s buying experience And finally, companies can find out the customers, who have already left their products, asking the reasons behind their dissatisfaction In addition, the companies need to equip the system to track the customer losing rate

Customer satisfaction is the key factor determining how successful an organization will be in customer relationship; therefore, it is very important to measure it (Fecikova, 2004):

x Satisfied customers are more likely to share their experiences with other people, even up to five or six people In the same vein, dissatisfied customers are more likely to tell ten other people of their unfortunate experience

x It is important to realize that many customers do not complain, and this will differ from one industry sector to another

x If people believe that dealing with customer satisfaction/complaints is costly, they need to realize that it costs as much as 25 per cent more to recruit new customer

Satisfied customers are more likely to return to those who have supported them while dissatisfied customers are more likely to go elsewhere next time Therefore, retention of satisfied customers is the key to organizational survival (Fecikova, 2004) The starting points for effectively measuring a customer satisfaction are the Following steps (Fecikova, 2004):

- Customer identification: they are the purpose of company activities instead of their depending on a firm, organizations very much depend on them Accurate information about the customers can help the company to provide products and services with match their needs Customer can be defined both internal (employees) and external customers (is seen as a cause-and-effect relationship)

- Understanding what customer satisfaction includes and what it means;

- Defining what needs to be measured: many companies identify the level of customer satisfaction through the number of direct complaints by phone, e-mail or even at premise; number of product support problem calls; number of returned products and the reason of returning The criteria for the measurement of customer satisfaction must be defined by the customer (Fecikova, 2004) From life insurance companies, measurement of customer satisfaction is the repeat of purchasing insurance products or introduction to relatives or friends It also includes no evil tidings from media, newspapers;

- Choosing the measurement method: appropriate methodology needs to be found to gather and explore customer feedback The methods to use include questionnaires by emails, by post, direct interviews, telephone interviews, marketing research and so on The validity and relevance of the data gathered through these methods also varies However, the most commonly method for satisfaction is using prepared questionnaires Customers are give more service related questions is asking them to evaluate their satisfaction using scales from

1 to 5 such as how likely they are to choose company’s service, how likely

they are to recommend the firm to others, how they satisfy with the service quality of the company, profession of staff/agents, etc…) It is also to ensure the answers are truthful and to be filled in by a person who is competent to respond

Usually, the effective method is conducting customer satisfaction survey By surveying regularly, companies can develop their whole business strategy as to satisfy customers (Lin and Jones, 1997, 4) Companies try to maintain their loyalty with their customers by improving product and service quality As a result in the last decade, many national indices have been developed in order to measure consumer satisfaction Thus, at the national level, the customer satisfaction index (CSI) is used to measure companies and organizations how they satisfy customers’ needs Kritensen et al 1998 performed analyses based on data from the American Customer Satisfaction Index 1994 (NQRC, 1995) The result showed a strong correlation between customer satisfaction and loyalty Customer loyalty will help

to increase company’s revenue as they will introduce the financial plan to their friends, relatives

2.6.2 Customer relationship development

Customers are the heart of a business because if the product cannot satisfy them then the customers will not buy anymore as a result the company will not be able to run the business and get profits It means that the company has to make the strong working relationship with customers in mean of mutual support, trust, and goals Through market analysis, treating the customers’ complaints in a positive way, ensuring the quality products or services can increase the sales, keeping the good relationship with customers can increase repeat purchase in future It may increase having good relationship with support staffs such as receptionist or a department secretary might be such kind of decision maker, this because potential customers before buying products, some of them would like to take other peoples’ opinions and this kind of customer behavior affects selling too much Internal relationship among the employees is also important as well as customer relationship because

the whole business market of the company Such as market research and finance departments can give market views of the products on different factors Atmosphere of the working environment of a company is an important issue for establishing good relationship strategy because if the company management has the good relationship and open communication then they can share their opinions, different information to improve the products and services

