Improving service quality a case of bao viet insuarance corporation

In line with the market trend, Bao Viet Insurance Corporation has considered for improving insurance service quality to meet customer satisfaction as the priority task of company... Ther

RESEARCH PROJECT

(BMBR 5103)

IMPROVING SERVICE QUALITY

A CASE OF BAO VIET INSURANCE CORPORATION

ADVISOR’S ASSESSMENT

Advisor’s signature

ABSTRACT

Insurance is an arrangement or agreement that protects the financial well-being

of an individual, company or other entity in the case of unexpected loss It is a form

of risk management primarily used to hedge against the risk of a contingent, uncertain loss Today, the insurance sector plays an important role in the development of financial markets in the economy Competition in the business, as

we know it, is dynamic and challenging According to insurance market in Viet Nam, many insurance enterprises are mainly competing by reducing premium or increasing commission, but they lack of service quality improving strategies

However, because the market competition develops rapidly, those advantages are no longer reliable decisive factor in competition for the insurance enterprises They realize that they cannot compete with each other solely on price, but need to focus on their valued customers

Therefore, service quality is an optimal factor and it becomes more and more important for customers to select and use a service of the company In line with the market trend, Bao Viet Insurance Corporation has considered for improving insurance service quality to meet customer satisfaction as the priority task of

company

ACKNOWLEDGEMENTS

First of all, I express my deep gratitude to Mr.Phan Dinh Nguyen, my supervisor I would like to say thank for his guidelines and help for identifying problems without which this work could not have seen the light of day

Another thank you goes to my classmates, friends that give me support and good comments about how I could improve my thesis Their help have been very important for motivating me to complete the thesis

Finally I would also like to direct a special thank you to parents and other family members who give me inspiration and support to work hard

