OVERVIEW OF THESIS
I NTRODUCTION
After 18 year of market opening, non-life insurance market of Vietnam has dramatically developed; average growth rate of premium for the period of 2006-2012 is about 23.6% In 2012, Premium of non-life insurance market is more than VND 22,316 billion accounted for 0.9% (compared with 0.6% in
2006) At the end of 2012, there are 29 non-life insurers on market including
16 joint-stock companies and 10 foreigner joint venture and foreigner owned companies The dynamic of foreigner companies helped to increase competitiveness of market
With increasingly severe competition in market, price-driven competition will not bring sustainable growth for insurance companies Therefore, improving service quality has become the goal of many insurance companies on the market
After 3 years working in United Insurance Company, I see that improving service quality is important and priority task of company Therefore, I chose the subject “Improving service quality: the case of United Insurance
O BJECTIVE OF SUBJECT
UIC was established in 1997, with 16 years old UIC is one of most mature insurer in Vietnamese insurance market According to business characteristic of company, UIC mainly focus on servicing Japanese client and most of them is longtime client, hence for many years, service quality has not been assessed and negatively affected In result, company has become more dependent on client, passive in client service, slow adoption to change and competitiveness of market UIC has very small market share and especially the growth rate of
Vietnamese client is rather low compared with competitors Therefore, company need to find the answer for the question “whether clients are satisfied with service quality of company or not? How much is satisfactory degree?” The objectives of subject are:
- Defining a model to measure and evaluate non-life insurance service quality
- Measure and evaluate insurance service quality of UIC
- Propose solutions and recommendations to improve service quality of UIC.
S COPE AND METHODOLOGY OF RESEARCH
In this subject, I research assessment of customer about UIC service
Data collected is through conducting survey with client in some provinces of in the North of Vietnam Time of survey is in 2013
Utilized measuring model is based on SERVQUAL model adjusted by particulars of insurance service The process of research is shown as below:
Preliminary research: is implemented through qualitative methods with technical discussions in group or duel This research will be used SERVQUAL model to establish preliminary scale of measurement of non-life insurance
Formal research: is done by quantitative methods I used a questionnaire to investigate the assessment of client of insurance Service quality of UIC This study aims to adjust and test the draft scale to form official scale about insurance service quality Scale was assessed by Cronbach alpha, EFA factor analysis, multi linear regression After this step, I can explore what are factors of service quality
After testing, the scale will be used to analyze actual insurance service quality of UIC through descriptive statistic After this step, I can explore what is the current status of service quality of UIC
Based on study results, I propose solutions and recommendations to improve service quality in the near future This process can answer the questions: What solutions should be made to improve insurance service quality of UIC?
S TRUCTURE OF THESIS
The thesis includes 05 chapters: Chapter 1: Overview of research subject;
Chapter 2: Theoretical basis of service quality; Chapter 3: Research methodology and some preliminary result; Chapter 4: Analysis of the actual service quality of UIC; Chapter 5: The solutions and recommendations to improve the service quality of UIC in; and the conclusion outlined the major findings of the project.
THEORETICAL BASIS OF SERVICE QUALITY AND NON-LIFE
D EFINITION AND NATURE OF SERVICE
Practices from the developing countries and the world have demonstrated that: Along with the economic development the services sector is increasingly playing an important role and the contributing big proportion of GDP of each countries The services sector led the economy as the center of economic activity and it has a close relationship with many other areas of the economy
In Vietnam, at the end of 2012, service sector accounted for 43.5% of GDP
In despite of recession of overall economy, the growth rate of service sector reached 5.97%, which is still higher than GDP’s growth rate This shows that the potential to develop the services in the future in our country is very large
The following part of this section will answer for some question, including What is service? What is the nature of the service? What is service quality?
What factors determine the quality of service? How to measure the quality of service?