CHAPTER 3: CURRENT SITUATION

3.1 Overview of Life Insurance industry

In the tough social economy raises new factor stimulating demand for life insurance Recently, the image of European people is published on mass media having struggle life such as: employment, health, education, housing, published on mass media Moreover, trouble of essential commodities has been increased such

as food, medicine, school fees, petrol, electricity and water has made Vietnamese people consider for savings, especially for education, medical treatment, housing for children, and for themselves at retirement age Beside that, the attract idle money channel from residential as securities, real estate, savings in the bank, gold and dollars are less attractive has made people choose life insurance products, they would have accumulation, moderate profitability, protecting from the natural disasters, accidents and disease occur Therefore, life insurance market in Vietnam

in 2013 had significant growth And reached 11.052 billion, increased 19.5% compared to the same period of last year in the first six month of the year 2014 (data announced from Ministry of Finance)

Actually, Vietnam is very potential market in Asia, a market with population of 87 billion people and only 10% of them having life insurance contract, while at least 30% of families in Vietnam is capable of participating insurance based on their stable income

3.2 Necessity of life insurance

Individual’s safety needs is eternal in our society Through our life, people always find the way to protect themselves for unexpected circumstances Social and health insurance is applied in many countries with the purpose is to ensure that people has standard of benefits, however, subjects covered and scope are limited People are interested in other issues in their life such as satisfaction of the demands in the life

In fact that people do not always see all positive living conditions There are many such cases have difficulty unexpected illness, accident, lost or reduced income So,

in order to avoid any financial difficulties, ensuring stability of life for individuals and their families, prepare good conditions in the future such as education for children, life insurance products can solve these problem in the people’s life

In general, there are four major threats to the people’s security, they are: unemployment, loss of employment ability, death and old age Life insurance is the only tool that contains the above-mentioned elements against these threats

new sales and this was quite a large proportion of the total growth of the whole industry

In the year of 2013, total revenue was estimated at 22,650 billion with growth of 23.1% in the first quarter, growth chart 26% Last year, Sunlife PVI achieved special revenue reaching to 1,000 billion which is contributed significantly to the growth of life insurance industry Total amount of insurance benefits payment was 8,095 billion, the total amount of investments into the national economy about 81,000 billion up 24% The total number of insurance contracts reached 5,204,727, number contracts increased 9.2% Revenue (interest) of investment activities was estimated at 8,778 billion, and the average interest rates paid out at these companies were 10.5% which is than the bank deposit rates This shows that purchasing life insurance would bring a better protection and interest for the insured

CHAPTER 4: RESEARCH METHODOLOGY

This section will describe hypothesis of research model, proposed research model,

an overview of data collection and its procedure which help researcher consolidate the factor affecting customer satisfaction; and the last part will be mentioned on the reliability and validity

4.1 Hypothesis for research model

The hypothesized research model is based on an assessment of factors affecting on customer satisfaction when they use the service or purchase a life insurance product In this research model has four factors affecting on satisfaction including:

- Service quality: has positive relationship with customer satisfaction

- Brand quality: has positive relationship with customer satisfaction

- Product quality: has positive relationship with customer satisfaction

- Functional quality: has positive relationship with customer satisfaction

The questionnaires consist of five parts, each of which serves a different purpose

It tested the independent variables (Functional Quality, Product quality, Brand Quality, and Service Quality), the dependent variable (customer satisfaction), and demographic factors The data collected through the questionnaires were cleaned, encrypted and input into the Statistical Package for Social Sciences (SPSS) system The target population for the study consisted of non-policy owners and policy owners who have purchased particular insurance products or used to experience the service quality of life insurance companies

S

Fingure 4: Proposed research model The equations show the relationship between these factors and the level of customer satisfaction with the following format:

Y = E0 + E1X1 + E2 X2 + E3 X3 + E4 X4

Y is the dependent variable represents the predicted value of the satisfaction level

of customers

- E0, E1, E2, E3, E4, are the regression coefficient

- X1, X2, X3, X4, are the independent variables in the following order: Service Quality, Brand Quality, Product Quality, and Functional Quality