TABLE OF CONTENT ABSTRACT 1

ACKNOWLEDGEMENTS 2

CHAPTER ONE: INTRODUCTION 7

1.1 Problem statement 7

1.2 Objective of the study 7

1.3 Ressearch questions 8

1.4 Scope and methodology of study 8

1.5 Significance of study 9

1.6 Structure of thesis 9

CHAPTER TWO : LITERATURE REVIEW 11

2.1 Service and characteristic of service 11

2.1.1 Concept of service 11

2.1.2 Characteristics of service 11

2.1.2.1 Characteristic of intangibility 12

2.1.2.2 Characteristic of inseparability 12

2.1.2.3 Characteristic of heterogeneity 12

2.1.2.4 Characteristic of perishability 13

2.2 Concept of quality 13

2.3 Service quality and formation of service quality 13

2.3.1 Concept of service quality 13

2.3.1.1 Customers‟ Expectation of Service Quality 14

2.3.1.2 Customers‟ Perception of Service Quality 14

2.3.2 Formation of service quality 14

2.4 Service quality measurement 17

2.4.1 The model originally provided a list of ten determinants of service quality: 19

2.4.2 The model provided a list of 5 determinants of service quality: 19

2.4.2.1 Tangibles 20

2.4.2.2 Responsiveness 20

2.4.2.3 Assurance 20

2.4.2.4 Reliability 20

2.4.2.5 Empathy 20

2.5 Assessing Service Quality 21

2.6 Important of service quality dimensions 21

2.7 Methods to improve service quality 22

2.8 Nature and characteristics of insurance business 23

2.8.1 Nature of insurance business 23

2.8.2 Characteristics of Insurance business 24

2.9 Features of non-life insurance service 25

CHAPTER THREE: RESEARCH METHODOLOGY 26

3.1 Qualitative research 26

3.1.1 Design qualitative research 26

3.1.2 Result of qualitative research 26

3.1.2.1 Measuring quality of product 26

3.1.2.2 Measuring quality of premium 27

3.1.2.3 Measuring quality of employees/ agents 27

3.1.2.4 Measuring quality of claim process and indemnity activities 28

3.1.2.5 Measuring quality of customer service 28

3.1.2.6 Measuring quality of distribution system 29

3.1.2.7 Measuring quality of advertising activities 30

3.1.3 Research model and scale of measurement 30

3.1.3.1 Research model 30

3.1.3.2 Scale of insurance service measurement 31

3.2 Quantitative research 32

3.2.1 Design quantitative research 32

3.2.1.1 Research subject and Sample 32

3.2.1.2 Questionnaire design 32

3.2.2 Method of data analysis 33

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS 34

4.1 Overview of Bao Viet Insurance Corporation 34

4.1.1 History and Development: 35

4.1.2 Network 36

4.2 Overview of insurance business 37

4.2.1 Insurance market 37

4.2.2 Non-life insurance 37

4.3 Summary of quantitative research result 38

4.3.1 Sample description 38

4.3.1.1 Gender 39

4.3.1.2 Age band 39

4.3.1.3 Education level 40

4.3.1.4 Type of insurance sector 40

4.3.2 Result of measurement scale testing 41

4.3.2.1 Cronbach‟s alpha 41

4.3.2.2 EFA factor analysis 41

4.3.2.3 Correlations analysis 44

4.3.2.4 Multiple linear regression 45

4.4 Analyzing the status of actual service quality at Bao Viet Insurance Corporation 47

4.4.1 Reliability of insurance service 47

4.4.2 Service capacity of insurance company 49

4.4.3 Responsiveness of insurance company 52

4.4.4 Attractiveness of the insurance company 55

CHAPTER FIVE : SOLUTIONS AND RECOMMENDATIONS 57

5.1 Solutions: 57

5.1.1 Improving reliability of insurance service 57

5.1.2 Improving the service capacity of insurance company 59

5.1.3 Improving the responsiveness of insurance company 59

5.1.4 Improving the attractiveness of the insurance company 60

5.2 Recommendations 60

5.2.1 Recommendation for Insurance Supervisory Authority – Ministry of Finance 60

5.2.2 Recommendation for Vietnam Insurance Association (VIA) 61

REFERENCE 62

APPENDIX 64

APPENDIX 1: DISCUSSION CONTENT (QUANTITATIVE RESEARCH) 64 APPENDIX 2: QUESTIONNAIRE FOR CUSTOMERS 65

APPENDIX 3: TABLE OF VARIABLES WERE ENCODED 69

APPENDIX 4: CRONBACH ‘S ALPHA 70

APPENDIX 5: EFA FACTOR ANALYSIS 72

APPENDIX 6A: MULTI LINEAR REGRESSION RESULT 75

APPENDIX 6B : MULTI LINEAR REGRESSION RESULT (WITHOUT THE CONVENIENT FACTOR) 79

The sinking position of the Bao Viet Insurance Corporation in the insurance market needs to be concerned These problems arise as a result of the corporation has been identified as not meeting customers „s demands and failing to reach service quality such as poor returns on premiums, delays in processing claims and confusing policy details It is common to hear people complaining about the late delivery of policy documents, renewal notices or even undue delay in responding to customers‟ requests Moreover, customers also complain about counseling products

by the sale persons who lack of expert knowledge about insurance products or insurance sectors These problems often expose in conflict as people are lured into buying insurance policies that they do not properly understand

With increasingly severe competition in market, the company needs to consider its customer demands more than ever because the efficiency of insurance sector depends upon how best it can deliver services to its target customers and how far expectations of customers are met In order to survive in this competitive environment and provide continual customer satisfaction, Bao Viet Insurance Corporation‟s insurance services are now required to persistently improve the quality of services Therefore, improving service quality to meet customer satisfaction which has become the priority goal of Bao Viet Insurance Corporation on the market

1.2 Objective of the study

The general objective of the study seeks:

 Measure and evaluate insurance service quality of BaoViet Insurance Corporation

 Suggest solutions and recommendations to improve service quality of Bao

Viet Insurance Corporation

1.3 Ressearch questions

The research will seek to provide answers to the following questions:

 What is the current status of service quality of Bao Viet Insurance Corporation?

 What solutions and recommendations do Bao Viet Insurance Corporation need to do for improving service quality?

1.4 Scope and methodology of study

2.3.2 Methodology of the study

Utilizing the theoretical model of service quality combined with specific analysis of insurance service, from which forming the research model to evaluate the insurance

„s service quality The process of research including:

 Preliminary research is implemented through qualitative method with

technical discussions in group or duel This research will be used to establish preliminary scale of measurement of nonlife insurance „s service quality

 Formal research: is done by quantitative method Using the questionnaire to

investigate the assessment of clients of insurance service quality of Bao Viet Insurance Corporation This study aims to adjust and test the draft scale to establish official scale about insurance service quality Scale is assessed by Cronbach alpha, EFA factor analysis , multi linear regression This process can explore what are factors of service quality?