Services is a very popular concept, there are many definitions of service
According to Zeithaml & Britner (2000), the service is the act, process, how to perform a certain task in order to create customer value used for satisfying the needs and expectations of customers
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
Implementation services can and cannot be related to the goods of its material form
Fitzsimmons said that the service is an intangible activity and storage, made to a customer and the customer is the creator of the product
To identify a service, it is often based on the following four specific characteristics:
Characteristic of intangibility is defined as a certain things that cannot touch, see, taste, hear or be aware of other goods (Groth and Dye, 1999)
Intangibility is the most important difference to distinguish between goods and services (Santos, 2002) Due to the intangible characteristics of services that now very difficult to determine the customer's perception of service, as well as their appreciation about service quality is how (Parasuraman, Zeithaml and Berry, 1985)
Characteristic of inseparability is shown that service provider perform service at the same time with the service consumption of customer Service providers cannot hide any fault or deficiency of services (Ghobadian, Speller and Jones, 1994)
For services with high labor content, such as quality occurs during service delivery, service quality expressed in the process of interaction between customers and employees of service provider (Svensson, 2002) For those services that require the participated opinions of consumers as health care, less service companies perform quality control management because consumers influenced to this process In such cases, the opinion of the customer as patients describe the symptoms to the doctor, consulted by the customer becomes important for the quality of service activities
Characteristic of heterogeneity: This feature is also known as the distinctiveness of the service Accordingly, the implementation of the service varies depending on how the service is provided, location of service, targeted customer of service or time of service This feature is most recognized for service required high labor force Requirement for uniform quality of employees will be very difficult to ensure (Caruana & Pitt, 1997) The reason is that what the company intends to serve can be completely different from what the consumer receives
Characteristic perish ability: Services are perishable; they cannot be stored Therefore, an empty seat on a plane, for example, is a lost opportunity forever Restaurants are now charging for reservations, which are not kept, charges may be made for missed appointments at the dental clinic Perish ability does not pose too much of a problem when demand for a service is steady, but in cases of unusually high or low demand, service organizations can have severe difficulties The above characteristics are generally referred to in many texts as being what makes services marketing so different
However, this assumption should be queried on a number of grounds Like all sweeping generalizations, generalizations concerning services marketing do not always represent the full picture Consider the question of tangibility In the main, services can be broken down into three main classifications.
S ERVICE QUALITY AND FACTORS OF SERVICE QUALITY
Quality of service is a concept that attracted much attention and controversy in the literature because the researchers have found difficult to define and measure service quality in unity
Gronroos (1984) defined service quality perceived as a result of an evaluation process when customers compare their expectations with the service they actually received
Parasuraman, Zeithaml and Berry (1988) also views this as to that service quality as a form of attitude, related but not homologous to customer satisfaction, is the result from the comparison between the customer expectations with actual service that they are aware of their consumption
Expectations is the desire, the desire of customers to service, as customers often feel that the service provider should offer something better than what they did Consumer expectations are formed based on their demand for goods and services; purchase from experiences in the past and from the information, they received from external vendors, friends or communication activities of the service provider
Cronin and Taylor (1992) suggested that, view concept service quality, as a gap between expectations and outcomes of services, is not appropriate They point out the confusion related the relationship between service quality and customer satisfaction for services The concept of customer satisfaction is defined as a gap between expectations and results, or an inconsistent with expectations
To clarify this issue, it is necessary to distinguish the differences between the concept of service quality and customer satisfaction: According to Parasuraman, Zeithaml and Berry (1988), perceived service quality is an overall assessment or attitudes related to the characteristics of services
Meanwhile, satisfaction is related to a particular transaction Service quality and satisfaction with the mutual relationship, service quality creates satisfaction, but cannot infer vice versus The satisfaction with the service, it is not possible to conclude definitely that high-quality service because satisfaction is influenced by many other factors (product quality; prices; situation factors; personal factors) There is only temporary satisfaction, customer always requires higher service quality
Moreover, the concept of customer expectations is different exposed in theory of service quality and theory of satisfaction theory: In the theory of satisfaction, expectations are considered as customer’ prediction what can happen in given transaction in the future Conversely, in theory of service quality, the expectations are desire of the customer, for example, they feel that businesses should provide something better than the current ones (Parasuraman, Zeithaml and Berry, 1988)
The traditional models of service quality that assess the client's awareness about service quality based on a number of factors or aspects, all view service as a complex mixture of explicit and implicit attributes Service quality should not be viewed as a discrete structure but a combination of several factors or aspects that they have different content and nature
Gronroos (1984) argues that the process of awareness of customer service reflected in two aspects:
- Technical quality: Is aspect results, what is the results of the service provider giving customers?