Based on the theory of customer satisfaction and the results of previous relevant researchers, a conceptual model is proposed According to Gronhaug & Ghauri (2005, 40) research methodology refers to the collection of data and analysis Several rules and procedures are being used as the tools or ways to solution of a specific problem or task

Figure 5: The use of research method (Gronhaug & Ghauri 2005, 40)

Research method can be either qualitative or quantitative so one has to decide which method should be implemented before starting any research Qualitative method does not contain numeric characteristics, it is an interpretation and rational

In this process oriented research method, the analysis of the data mostly depends upon the skills and knowledge of the researcher (Ghauri and Gronhaug 2010, 103-105.) According to Philip Kotler et.al (2008) qualitative research is based on gathering qualitative data or information and understanding them on the basis of attitudes, feelings and motivations of the product users (Kotler et al, 2008, 335) On the other hand, according to Malhotra (2005, 43) quantitative research is based on numerical character and is aimed at qualifying the data through statistical analysis 4.2 Factors affecting on satisfaction

4.2.1 Service quality

An assessment of how well a delivered service conforms to the customer’s expectations Service business operators often assess the service quality provided to their customers in order to improve their service, to quickly identify problems, and

to better assess customer satisfaction

Method

i) Service

Services include all economic activities which are intangible, not physically apparent like products, which provide value to the customer Service has become very crucial in all business industries due to globalization and the information technology developments Services are now seen almost to every part of our life, starting from the most essential demands Service is not bound to only service based businesses, but it is found on all companies strategic tools for gaining a competitive advantage Service quality is an assessment of how well a delivered service conforms to the customer’s expectation Gronroos (2001) offer a comprehensive definition of services as “an activity or series of activities of a more

or less intangible nature than normal, but not necessarily, take place in the interaction between the customer and service employee and/or physical resources

or goods and/or system of service provider which are provided as solution to customer’s complaints

ii) Quality

Quality plays a significant role in determining and influencing customer satisfaction as well as measure the level of satisfaction Quality is one of the most expected aspects by customers of almost all service product (Urban, 2009) Before quality can be managed it must be defined (Roneau, et al., 2006) Quality is the main construct forming satisfaction and making the background of customer’s perceived value, therefore, it is useful to take an in-depth look at the nature of quality Quality of services can be the difference between success and failure in both service and manufacturing firms Service quality, customer satisfaction and customer value have become the main concern of both manufacturing and service organizations in the increasingly intensified competition for customers in today's customer-centered era (Wang et al., 2004) As a result, many organizations are paying increasing attention to improve service quality Service quality improvements will lead to customer satisfaction and cost management that result in improved profits (Stevenson, 2002)

Service quality is always the top criteria for selection of customers when choosing

an insurer in the competitive market nowadays as insurance product is intangible product Customers expect to send their money to the company with the belief and good and professional service quality, so that they can get the returned amount on time It is the core element, a critical insurance business to attract potential customers Increasingly difficulties of the economy, the role of quality becomes more important It will be the factor to retain and increase loyalty of the customer with the company, therefore, focusing on quality service improvement can keep the existing customers and attract potential or new customers

iii) Complaints handling

According to Barsky (1995, 22): “People who do complain and have their problem taken care of tend to be more loyal to the company than the people who were satisfied in the first place”

This statement has drawn our attention to the customer handling which is required

to be paid attention to The above statement express the meaning that complaint is

a good thing to the business because it will give a chance to the business to shine and make improvement on the service, also give solution of the complaint Customers do not want to complaint normally unless they are badly dissatisfied with the products or services that they have bought If the company does not handle properly the complaint procedures after receiving complaints from customers then it damages the image of the company More importantly, a complaint without any concern which causes further complaints can be a disaster for the company while the customers are talking to their family, friends, even to the media (television, newspaper, or hot line of consumer protection, etc…) It has been shown is several researches that if the complaints are being treated more quickly and efficiently then it makes more loyal customer to the company (MacNealy 1994, 43)

Some typical complaints that many life insurance companies receive:

- Complaints on the insurance claim which is dissatisfied settled;