After testing the scale will be used to analyze actual insurance service of Bao Viet Insurance Corporation through descriptive statistic This step aims to answer

1.5 Significance of study

This study identifies service quality dimensions of Bao Viet Insurance Corporation in order to develop strategies for improving the quality of service delivery This will enhance the company‟s competitive position in the insurance sector and ensure survival of the company, especially in this era of keen competition

By improving service quality, Bao Viet Insurance Corporation can develop customer service approach to deal with customers in order to avoid the tendency of existing customers switching to a competing company By identifying what customers expect and perceive to be quality, the company can revise, redesign its service operations and tailor them to meet the perceptions and expectations of the customers By this way, the delivered services will bring satisfaction to the customers and make them stay while attracting new ones The study will serve

as a guide for Bao Viet Insurance Corporation to develop policies which will improve its overall service delivery, especially in areas where gaps between expectations and perceptions are so wide to enhance customer satisfaction This will give Bao Viet Insurance Corporation a comparative advantage to become the most favourite insurance company in Viet Nam „s insurance market

1.6 Structure of thesis

The study is organized into five chapters as following:

 Chapter One: Introduction

 Chapter Two: Literature Review

 Chapter Three: Research Methodology

 Chapter Four: Data Presentation and Analysis

 Chapter Five: Conclusions and Recommendations

Figure 1.1: Structure of Thesis

INTRODUCTION LITERATURE REVIEW

RESEARCH METHODOLOGY

DATA PRESENTATION & ANALYSIS

CONCLUSIONS &RECOMMENDATIONS

CHAPTER TWO : LITERATURE REVIEW

2.1 Service and characteristic of service

The world economy is increasingly characterized as a service economy This is primarily due to the increasing importance and share of the service sector in the economies of most developed and developing countries In fact, the growth of the service sector has long been considered as an indicator of a country's economic progress

Along with the economic development, the service sector plays an important role and it also contributes a big proportion of GDP of each countries In Viet Nam, total domestic product (GDP) in the first 6 months of 2015, an estimated 6.28% increase over the same period of 2014.In the 6.28% growth of the whole economy, service sector increased 5.90%, contributing 2.22 percentage points This shows that service sector occupies a key position in the national economy and it is an important sector that contributes to economic growth

2.1.1 Concept of service

In today‟s economy, service is everywhere and it has increased in importance over the last decade with the advent competition According to Kotler and Keller (2009) define service as “Service is any act and performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything”

Zeithaml et al (2006) define services as “Services are deeds, processes and performances”

According to Kotler & Armstrong (2004), “Services are activities or benefits that businesses can offer to customers in order to establish, strengthen and expand the long-term and cooperative relationships with customers”

Almost same said by James Fitzsimmons (2008), “A service is a time perishable, intangible experience performed for a customer acting in the role of co-producer”

2.1.2 Characteristics of service

To identify a service, it is often based on four unique characteristics of a service

to be intangibility, heterogeneity, inseparability and perishability

2.1.2.1 Characteristic of intangibility

It is considered to be a key characteristic of services and the most important difference between goods and services, from which all other differences emerge (Zeithaml et al., 1985) It 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)

2.1.2.2 Characteristic of inseparability

It is taken to reflect the simultaneous delivery and consumption of services and it is believed to enable consumers to affect or shape the performance and quality of the service It 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)

2.1.2.3 Characteristic of heterogeneity

This reflects the potential for high variability in the output of services (Zeithaml

et al., 1985) This is particularly problematic when the service is labor-intensive as its performance and quality vary depending on the producer

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

2.1.2.4 Characteristic of perishability

It means that services cannot be inventoried and saved for use in the future (Zeithaml et al., 1985) Services are performances that cannot be stored They should be consumed when they are produced (Edgett and Parkinson, 1993) For example, a hotel room that is not occupied for the day could not be saved and does not generate revenue during that day If a service is not used when available, then the service capacity is lost (Edgett and Parkinson, 1993)

On the other hand, the hotel cannot supply hotel rooms for its customers when it

is fully occupied Thus, the hardest task of services organizations is to match supply and demand (Zeithaml et al., 1985) Sometimes demand exceeds maximum available supply or demand exceeds optimum supply level Some of the possible strategies to match supply and demand include different pricing according to the peak period, developing non-peak demand, developing reservation systems and complementary services, utilizing part-time employees or third-parties, sharing capacity, preparing in advance for expansion, etc (Zeithaml et al., 1985)

2.2 Concept of quality

Quality is one of the things that consumers look for in an offer, which service happens to be one (Solomon 2009) Quality can also be defined as the totality of features and characteristics of a product or services that bear on its ability to satisfy stated or implied needs (Kotler et al., 2002) It is evident that quality is also related

to the value of an offer, which could evoke satisfaction or dissatisfaction on the part

of the user

2.3 Service quality and formation of service quality

2.3.1 Concept of service quality

Kasper and Gabbott (2006) define “Service quality is a complex and ephemeral concept which refers to some attribute of what is offered, provided whereas satisfaction or dissatisfaction refers to a customer‟s reaction to that offer” Zeithaml

et al (2006) refers service quality focuses specifically on dimensions of service