- Functional quality: A process perspective, how were service functions realized?
Customer aware service quality in the two aspects of this: What do they receive? How do they receive? How are form and manner of service like?
Depending on the evaluation of customers for service is good, average or bad
Lehtinen and Lehtinen (1991) suggested that it is necessary to consider service quality in the three aspects The three aspects are:
- Material quality: Includes equipment and physical environment
- Transactional quality: is mainly derived from the matching between communication styles of delivered service and the customer's style
- Company quality: is mainly assessment of company’ exterior form
Brady and Cronin (2001) also viewed service quality composed of three dimensions, which has two dimensions same as Gronroos opinion of the technical quality (the results of the service) and functional quality (quality of transaction) The third dimension is the physical environment of the service
Each of these dimensions (communication, environment and results) has three sub-elements and customers conjunct with their assessment from additional factors to form their perception of the quality of each the first main dimension Combination of that assessment will give the final result of overall service quality
Figure 2.1: Hierarchical of service quality by Brad and Conin
Source: Brady, Cronin (2001), ―Some new thoughts on conceptualizing perceived service quality: A hierarchical approach‖, Journal of Marketing, Vol 65, pp 37
Dabholkar, Shepherd and Thorpe (2000) said that service quality is the customer's overall evaluation, which based on different elements / attributes related to service, thereby forming the overall assessment about service quality, rather than a simple sum of the component elements Multi-level model is as follows:
Figure 2.2: A comprehensive framework for service quality by Dabholkar and coauthors
Source: Brady, Cronin (2001), ―Some new thoughts on conceptualizing perceived service quality: A hierarchical approach‖, Journal of Marketing, Vol 65, pp 37
Different researches of service quality provide different complex model, which express factors influencing and forming service quality In scope of this thesis, I would like to use the model SERVQUAL by Parasuraman, Zeithaml và Berry (1985) to apply for my analysis This model has been proven as effective model not only in marketing but also various sector such as: healthcare, banking service, retail… The content of this model and measurement scale of this theory are introduced in next section.
S ERVICE QUALITY MEASUREMENT
Parasuraman, Zeithaml and Berry (1985) are those who pioneered in research on service quality and provide a comprehensive, feasible model to measure service quality The authors said that there are five different gaps affecting the assessment of customers about service quality, which includes:
The Gap 1: this is the gap between customer expectations and perceptions of the business about those expectations The basic point of this gap is due to companies do not understand all the characteristics that make up the quality of their services and how to transfer them to customers to satisfy their needs
The Gap 2: this is the gap between the perceptions of the business about customer expectation and the business characteristics of the service design In many cases, companies can realize the expectations of customers but company cannot always convert these expectations into specific criteria for quality and transfer exactly characteristics of services that customer expected
The Gap 3:this is the gap between the business characteristics of service provided and service delivery process.In service, the employees can directly contact with customers, play an important role in the process of creating quality However, not always the staff can complete tasks according to the criteria set out
The Gap 4: this is the gap between the service delivery process and the implementation of promises to customers through external communication activities The promises in the advertising and promotion programs can increase the expectations of customers but also will reduce the quality In such cases, customers feel when service providers do not comply with what was promised
The Gap 5: this is the gap between customer expectations of service and their perception of the results after the service consumer Service quality depends on this gap Once customers see no difference between their quality expectations and quality they feel when using a service, the quality of service is considered perfect
Parasuraman, Zeithaml and Berry (1985) introduced a model of Gap of service quality as follows:
Figure 2.3: Service quality model by Parasuraman, Zeithaml, and Berry
Source: Parasuraman, A., Zeithaml, V A., and Berry, L L (1985), ―A conceptual model of service quality and its implications for future research‖, Journal of Marketing, Vol 49, Issue 4, pp 4
Parasuraman, Zeithaml, and Berry (1985) suggested that service quality is a function of the gap no five, so service providers must find ways to narrow this gap In order to archive this, the enterprise must narrow the gap 04 listed before (1,2,3 and 4 gap) because it is likely to affect the service quality