- Complaints on insurers taking action quite slowly because of waiting feedback

or results from the authorities;

- Complaints and suggestions on issues related to the provision of customer service;

- Complaints and suggestions on the management of the insurance agent forces;

- Complaints and suggestions on content, rules, insurance terms and conditions are using

4.2.2 Brand Quality

The brand is one of the important factors contributing to the maintenance, expansion and development of domestic and overseas markets for businesses, enhancing commercial civilization, contributing against unfair competition In the context of international economic integration of our country, now standing in front

of the severe competition, especially when there are a lot of foreign goods penetrate the Vietnam market Therefore, it is essential to business branding for their goods i) What is branding?

Currently, brand terminology is widely used in Vietnam It is existed under many different interpretations around this term In the legal documents of Vietnam without brand terms that only other related terms including multiple perspectives trademarks, trade names, appellations of origin, geographical indications, industrial designs, etc so there's a way to understand the relative brand Actually, brand, is

a term first used a lot in marketing; statue of a manufacturing facility or business or

an image or a group of goods and services; is a collection of signs for distinguishing goods or services of the business with goods or services of other businesses The signs can be letters, numbers, graphics, images, showing the color, sound or a combination of these factors Expressing a brand not only recognize and consider the legal perspective of the term, but more importantly, in terms of international economic integration of Vietnam profound need to look at it from the angle of corporate governance and marketing Such brand is a broad term with connotations First and foremost it is iconic for goods (products) or business

be the quality of goods and services The brand should be going into the customer's mind and their word of mouth

ii) Economic benefits brought by brand

- Increasing sales and revenue;

- Tightening the loyalty of customers

- Increasing profits and income for business;

- Expanding and maintaining market

- Attracting labor and employment

- Increasing production and sales of goods

- Increasing the value of product by the consumer to purchase a reputation or popular products;

Brand brings benefits for business: When a brand has been entered to serve customers, it will bring to the business real noticeable benefits It is the ability to access market and greater ease even when there is a new category of goods (such as Wave, @ of Honda products); create opportunities to penetrate and dominate the market with strong brands Well-known brand can be sold with higher price than the same goods or services with unfamiliar brand In addition, a strong brand will help sell more products (due to propagation effects and the common experience of consumers)

Brand is one of the important factor that customer considers to purchase insurance products Some of them prefer local companies as they believe they easily to claim, get returned amount on the matured date of the policy Others prefer foreign organizations as these firms have strong finance and well practice on reinsurance activities for safety reasons and get more income, higher yearly profit sharing From the market shares data have been above-mentioned, it showed the first brand life insurance businesses contributed greatly to influence purchasing decisions of customers as well as create customer satisfaction And the last point of the company’s brand is working to find the "stature" and "magnitude" of the brand,

especially the ones who lead the market Following are some leading market firms and early entering to the Vietnam market

x Prudential

Founded in London in 1848, Prudential is one of the financial services conglomerate the world's leading provider of life insurance products, financial services and asset management in the UK, America and Asia Prudential has life insurance operations in the UK 164 years Today, Prudential has over 24 million customers worldwide and manages funds worth over 405 billion pounds The close coordination of activities of the business units around the world has helped Prudential to take advantage of demand for asset accumulation and retirement income needs of customers are increasing Scale global operations and income from the geographic area and diverse product gave Prudential dominance Prudential Group owns the brands reputation follows:

· In the UK, Prudential Life Insurance Company and Retirement Fund leading provider of personal financial product diversity

· M & G, the fund management company in Europe and the United Kingdom's Prudential Group, which manages funds worth more than $ 369 billion (equivalent

to 228 billion pounds)

· Jackson National Life Company is one of the leading life insurance products provide long-term savings and retirement accumulation for individual clients and client organizations throughout the United States economy

· Prudential's Asian Life Insurance Company Europe with Asia leading the business unit's life insurance and fund management in 14 markets