“Service quality is the totality of features and characteristics of service that bear

on its ability to satisfy stated or implied needs”,(Kotler and Keller 2009).Gronroos (1984) defined service quality perceived as a result of an evaluation process when customers compare their expectations with the service they actually Customer expectation and perception are the two key ingredients in service quality Oliver (1980) posits that customers judge quality as “low‟ if performance (perception) does not meet their expectation and quality as “high‟ when performance exceeds expectations

2.3.1.1 Customers’ Expectation of Service Quality

Customer expectations are beliefs about a service that serve as standards against which service performance is judged (Zeithaml et al., 1993); which customer thinks a service provider should offer, rather than on what might be

on offer (Parasuraman et al., 1988).This is influenced by their personal needs, past experience, word-of-mouth and service provider‟s communications

2.3.1.2 Customers’ Perception of Service Quality

Customers‟ perception of performance is what they experienced (Parasuraman et al., 1988) Literature maintains that customers‟ total perception

of a service is based on their perception of the outcome and the process; where the outcome is either value added or quality and the process is the role undertaken by the customer (Edvardsson, 1998).The customer‟s perception of quality of service is based on the degree of agreement between expectations and experience (Kandampully, 1998)

2.3.2 Formation 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,as service includes a complex mixture of explicit and implicit attributes Service quality is 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:

Lehtinen and Lehtinen (1991) suggested that it is necessary to consider service quality in the three aspects The three aspects are:

- Physical quality: Includes equipment and physical environment

- Interactive 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 including three dimensions, which has two dimensions same as Gronroos opinion of the technical quality and functional quality The third one is the service environment Each of these dimensions has three sub-dimensions and customers aggregate their evaluations of the subdimensions to form their perceptions of an organization‟s performance on each of the three primary dimensions.Customers establish their service quality perceptions on the basis of an evaluation of performance at multiple levels and combine these evaluations to arrive at an overall service quality perception (Brady ,Cronin,2001)

Figure 2.1: Hierarchical model of service quality ( Brady ,Cronin,2001)

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: The multilevel model of Retail Service Quality (Dabholkar,et al., 2000)

Among the models for measuring service quality, the most acknowledged and applied model in variety of industries is the SERVQUAL (service quality) model developed by Parasuraman et al The model originally provided a list of ten determinants of service quality: access, communication, competence, courtesy, credibility, reliability, responsiveness, security,

understanding and tangibles Further studies merged correlated variables and reduced the determinants into five consolidated dimensions: tangibles, reliability, responsiveness, assurance and empathy as the instruments for measuring service quality (Parasuramanet al., 1988; Zeithamlet al., 1990) The SERVQUAL model assesses customer expectation and perceptions of service quality by capturing the gap between expectation and experience

2.4 Service quality measurement

The gap model of service quality:

The gap model (also known as the "5 gaps model") of service quality is an important customer-satisfaction framework In "A conceptual model of service

quality and its implications for future research" (The Journal of Marketing, 1985),

A Parasuraman, VA Zeitham and LL Berry identify five major gaps that face organizations seeking to meet customer's expectations of the customer experience

 Gap1: Customers‟ expectations versus management perceptions: as a

result of the lack of a marketing research orientation, inadequate upward communication and too many layers of management

 Gap 2: Management perceptions versus service specifications: as a

result of inadequate Commitment to service quality, a perception of unfeasibility, inadequate task standardisation and an absence of goal setting

 Gap3: Service specifications versus service delivery: as a result of role

ambiguity and conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and lack of teamwork

 Gap4: Service delivery versus external communication: as a result of

inadequate horizontal communications and propensity to over-promise

 Gap5: The discrepancy between customer expectations and their

perceptions of the service delivered: as a result of the influences exerted from the customer side and the shortfalls (gaps) on the part of the service provider In

this case, customer expectations are influenced by the extent of personal needs, word of mouth recommendation and past service experiences

Figure 2.3: Model of service quality gaps by Parasuraman et al (1985)

The first four gaps are identified as functions of the way in which service is delivered from the service provider to the customer, while gap number five is connected to the customer and as such is considered to be the truth of service quality Gap five is also the gap that the SERVQUAL instrument influences Edvardsson (1996) mentioned that it is important for a service organization to define the level of quality at which to operate; he argued that it is more relevant to speak of the “right quality” than of merely high quality