Therefore, it is necessary to perform a sequence of action to measure customer perceptions of service after consumption to check if service met their expectations or not, that is the measurement of service quality
According to service quality measurement model by the theory of asymmetric customer expectations initiated by Parasuraman and coauthors
(1985), service quality includes 10 dimensions that customers use to form their expectations about services, as well as evaluating their awareness about service quality after their consumption Ten dimensions of service quality are:
Figure 2.4: Dimensions of service quality perceived by customers of Parasuraman and Coauthors
Source: Parasuraman, A., Zeithaml, V A., and Berry, L L (1985), ―A conceptual model of service quality and its implications for future research‖, Journal of Marketing, Vol 49, Issue 4, pp 8
Ten dimensions of service quality model mentioned above have the advantage of covering most aspects of the service However, this model has the disadvantage of complexity in measurement Moreover this is theoretical model, there may be many dimensions of service quality model not achieve value distinction Therefore, in later researches Parasuraman, Zeithaml and Berry (1988, 1991 and1993) adjust the model to be more particular to five dimensions of service quality, which are:
Reliability Responsiveness Competence Access Courtesy Communication Credibility Security Understanding/ knowing the customer Tangibles
1 Reliability: demonstrate the ability to perform appropriate and timely service from the very first time
2 Responsiveness: express the desire, willingness of Service Company to provide prompt service to customers
3 Assurance: represented by professional and polite service manner It can be knowledge and courtesy of employees and their ability to convey trust and confidence
4 Empathy: is the attention and carefulness to each individual customer
This aspect is demonstrated by the ability to understand customer needs, are interested in their personal identity and regular customers
5 Tangible: is the appearance of physical facilities, equipment, personnel, and communication materials
C HARACTERISTICS OF NON - LIFE INSURANCE BUSINESS
In daily life and business activities despite of always paying attention prevention and precaution, people still have to encounter unpredictable risk
The risks due to many reasons, such as risks of the natural environment, risks due to the progress and development of science and technology, social environmental risk
Whatever the reasons, the risks often bring people difficulties in life such as job loss, income reduction, destruction of property, shut down production and business organizations, business, personal, etc This would affect the social and economic life in general
To cope with these risks, people have many different measures to control and overcome the consequences caused by the risk At present, in view of the risk management, there are two groups of measures to deal with risks - which are a group of risk control measures and group of financing risk measures
Group risk control measures including measures of avoiding risks, preventing losses, mitigating risks These measures are often used to prevent or minimize the possibility of risk
Group of risk financing measures include risk accepting and insurance
These are the measures used before the risks with the aim of overcoming the consequences of the loss caused by the risks, if any
Insurance is an important part of the risk management program of the organization as well as individuals In view of the risk management, insurance is risk transferring on a contractual basis On social point of view, insurance is not only the transferring of insurance risk but also reducing risk by focusing on a large number of predictive risk can allow for losses when they occur
Non-life insurance is a commitment between the insured and the insurer in which the insurer will pay for the participant or beneficiary a certain amount when events predetermined happen, but participants must pay the full premium on time
- Insurance business based on majority rule: insurance fund was formed based on the contributions of the many participants in insurance; this fund is used to pay for a small number of participants as unfortunate loss of lives and property The greater number of insurance participants, the greater the ability to compensate and business activities of the insurance companies more efficient
- Principles for risk diversification: In insurance business, insurance company normally calculates premium based on majority rule However, this is only predictable possibility of risk; in fact, it is possible that the real possibility exceed predictable possibility In this case, premium is not enough for claim compensation, so this is now the risk for insurance company To ensure the payment of compensation, the insurance companies diversify risks through reinsurance and co-insurance
- Financial investment: The insurance industry is quite different from other industry, when an insurance contract was signed; insurance companies collect the premium from customer and realize liability for customer by the contractual commitment Therefore, there is a period of waiting time between receiving premium and compensation to the customer That is why the insurance companies usually have a large idle and stable capital Insurance companies can invest in many different areas of the economy to increase the profitability of capital As a general trend, the profit of insurance company not only comes from original insurance activities but also mainly comes from financial investment activities In the increasingly competitive market, insurance companies those use funds effectively and achieve the highest level of profitability will have a positive impact on business performance of the company