With an international brand, strong financial and good reputation, Prudential have gained trust from the consumers It often in the list of their choice

x Bao Vietnam Life

Life insurance company under the Vietnam Museum was founded Bao Vietnam has researched and marketed life insurance services for the first time in Vietnam,

demonstrating a pioneering role in Bao Vietnam insurance market in Vietnam Bao Vietnam Life is the only name of Vietnam is the great support from the Government of Vietnam

Bao Vietnam is a local brand with strong relationship with the Government organizations, good experience in both life and non-life insurance, it’s one of their competitive advantage

x Manulife

Manulife Financial is a financial services conglomerate leading Canadian-based, operates in many countries and regions in Asia, Canada and the United States Manulife offers clients with strong value, reliability, reputation, and future-oriented financial decisions most important of them International Network Our team of employees, agents and distribution partners offers services and financial protection products and wealth management for millions of customers around the world We provide asset management services to clients that the organization of financial institutions worldwide as well as reinsurance solutions, particularly in life insurance, property and casualty disaster compensation art Funds under management by Manulife Financial and its subsidiaries of the company worth about 575 billion Canadian dollars (approximately US$559 billion) as of September

30th, 2013 Group operates in Canada and Manulife Financial Asia in the name and under the name of John Hancock in the United States

Formal operations in Vietnam from June 1999, Manulife Vietnam currently provides financial services to hundreds of thousands of customers through a network of professional dealers On June 14th, 2005, the company Manulife Vietnam Fund Management (Manulife Vietnam Fund Management - MVFM, renamed Manulife Asset Management (Vietnam) Company Limited - MAMV on May 11th, 2010), a subsidiary of Manulife Vietnam , has been licensed to operate in the field of business management and investment funds, enabling the expansion of the diversity of Manulife Vietnam to meet customer needs

Manulife is also a strong and good reputation in the local market with a comprehensive product portfolio from the traditional insurance products, investment linked insurance products for low-income people, and voluntary pension products Manulife’s FCs have been acknowledged as professionality and quality among its peers

"Customer First", Dai-ichi Life Vietnam strives to provide products and services to meet the financial best financial needs and diversity of customer trust Vietnam Dai-ichi Life is the Japan’s brand which has entered into Vietnam’s consumer with reliable and high quality products This is also a competitive advantage for its business operations in the local market

AIA Vietnam is a member of the AIA Group, provider of life insurance products to help bring solutions to the financial security and peace of mind for future customers

AIA Group is an independent life insurance, originated in Asia the world's biggest listed Group member companies have either wholly owned subsidiary part in 17

Malaysia, China, Korea, Philippines, Australia Indonesia, Taiwan, Vietnam, New Zealand, Macau, Brunei, an affiliated company with 97% stake in Sri Lanka and a joint venture with 26% stake in India and a representative office in Myanmar Over the past 90 years, the AIA Group has built a solid business by responding to changing needs of residents and businesses in Asia The approach is based on establishing and maintaining personal relationships help AIA become a part of life

in the communities where AIA activities And the Group continues to protect its customers against the risk that they unfortunately encounter in life

Officially operating in Vietnam since February 2000, within 14 years, AIA Vietnam has been trying to build a solid foundation for sustainable development through the training and development of human resources with the contingent of more than 500 employees and 17,000 agents by the end of December 2013

AIA is American’s brand that would is very easy to go into the consumer’s mind as Vietnamese’s insight is preferred American’s products, strong finance

x Prevoir

Founded in 1910, the Group Prévoir with history more than 100 years, is the first company to carry out life insurance for people with middle income in France Prévoir is one of the most robust coverage of France, one of the leading insurers of affordability, method prudent management of the Group's long-term priorities for investment in bonds In 1996, the Group began Prévoir expanded internationally with the establishment of its first branch in Portugal In 2000, a second branch was established in Poland In 2005, the Government of Vietnam has agreed to open a Prévoir Group branch in Hanoi On March 17th, 2005, Ltd Life Insurance Vietnam Prévoir was born The Group has signed a cooperation agreement with Group Vietnam Posts and Telecommunications (now the Postal Corporation Vietnam) for exclusive distribution of products Prévoir International development is an important direction for the development of the Group Prévoir «Expanding the vision to conquer", that is the motto of the Group Prévoir

x Hanwah Life

Founded in 1952, Hanwha is one of the ten largest corporations in Korea and in the top 500 largest corporations in the world Hanwha currently operating portfolio diversification with three main areas:

- Production & Construction

- Finance

- Service & Vacation

Network-wide global operations of Hanwha up to 142 members (52 members in South Korea and 90 other members in the country) as: Hanwha Corporation, Hanwha SolarOne, Q.Cells Hanwha, Hanwha Chemical, Hanwha Engineering & contrustion, Hanwha Life Insurance, etc operations in 19 other countries, including Canada, China, Czech Republic, Germany, Greece, Hungary, India, Indonesia, Italy, Japan, Philippines, Kazakhstan, Russia, Saudi Arabia, Singapore, Thailand, United Kingdom, United States and Vietnam

As a member of Hanwha Group, Hanwha Life Insurance (previously known as Korea Life Insurance), was established in 1946, is a life insurance company has the oldest history in the Korean market Hanwha Life Insurance has grown rapidly to become one of the company's life insurance market leader South Korea with total assets of $ 80 billion and is the highest credit rating is "AAA" by Korea Ratings Inspection Agency and Credit Information Services Korea Co., Ltd

iii) Brand image

According to Hsieh, Pan, and Setiono (P.252, 2004), "a successful brand image enables consumers to identify the needs that the brand satisfies and to differentiate the brand from its competitors, and consequently increases the likelihood that consumers will purchase the brand" A company or its product / services which constantly holds a favorable image by the public, would definitely gain a better position in the market, sustainable competitive advantage, and increase market share or performance (Park, Jaworski, & MacInnis, 1986) Reynolds (1965) noted that "an image is the mental construct developed by the consumer on the basis of a few selected impressions among the flood of the total impressions; it comes into being through a creative process in which these selected impressions are elaborated, embellished, and ordered" (p 69) Kotler (2001) defined image as "the set of beliefs, ideas, and impression that a person holds regarding an object" (p 273) On the other hand, Keller (1993) considered brand image as "a set of perceptions about

a brand as reflected by brand associations in consumer's memory" (p.3) A similar definition to Keller's was proposed by Aaker (1991), whereby brand image is referred to as "a set of associations, usually organized in some meaningful way" (p 109) Biel (1992) however defined brand image as "a cluster of attributes and associations that consumers connect to the brand name" (p 8)

For brand attitude, Keller (1993) referred to Wilkie's (1986) definition of brand attitudes which was "consumers' overall evaluations of a brand" (p 4) Overall, image can generate value in terms of helping customer to process information, differentiating the brand, generating reasons to buy, give positive feelings, and providing a basis for extensions (Aaker, 1991) Creating and maintaining image of

the brand is an important part of a firm's marketing program (Roth, 1995) and branding strategy (Keller, 1993; Aaker, 1991) Therefore, it is very important to understand the development of image formation and its consequences such as satisfaction and loyalty

The brand is one of the important factors contributing to the maintenance, expansion and development of domestic and overseas markets for businesses In the context of international economic integration in Vietnam, standing in front of the severe competition, it is essential to do branding for their goods or service Trust is the indicator to show the degree of customer´s satisfaction The existence

of trust between customer and company performs as kind of insurance against risks and unexpected dealings in the future regardless of the reason for the trust in a certain situation Trust concept is subdivided into four divisions:

- Generalized trust: is the outcome of social norms For example, a customer can trust the company due to its size, market reputation and that is why he/she decided

to sign a policy with a certain company In life insurance industry, the customer also feels comfort to invest in the company due to its popularity, reputation, forward thinking, and strong finance It is one of customer’s choice as they assume their money will be appropriately invested, they would receive on time claim service, even proper payment on matured date

- System trust: depends on laws, industry regulations and contracts even also care the professionalism of the company The customer trusts that the company performs to meet up his/her expectations including quality of service, customer complaint handling, good and suitable insurance products which are fit their financial plan Good system along with technology, good service and complaint handling to ensure the customer get the best service at their most convenience