The SERVQUAL scale which is also known as the gap model by Parasuraman,

et al (1988) has been proven to be one of the best ways to measure the quality of services provided to customers This service evaluation method has been proven consistent and reliable by some authors (Brown et al., 1993) They held that, when

perceived or experienced service is less than the expected service; it implies less than satisfactory service quality; and when perceived service is more than expected service, the obvious inference is that service quality is more than satisfactory (Jain

et al., 2004, p 27) From the way this theory is presented, it seems the idea of SERVQUAL best fits the evaluation of service quality form the customer perspective This is because when it is stated “perceived” and “expected” service, it

is very clear that this goes to the person, who is going to or is consuming the service; who definitely is the consumer/customer

2.4.1 The model originally provided a list of ten determinants of service quality:

 Tangibles: Appearance of physical facilities, equipment, personnel, and

communication materials

 Reliability: Ability to perform the promised service dependably and

accurately

 Responsiveness: Willingness to help customers and provide prompt service

 Competence: Possession of required skill and knowledge to perform service

 Courtesy: Politeness, respect, consideration and friendliness of contact personnel

 Credibility: Trustworthiness, believability, honesty of the service provider

 Security: the absence of doubt, economic risk, and physical danger

 Access: Approachable and easy of contact

 Communication: Listens to its customers and acknowledges their

comments Keep customers informed In a language which they can understand

 Understanding the customer: Making the effort to know customers and

quality but after some initial study in1988, they reduced to five dimensions for service quality model The SERVQUAL model was based on difference between perception and expectation of quality of service through five dimensions

2.4.2.1 Tangibles

They include physical aspects of the service such as physical facilities, appearance of personnel, tools or equipment that is used to provide the service, physical representations or other customers in the service facility

This considers the knowledge and courtesy of employees as well as their ability

to convey trust and confidence The assurance dimension includes the following features: competence to perform the service, politeness and respect for the customer, effective communication with the customer and the general attitude that the server has the customer‟s best interest at heart

2.4.2.4 Reliability

That is connected to the consistency of performance and dependability Here it is determined if the company give the service in the right way the first time and keeps to its promises

2.4.2.5 Empathy

It includes access, communication, understanding the customer Caring and individualized attention that the firm provides to its customers

Figure 2.4: SERVQUAL model by Parasuraman et al (1988)

2.5 Assessing Service Quality

Implementing and evaluating service quality is a very complex process, because of the intangible nature of service and the difficulty in measuring customers expectations and perceptions Zeithaml and Bitner (1996) believe that content and delivery of a service are essential factors for evaluating service quality While customers evaluate the quality of delivery, service providers determine the content of the service Edvardsson (1998) contends that the concept of service should be approached from the customer‟s perspective Because the customer‟s total perception of the outcome is the service and the customer outcome is created in a process where service is generated through that process Customers involvement in the service process is necessary, since they are co-producer of service The service process can be a delivery of service, interpersonal interaction, performance or customer‟s experience of service

2.6 Important of service quality dimensions

The measurement of service quality relies upon an understanding of attributes which contribute to consumer expectations and perceptions of service quality These attributes are assessed by customers and contribute meaningfully to a quality based evaluation of the service provided Knowledge of the dimensions of these attributes, and possibly the ability to measure them, can yield an insight into more effective ways of improving service quality Indeed, Parasuraman et al (1988) with their

work on SERVQUAL have sought to identify dimensions of service quality, such as

- reliability, assurance, tangibles, empathy and responsiveness (RATER)

Theoretically, this research offers a concept for explaining the varying importance of service quality dimensions used by Parasuraman et al (1991) As Gronroos (1984) has noted it is important for managers to understand how individual facets of service quality are influenced, and how these facets are perceived by customers As studied by previous researches, the significance of understanding of the service encounter from the consumer's perspective is an essential element in developing and designing better service processes to enhance overall quality (Bitner et al 1994) Nevertheless, it is essential to recognize the most important dimensions of the delivery of specific services and any strategies that facilitate communication with customers leading to the identification of such dimensions

2.7 Methods to improve service quality

Quality service is a key element of a successful business But many businesses struggle to improve service and retain their customers There are several methods to improve quality service at the business, from having clearly defined and measured service goals and motivating the employees, to using customer feedback and updating the service tools to better serve customers

 Motivating the employees

 Invest in service training, rather than a quality control department

 Set up a new-employee initiation program

 Tie employee‟s actions to the business‟s overall performance

 Encourage employees to think of customer service as a "story" about the

business

 Give the employees service quality goals

 Recognize and reward improvements in employee performance

 Emphasize problem-solving

 Teach the employees to overcompensate for any issues or complaints

 Listen to feedback from the employees

 Measuring customer service performance

 Determine how quickly to solve problems

 Ask for personalized feedback from customers

 Create a customer service survey

 Track any issues or complaints

 Put processes in place to prevent issues from occurring again

 Defining service goals

 Consider business type

 Create a clear vision statement

 Updating Quality Service Tools

 Implement customer friendly technology

 Don‟t neglect the social media

2.8 Nature and characteristics of insurance business

2.8.1 Nature of insurance business

Insurance in law and economics, is a form of risk management primarily used to

hedge against the risk of a contingent, uncertain loss Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment Insurance business is based on majority rule, it means insurance fund is formed on the contributions of the many participants in insurance; this fund is used

to pay for a small number of participants as unfortunate loss The greater number of insurance participants, the greater the ability to compensate and business activities

of the insurance companies more efficient Moreover, the insurance companies

2.8.2 Characteristics of Insurance business

The insurance has the following characteristics which are:

To spread the loss immediately, smoothly and cheaply, large number of persons should be insured The co-operation of a small number of persons may also be insurance but it will be limited to smaller area

 Insurance is not a gambling

The insurance serves indirectly to increase the productivity of the community by eliminating worry and increasing initiative The uncertainty is changed into certainty by insuring property and life because the insurer promises to pay a definite sum at damage or death

 Insurance is not charity:

Charity is given without consideration but insurance is not possible without premium It provides security and safety to an individual and to the society although

it is a kind of business because in consideration of premium it guarantees the payment of loss

2.9 Features of non-life insurance service

 Product: is basically an insurance contract It contains an agreement by

the insurer to provide, in exchange for a set of insurance premiums, agreed upon benefits to a beneficiary of the contract upon occurrence of specified uncertain or contingent future events affecting the life or property of the insured party, i.e., a transfer of such risks

 Insurance premium: The amount of money that an individual or business

must pay for an insurance policy The insurance premium is considered income by the insurance company once it is earned, and also represents a liability in that the insurer must provide coverage for claims being made against the policy Generally, premiums cover whatever is detailed in the insurance policy, and the services provided or paid for depend entirely on the specific policy and type of protection

 Claims: insurance claims are reviewed by the company for their validity and

then paid out to the insured or requesting party (on behalf of the insured) once approved

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Qualitative research

3.1.1 Design qualitative research

Based on the scale model of Parasuraman et al., and combined with the characteristics of insurance business sector, I list the main factors that affect the service quality in insurance business sector As the result, there are seven factors that influence the customer perception about service quality These factors include:

(The content of discussion is presented in appendix 1)

3.1.2 Result of qualitative research

3.1.2.1 Measuring quality of product

The result of discussion shows that customers evaluate the quality product based

on four key elements:

 The diversity of insurance product,

 Provision of insurance,

 Scope of insurance,

 Form of insurance contract

The participants share that quality product is expressed by the diversity of insurance product which is able to fully meet the needs of customers Moreover, the provision of insurance must be understandable, clear and unambiguous The scope

of insurance should be expanded Besides, the form of contract should be presented logical and attractive in order to satisfy the taste of customers

3.1.2.2 Measuring quality of premium

Participants say that there are 2 factors which affect the quality of the premium, those are:

 The competitiveness,

 The flexibility

The participants discuss that insurance premium is one of an important factors affecting choice of customers whether participating insurance or not However, it is not the absolutely decisive factor because customers still decide to join insurance with higher premium with other considerations such as the reliability of claim settlement, behavior of employees, and reputation of insurance company

In addition, customers also hope the insurers to offer a flexible premium policy which is suitable for competitive situation in the market

3.1.2.3 Measuring quality of employees/ agents

With the discussion, it is agreed that there are six factors influence the quality of employee / agent of insurance company:

 Qualification and skill

- Employee / agent must have qualification and skill as well as work experience in order to counsel customers, assess and manage the risks, understand the provision of policy, solve customer‟s problems, understand customer„s particular needs, answer customers‟ questions and settle claims

- Moreover, employee or agent should have the enthusiastic attitude, positive

of working spirit They are willing to help customers, listen and respond in an attentive way to client inquiries, explain the provisions for customers in a polite way and satisfy the requirements of customers

- Working style must be logic and serious Especially, the ethic of employee/agent must be always assured and honest

3.1.2.4 Measuring quality of claim process and indemnity activities

Discussions express that there are two factors determining the quality of the claim process and indemnity activities:

3.1.2.5 Measuring quality of customer service

Two factors are discussed as an important role in the customer service

 Customer care

 Promotional policy

Customer care is at the heart of all successful companies It can help the companies develop the loyal customer base and improve relationships with their customers Customer care is provided to customers after purchasing and using

goods and services A good customer service provides an experience that meets customer expectations Customer care is the act of taking care of the customer's needs by providing high quality service and assistance during customer's requirements are met such as provide a variety of call center services, answering frequently asked questions on the website, sending reminders when services or check-ups are due, offering preferential discounts to existing customers on further purchases, calling for customer to evaluate the service quality and service attitude , paying attention to customer feedback