- Utmost good faith: In insurance business, insurance company absolutely trusts insurance buyer about the information provided such as insured object If any dishonesty was found, the insurance will be whole or partly invalid In contrast, insurance service is only a contractual commitment of insurance company for their customer, so customer can only experience service in case of claim happened Quality of insurance service, assurance of rights, rationality of premium… are all depended on honesty of insurance company
2.4.2 Characteristic of non-life insurance service
- Product: The product is basically an insurance contract recorded a binding agreement between two parties and legal requirement for each other
A party makes the proposal and the other party accepts terms A party pay premium and the other commit to compensate in the case agreed Insurance products are characterized by:
Unstable profit: profitability of insurance product is depended on level of risk of insured object
The product is easy to imitate: an insurance contract, even if the original cannot be patented, can not be protected
In terms of mentality: buying a insurance services is similar to buying a commodity, but the buyers just want to prevent and limit risk and do not want to receive insurance compensation
- Insurance premium: Price of insurance is insurance premium
Accordingly, insurance buyers pay for insurance companies to sell their risk and take commitment of compensation if the risks that occur in the future
Insurance cost depends on many factors such as: business insurance, risky level, limit of liability, insurance coverage
- Claim: Claim is an accurate compensation for the loss of insured object, which is compatible and reasonable with liability specified in insurance contract Concept of claim applies only in the property insurance business In the personal insurance, this concept is called compensation since people is priceless
In addition to above characteristics, a non-life insurance contract should contain below characteristics:
Contract of adhesion: All non-life insurance policies are contracts of adhesion This means that one party (the insurance company) writes the contract, and you agree to it The contract does not result from any negotiation
Conditional contract: the conditional nature of non-life insurance is that the insurance company will not pay unless the conditions are met for a claim This is normally spelled out in the contract
Indemnity Contract: while life insurance contracts are valued contracts, non-life insurance contracts are indemnity contracts This means that, when a claim is filed, the insurance company works to restore you to the financial position you were in prior to the incident that caused the claim
This chapter systematizes the theories regarding services and the nature of the service; points out the different views about service quality, service quality factors and measurement of service quality, stated the particulars non- life insurance business Analysis showed that:
Due to tangibility of service, the determining of service quality is very difficult and complex Customers define their own standards for service; these standards are affected by the surrounding environment that changes continuously In the field of insurance business, too, insurance buyers want to be safe and not expect to receive compensation from insurance companies
Moreover, customers have the risk compensation always account for a small proportion of the total number of customers of insurance companies
RESEARCH METHODOLOGY AND SOME PRELIMINARY
Q UALITATIVE RESEARCH
In this part of research, I will have 3 steps of research:
Based on particulars of insurance business and insurance service, I will list out factors that form insurance service of company As a result, those factors are (1) insurance product; (2) insurance premium; (3) claim and indemnity activities; (4) quality of staff/agent; (5) distributing insurance product; (6) customer care;
After determined above factors, I discuss with 10 persons (5 persons are high experienced management in insurance companies, 5 persons are insurance expert of UIC) From those discussions, I found main factors, which are used to evaluate quality of each above service quality aspects (The content of discussion is presented in appendix no 3)
The last step in this research is to group all selected factors affecting service quality in SERVQUAL model of Parasuraman and coauthors, in order to design an appropriate measurement scale of non-life insurance quality
3.1.1.1 Evaluating quality of insurance product
Result of discussion showed that customers evaluate the quality of products based on four key elements: (1) The diversity of insurance class
(product), (2) Content of insurance terms, (3) form and design of insurance contract
Participants discussed that insurance service quality is initially aware by diversity of insurance products, which can meet various need of customer; insurance term should be tight, understood, unambiguous; insurance contract form should be clear and nice to make satisfaction of client