- Personality-based trust: derives from the human behaviors to rely upon other Here, the customers are trust the agent forces to meet up his/her expectations

each-on the basis of word of mouth The company with good reputatieach-on will have a

good business strategy and provide professional training to the agent force and customer service staff who play as front-line in the organization

- Process-based trust: is the outcome of a long term existing business For agent force, the first policy is not their target, they expect or look for potential customers who are their customer’s relatives, friends This means an expectation of long-term relationship

4.2.3 Product Quality

Product-based approach is based on its economical roots which the differences of the elements or attributes infatuated by the product are being considered as reflecting to the differences in quality (Garvin, 1984) Providing satisfaction to customers by the designing the products which meet the needs of customer, referred to the “quality of design” (Juran, 1974) Besides that, quality set at a high level off product or services, it expand reputation, increase customer retention, attracting new customer from the word of mouth, and also increasing the financial performance as well as profitability (Julian and Ramaseshan, 1994; Zeithaml,1996) The concept of product quality can be critically defined from two different perspectives; objective quality and the perceived quality (Brunsø et al., 2005) Objective quality refers to the technical, measurable, and verifiable nature of products/services, processes, and quality controls This includes product features, product performance, durability amongst others While subjective or perceived quality refers to the consumers' value judgments or perceptions of quality Product Quality encompasses the features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs In other words, product quality is defined as “fitness for use” or ‘conformance to requirement” (Russell and Taylor, 2006)

Perceived quality is a result of consumers’ subjective judgment on a product (Zeithaml, 1988; Dodds et al., 1991; Aaker, 1991) Bhuian (1997) defined perceived quality as a judgment on the consistency of product specification or an evaluation on added value of a product Garvin (1983) proposes that perceived quality is defined on the basis of users’ recognition while objective quality is

defined on the basis of product or manufacturing orientation The differences between objective quality and perceived quality lie in that objective quality has a pre-design standard to a product, and perceived quality is influenced by internal and external product attributes which is an evaluation basis for consumers (Olshavsky, 1985; Zeithaml, 1988) Kan (2002) points out that objective quality is that consumers will use their experience and knowledge to evaluate overall product benefit, function, durability, technology and reliability when consumers purchase a product Perceived quality is a consumer judgment on the accumulative product benefits and a subjective feeling on product quality (Zeithaml, 1988; Dodds et al., 1991) Aaker (1991) argues that perceived quality can show the salient differentiation of a product or a service and becomes a selective brand in consumers’ mind One of the reasons why perceived quality is different to real quality is because a previous bad image of a product may influence consumers’ judgment on product quality in the future; even if the product quality has been changed, consumers may not trust that product because of their unpleasant experience in previous (Aaker, 1996)

Most of life insurance products in the market have common characteristics:

- Saving: although the interests is lower than saving in the bank; just for

- Protection: protecting customers when their life do not follow to the rule of birth-aging-disease-death, for those who have not yet aging, however, the disease or death has came before Therefore, they buy life insurance products

to protect themselves and their family in case of bad situations or serious diseases The customers will receive a certain amount at the appointed time that they have committed to participate;

- Safety when happening any family financial issues: in case of having family financial issues, the amount customers withdraw is unlimited from the policy conditions It’s quite different when they deposit their money from the banks, they are even not get interests if they withdraw the amount before the mature

The insurance products are uniquely designed for each period of customer’s needs

in their life stage It not only aims to protect people and their loved ones at risk but also helps them to implement individual and families financial plans, ensuring firm resources for the future

Beside that, the customer needs are increasing, these companies are trying to provide new products which the purpose is to meet the customer’s requirements Many specialized product such as protection of serious diseases, paying higher medical fees (medical rider) compared to traditional products, or accident pay for some high-risk occupations (e.g sales), educational products for children, and the premium is discontinued when the policyholder (parents) is mortality or permanent disability, etc… Moreover, how payment are paid on mature date or during the process of participation is not the same as well as the buyer’s benefits are also different in these companies