Promotional policy includes gift for large customers, loyalty client or special event Moreover, the insurance company discount for customers such as family, large group

3.1.2.6 Measuring quality of distribution system

The quality of the distribution channel is shown in the following aspects:

 Network of office,

 Size and facilities of office,

 The quantity of agent/broker network

The network of office should be wide and its facilities are modern because it is easy to deliver products quickly and conveniently for customers; shorten transaction time , support to handle claims as well as provide information of insurance company to customer Moreover, customers can find many network of offices to make transactions easily, contact with counselors in a fast way when they want to participate in insurance or solve problems

The quantity of agent/broker network must ensure both quantity and quality They have to adapt enough quantity of people with knowledge or skills to serve customers in the professional way

Besides, the insurance company needs to provide new distribution systems such

as sale online to provide product and service for customers conveniently and quickly

3.1.2.7 Measuring quality of advertising activities

The results of this discussion show is that the quality of the advertising activities represented by three factors:

 Brand reputation

 Financial position,

 Form of advertising The purpose of advertising activities are to make the customers feel secure and reliable to participate in insurance with the insurance company Therefore, advertising activities should emphasize factors such as brand reputation; financial position, prestige transaction as well as designing form of advertising is impressive and attractive

3.1.3 Research model and scale of measurement

3.1.3.1 Research model

Based on the characteristics of insurance business, compared SERVQUAL model by Parasuraman et al including 5 factors: reliability, responsiveness, assurance, empathy, tangible combined with information collected from the preliminary study, from which building the model of factors affecting the service quality

Employee

or agent

Distribution system

Customer service

Advertising activities Product

3.1.3.2 Scale of insurance service measurement

Through the step of preliminary study, determining 23 factors affecting service quality of insurance

 Size and facilities of office

 The quantity of agent/broker network

3.2.1 Design quantitative research

3.2.1.1 Research subject and Sample

To obtain an accurate result in this study, I use the sample in random manner and pick respondents for answering the questionnaires that are designed

Research subjects are customers who participate in insurance policy at Bao Viet Insurance Corporation in Ho Chi Minh city I make a list of customers in Ho Chi Minh city and divide it into 3 kinds of insurance sector: Vehicle insurance, Health insurance, Property insurance The sample size is 50 people for each insurance sector, so total sample is 150

3.2.1.2 Questionnaire design

The questionnaire includes 2 main parts:

 Part 1: Questions involve in general evaluation and information of the customer

 Part 2: Questions involve in factors affecting insurance service quality (The questionnaire is presented in appendix 2)

3.2.2 Method of data analysis

I use software SPSS 20.0 and Excel 2010 for data processing and analysis To make it easier for data input, analysis and presentation, variables were encoded (as presented in appendix 3)

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)

EFA factor analysis is used to test extracted factor from total variables The weighted observed variables factor loading less than 0.4 will be removed and the scale is accepted as the total variance equal to or greater than 50% (Gerbing

& Andesson, 1988) 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 FOUR: DATA PRESENTATION AND ANALYSIS

4.1 Overview of Bao Viet Insurance Corporation

Vietnam Insurance Company (Bao Viet) was established and commenced business since 1965, and its focus was to develop the non-life insurance business Bao Viet Insurance's business lines include the non-life insurance, reinsurance, loss adjustment, financial investment and other business permitted by laws and regulations

Being the first insurance company in Vietnam, Baoviet Insurance Corporation (Baoviet Insurance) is a wholly-owned subsidiary of Baoviet Holdings The chartered capital of Baoviet Insurance increased to VND1,800 billion in 2012 from VND1,500 billion in 2011; and reached VND2,000 billion in early 2013 On 27 March 2013, the Ministry of Finance granted the Approval of capital increase that allows Baoviet Insurance to rise its chartered capital to VND2,000 billion This capital increase helped make Baoviet Insurance the non-life insurance company with largest chartered capital in the market

With 50 years of development, Baoviet Insurance is proud to be the first non-life insurer in Vietnam, and to be presented with many prestigious awards by the State Baoviet Insurance has consistently maintained the leading position in the non-life insurance market by market share and revenue.Baoviet Insurance boasts a network

of 67 branches and nearly 300 customer support offices across Vietnam, and more than 3,000 qualified employees This, coupled with its strong financial capacity, effective business management and claim settlement, enabled Baoviet Insurance to meet all insurance needs and handle claims of customers in a prompt, timely and professional manner.Baoviet Insurance‟s business goals include improving customer service, developing individual insurance and bancassurance products with advanced features, enhancing risk management, and applying latest software to support business management