3.1.1.2 Evaluating quality of insurance premium
Participants see that there is only one factor influencing quality of insurance premium (1) the flexibility of insurance premium
The participants discussed that insurance premium is an important factor affecting insurance purchasing tendency of customer but not the deciding factor Customers may decide to choose insurance for a higher premium after considering the other elements of the enterprise such as the reliability of claim settlement, good service attitude of staff, and reputation of insurance company
Customer normally expect Insurance companies to offer a flexible premium which can be adjusted according to competition of market, level of risk of insurance object, insurance coverage or financial condition of customer
3.1.1.3 Evaluating quality of claim and indemnity activities
Discussions showed that there are three factors determining the quality of the claim and indemnity: (1) the procedures regulated, (2) handling time of request/claim, and (3) implementation of commitments
The payment of compensation is made at difficult time of customer (financial loss, personal loss…), so these activities specially affect customer’s satisfaction If insurance companies have reason to doubt the truth of claim and delayed payment, the customer may be very angry When claim unexpectedly happens to customer, what they want is to quickly overcome consequences to maintain normal daily activities Therefore, claim activities should be carried out quickly and accurately; simple procedure; along with supporting attitude, transparency of staff performing this work
3.1.1.4 Evaluating quality of staff/ agent of insurance company
This is the most debated aspects, finally came to the agreement that there are five factors affecting the quality of staff / agents of insurance companies:
(1) qualified staff, (2) working experience, (3) working behavior, (4) spirit of service (5) ethic
In the course of discussion, participants clarified the content of the above factors As follows:
- Staff / agents must have qualifications and work experience to carry out all process in a scientific and professional manner, such as: risk assessment before insurance agreement; issuing insurance contract; implement claim and indemnity activities
- Staff/agents should have spirit of enthusiasm, ready to meet the requirements of customers They also need to serve politely and attentively, give and explain customer clearly about terms of responsibilities and rights of insurance
- Working style must be neat and serious Moreover, ethic of staff /agent must be always assured
3.1.1.5 Evaluating quality of distributing insurance product
Through discussion, the quality of the insurance distribution channel is shown in the following aspects: (1) offices and service network; (2) size and facilities of office; (4) number of staff/agent network
- If company has huge service network, it can make good impression to customer the company can provide products quickly and conveniently based networks, representative offices throughout and making a good impression in order to provide a quick and conveniently; shorten transaction time or solving insurance right for customer
- Staff and agent network must ensured quantity and quality They are represented for company to contact customer, provide information of insurance company to customer
- The application of modern technology and equipment to provide products to customers is necessary Along with the rapid development of science and technology, new distribution channels have been created for insurance companies such as sales by phone, fax, the internet, etc Since then, the insurance companies can provide its products to customers quickly and smoothly
3.1.1.6 Evaluating quality of customer care
Customer care policies for insurance companies are generally very various
The following customer care policies were discussed as important roles in the customer service: (1) Risk prevention support for client and (2) promotions
- Risk prevention support for client: can be expressed through measures, such as advising, warnings or equipping customers with necessary tools to prevent risks; co-operating with the authorities to promote and disseminate the provisions of State as: sanitary environment; regulations on fire safety; traffic safety laws; labor safety; safety of using electricity Thereby insurance company can help to raise awareness of risk prevention of insurance buyer Well make this, insurance company will not only limited business risk may lead to compensation, but also create confidence, peace of mind for customers
- The promotions: as reduction premium when customers do good risk prevention for many years of using insurance; Gift for large customers, loyalty client or special event; financial support to customers in special circumstances (but not within the scope of insurance)
3.1.1.7 Evaluating quality of communication and advertising
The results of the discussions showed that the quality of the communication and advertising represented by two factors: (1) Brand reputation, (2) Information and advice on insurance products