4.2.4 Functional Quality (focus on agent force or financial consultant)

The functional factors revolve around “how” the service was rendered This includes items such as the appearance of the agents, their knowledge on the insurance products, their attitude towards customers and how accessible and responsive of the agents was to the customers (Barrett, Baldry, 2007)

“All business is based on relationships The firm only has to make them visible and meaningful for its customers-provided that the customers want that” (Gronroos 2000,20)

A sales person of a company can play vital role to change the attitude of the customers because she or he is working closely with the customers and it is such a position that from where the satisfaction of the customer can be felt easily Therefore, a salesperson has the responsibility to create a good relationship with the customers who are directly and indirectly, internally and externally affecting business (Manning et al 2010, 56)

Most clients have insurance needs, but they do not recognize Financial Consultant (FCs) or agent force’s task is to point out to them and help them to recognize their

potential demand and their family There is no habit of buying life insurance in Vietnam market, therefore, Vietnam market is potential insurance market, and the insurance profession is also said to be profitable, but the life cycle of the insurance agent is so short, and retention together with development of agents is not easy.According to the statistic, agent retention in Vietnam is under 10%, therefore, maintaining an agent is vital, because the cost of training an agent is high Recruiting insurance agents become extremely difficult not only for the new insurance companies in Viet Nam but also to the existing in the industry such as: Prudential, AIA, Malulife, Dai-ichi Life Vietnam , ACE Life, it also sees "hard as… recruiting insurance agents" In order to penetrate fast and be effective to the insurance industry in Vietnam are a direct marketing, and word of mouth marketing Working style and appearance of insurance agents or FCs are also a factor affecting the recruitment of insurance companies In practical, many FCs consider this kind of job is a temporary or second job which would contribute in their income while waiting for a better job Beside that, there is no benefits attraction from the company side as most of them are contractors instead of employees From the thoughts, they do not really concentrate in their work, and willing to leave the company at any time causing a shortage of personnel in the market This force is the most unstable force in the life insurance organizations Therefore, insurance companies have no choice, and continue to hire and train new candidates leading to the low quality of FCs This is a normal story happens at life insurance organizations: recruitment, training – and then recruitment, number of recruitment and termination are nearly the same Understanding that recruitment is important, but the most important is retention FCs There are many life insurance companies concentrate in hiring to meet the recruitment target or cope with training time which is not enough time as regulated by the Ministry of Finance In some countries, FCs are go through the training process in advising financial plan to their clients instead of selling insurance products only This profession is not focused properly in Vietnam market

Nowadays, customers approach lots of communication channels, their knowledge is improved from these channels It’s required the FCs to be trained and regularly refreshed the way to approach, consult the potential customers as well as remind them to go through the terms and conditions in order to understand the rules, terms and particular characteristics of the product to avoid buying the wrong insurance products which is not fit with their financial purposes It is very important that FCs follow to “insurance consulting procedures” that providing directions to FCs in an effective way when meeting or approaching the clients such as: finding out the customer needs, their circumstance such as where their income comes from, how much their monthly expenditures are, any backup plans, then design and offer a suitable products to them with the purpose is to balance the monthly expenses and premium payment so that they are not at risk of financial crisis

As above-mentioned, the effective marketing is a direct marketing, and word of mouth marketing This means that possesses a large of number of FCs, a life insurance company has prevailed in reaching customers and expanding market shares

4.3 Data collection

The research model with hypotheses is built based on the theory of customer satisfaction, previous studies, quantitative and qualitative research of the author 4.3.1 Overview of data collection

Proposed research model is presented in Figure 4 There are many methods to collect data for the research, such as questionnaires, observation, interview, case study, focus group However, questionnaires are the most appropriate techniques for this study While the research is on customer satisfaction of the life insurance companies, the most important point how to design a reasonable questionnaire to get as much as possible information and opinion from the customers which includes existing and potential customers Beside that, the research does not only determine how good the service and product, professional of agent forces is, but it also to