Chart 4.1: Total revenue and profit of Bao Viet Insurance Corporation in 2014

(Source: Bao Viet – Integrated annual report 2014)

4.1.1 History and Development:

• 1964: Vietnam Insurance Company established under Decision 179 / CP of

the Government dated 17December

• 1965: Officially operating in the non-life insurance from 15 January with

headquarter in Hanoi and a branch in Haiphong

• 1965 -1974: Serve a small group of customer that is the economic unit of

the State operated in the field of import-export and ships in the North

• 1975-1982: As a largest State Insurance Company in Vietnam with wide

networks and diversity of insurance products such as Aviation and aerospace

insurance, Motor vehicle insurance, Personal accident insurance…

• 1989: Became Vietnam Insurance Corporation according to Decision No

27-TCQD-TCCB issued by the Ministry of Finance dated 17 February

• 1996: granted “Special-Class State enterprise”, was one of the 25 largest

State enterprises in Vietnam

• 1996-2007: During this period, Vietnam Insurance Company continued to

diversify and improve the quality of products and services

• 2007: Vietnam Insurance Corporation renamed Baoviet Insurance

Corporation

• 2013: Bao Viet Insurance increased its capital from 1.800 billion VND to 2.000 billion VND This capital increase helped make Baoviet Insurance the non-life insurance company with largest chartered capital in the market

In recent years, Bao viet Insurance is one of the pioneering companies in the implementation of the centralized management model, diversification of products and distribution channels, boosting risk management rand building system of advanced information technology to provide customers with excellent service and sustainable value

4.1.2 Network

Extensive distribution network at prime locations across the country, with the commitment to providing top quality service in the market.Outstanding distribution capacity in the insurance sector with 127 branches in 63 cities and provinces, 700 insurance transaction offices throughout the country, and 41 branches and transaction offices providing securities services, fund management and other financial services

Major customer base across cities and provinces nationwide.Diversified customer segments (with low-medium-high income), in which middle-income customers accounting for large proportion.Well-positioned in unlocking the potential of middle class and rural customer segments

Most diversified product portfolio in the market, with 80 non-life insurance products; 40 life insurance products; also providing banking, sercurities, fund management services.Take the lead in developing financial and insurance products with protection, saving and investment features.Actively conduct market research and develop products that satisfy potential demand of medical, health care, pension plan Pioneering in implementing insurance programs of the Government including agriculture insurance, export credit insurance, natural disaster risk insurance, fisheries insurance, medical insurance, supplementary pension plan

Branches located at key economic areas of the country such as Ho Chi Minh city, Hanoi, Da Nang, Nghe An, Hai Phong, Binh Duong, Dak Lak remain high performing units, contributing significantly (over 10%) to Baoviet‟s total revenue

4.2 Overview of insurance business

4.2.1 Insurance market

Vietnam‟s insurance market and insurance businesses have seen rapid development and gradual integration into the region and the world in recent years The number of enterprises entering the market and the market size increased rapidly, insurance products were diversified to meet increasing needs of customers

So far, there are 61 businesses operating in of the market, including 17 life insurers,

29 non-life insurers, 01 non-life branch, 02 reinsurers and 12 insurance brokers

Market share by gross written premium Loss ratio(%)

Chart 4.2: Market share by gross written premium and Loss ratio of Bao

Viet Insurance Corporation in 2014 (Source: Association of Viet Nam insurers)

4.2.2 Non-life insurance

According to estimates of the Association of Vietnamese Insurers, the growth rate of the non-life insurance market in 2014 returned to the two-digit numbers

(11.8%), reaching VND27,346 billion, compared with 7.5% in 2013 Baoviet Insurance‟s 2014 total revenue and profit before tax achieved VND6,510 billion and VND320 billion, respectively Within 2014, Baoviet has clearly identified market trends and centered around the process of corporate governance mechanism and business model transformations; upgraded products and enhanced service quality; focused on designing new retail products and developing agents, with a view to ensure the business growth and sustainable development

Chart 4.3: Market share of Bao Viet Insurance Corporation comparison with the

main competitors ( Source: Insurance Supervisory Authority – Ministry of Finance )

4.3 Summary of quantitative research result

4.3.1 Sample description

Total surveyed questionnaire is 150, was sent by mail and directly to interview clients The number of questionnaire collected is 132 filled questionnaires After eliminating 12 invalid filled questionnaires due to a lot of unanswered question, thus, the total number of valid votes is 120 valid questionnaires

PVI 22.34%

Bao Viet 18.36%

Bao Minh 8.63%

PTI 7.27%

PJICO 6.61%

Others 36.79%

Market share