Due to particulars that client buy insurance just for preventing and reducing risks but did not want to received insurance compensation (purchase but do not want to use; selling or buying insurance risk), so the communication and advertising in insurance has its own unique characteristics, and cannot be done as tangible products The main purpose of promotional activities, advertising of insurance companies is to make the customer feel secure and confident to choose the insurance companies as a place to entrust and transfer risk in life and business Therefore, communication advertising of insurance companies should emphasize factors such as brand reputation; give valuable, accurate and attractive advises to customer
3.1.2 Research model and scale of measurement 3.1.2.1 Research model
Based on the characteristics of insurance business compared SERVQUAL model of Parasuraman and coauthors including reliability, responsiveness, assurance, empathy, tangible combined with information collected from the preliminary study, from which I build the model of insurance service quality as follow:
Figure 3.1: Research model of Insurance service quality factors
3.1.2.2 Scale of insurance service measurement
Through step 2 of preliminary qualitative research, I determined 19 factors of five dimensions as:
2 Ethics of staff / insurance agent
3 Brand reputation of the insurance company
Service capacity of insurance company
Customer care of insurance company
Convenient service access for customer
7 Information and advises about insurance products
Service capacity of insurance company
10 Number of staff and agent network
Customer care of insurance company
14 Handling time of request/claim
Convenient service access for customer
Q UANTITATIVE RESEARCH
Research subjects are representative of customer (corporate customer only) in four city/provinces in the north market: Hanoi, Bac Ninh, Hai Duong, Hung Yen
Sample was selected by the following method: Firstly, I make a list of customers of UIC of the North market and divided into three insurance product class groups: property insurance, personal insurance and car insurance Then, I randomly selected 50 customers in each group Total number of samples is 150
Part 1: includes common evaluation questions to collect general information of customer
Part 2: includes questions related to 19 factors affecting insurance service quality In this part, I apply theory of Likert scale to design questions A Likert scale measures the extent to which a person agrees or disagrees with the question The most common scale is 1 to 5 Often the scale will be 1=strongly disagree, 2=disagree, 3=not sure, 4=agree, and 5=strongly agree
The questionnaire was designed through the following stages:
Phase 1: Creating a questionnaire based on five dimensions (regroup by 19 factors) of insurance service quality
Phase 2: After designing the questionnaire, I took comments of colleagues and then try direct interview 05 customers to check on the form as well as content of the questionnaire
Phase 3: Editing and completing the questionnaire, then starting to conduct customer survey (Detailed content of the questionnaire is presented in appendix 4)
I use software SPSS 16.0 and Excel 2007 for data processing and analysis
To make it easier for data input, analysis and presentation, variables were encoded (as presented in appendix 5)
Before conducting the analysis and evaluation customer’s assessment, reliability of measurement scale was tested by the main tool –Cronbach’s alpha, EFA factor analysis, Multi linear regression:
Cronbach’s alpha reliability coefficient was used to remove the wasted variable and test the internal consistency of variable in measurement scale
Variables with correlation coefficients and the total are less than 0.3 will be disqualified Close degree of the scale variable can be rated as good to alpha coefficient of 0.6 or higher (Nunnally & Burnstein, 1994)
Cronbach’s alpha Internal consistency α ≥ 0,8 Excellent
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%
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
In this chapter, I present methodology of thesis, in order to build the measurement scale of insurance service quality, which is basis for service quality evaluation of UIC
Results of preliminary research step through qualitative methods group and duel discussion based on 7 main aspects that impact insurance service quality:
(1) insurance product; (2) insurance premium; (3) claim and indemnity activities, (4) quality of staff/agent; (5) distributing insurance product; (6) customer care policy; (7) Communication and advertising After discussion, I extracted 19 factors that are most important for client to evaluate service of insurance company Based on SERVQUAL model of Parasuraman and Coauthor, I regrouped 19 factors in to five dimensions: reliability of insurance service, responsiveness of insurance company, service capacity of insurance company, customer care of insurance company, convenient service access for customer This is also defined as official measurement scale of insurance service
Formal research is done through quantitative methods, using the questionnaire survey to assess the scale, test the model Questionnaire is designed based on Linkert 5 method to measure the evaluations of customer regarding each variable According to result of survey, Cronbach alpha coefficient, EFA factor analysis, Multi linear Regression were used to test measurement scale.
ANALYSIS OF INSURANCE SERVICE QUALITY OF UNITED
B USINESS OVERVIEW OF U NITE I NSURANCE C OMPANY
Profit after tax: VND 68 Billion
Specializing in non-life insurance, United Insurance Company (UIC) began its operation on 1 st November 1997 with USD 6 million in capital The company’s charter capital has now increased to VND 300 billion, jointly contributed by three Members:
- Sompo Japan Insurance (Japan): Sompo Japan Insurance is second biggest insurance providers, with a history stretching back to 188 Sompo Japan has offices and subsidiaries in 28 countries and regions (164 cities) outside of Japan, and provides a comprehensive range of risk and asset management solutions under a strict customer-first policy with good international financial strength rating “AA-“by Standard & Poor
- Bao Minh Insurance Corporation (Vietnam): Bao Minh is a leading insurer with good reputation in Vietnam Currently Bao Minh is able to support UIC on local expertise through nation-wide network branches and offices
- LIG Insurance (Korea): establish in 1959, LIG Insurance Co, Ltd (formerly known as LG Insurance) specializes in non-life insurance LIG Insurance provides all types of insurance including property and casualty insurance, marine and aviation insurance, automobile insurance and long – term insurance to individuals and corporations Since its establishment, LIG has maintained good international financial strength of “BBB+” by Standard &
Some milestones in history of United Insurance Company:
In 1997, UIC was founded as a joint venture among: the Yasuda Fire and Marine Insurance Co., Ltd ( Currently Sompo Japan Insurance Inc) + Mitsui Fire and Marine Insurance Co., Ltd ( currently Mitsui Sumitomo Insurance) + Hochiminh City Insurance Company ( Currently Baominh Insurance Corporation)
In 2002, UIC was allowed to expand the scope of activities to provide insurance products for some kinds of non-state owned enterprises in Vietnam
In 2004, LIG insurance Co., Ltd (Korea) entered to joint venture to serve Korean Clients in Vietnam
In 2009, Sompo Japan increased their invested capital by acquiring Mitsui Sumitomo’ share in UIC
In 2012, UIC marked a new milestone in development path by opening a new brand in Haiphong city in where many Japanese and Korean customers located
UIC have Head Office in Hanoi and two branches Office in Hochiminh city, Haiphong city Since the date of operation, UIC has achieved sustainable growth in the Vietnam’s non-life insurance market, especially in Japanese and Korean business community UIC has now become a reliable and professional insurance brand in Vietnam
Different from most of non-life domestic insurers, UIC has a quite compact structure The head is Members of council who decides and gives company strategy, business target to Board of Director UIC’s Board of Director has three members including one General Directors and two Deputy General Directors Head office has all functional department – back office, and front office, however branches only have department of client servicing:
Figure 4.1: Organizational structure of UIC
At the end of 2012, UIC has 76 staffs, Marketing/sale department and claim survey department account for majority of human resource with 26 and
18 persons In comparison with some foreign invested insurer of Vietnamese market, human resource of UIC is average
4.1.2.3 Business performance and market share
The end of 2011, UIC’s premium revenue reached VND 139 billion, growth rate reached 11.53% and in 2012 company’ premium revenue is VND
174 billion In term of market share, UIC has a very modest market share of premium revenue: 0.78% Revenue growth rate in 2012 of company was 25.47%, which is much higher than the industry average of 8.46%
Revenue structure by insurance class: the revenue structure of the UIC is almost unchanged for years In which, revenue property insurance accounted for the highest percentage: 45.71%, followed by the type of like human insurance n, motor vehicle insurance:
Table 4.1: Premium revenue of UIC by insurance class (2012)
Insurance class Premium revenue Proportion
Chart 4.1: Proportion of premium revenue of UIC by insurance class (2012)
To be more accurate in evaluation, we may compare market share of UIC with the direct competitors including companies in Japanese and Korean market; compare annual growth rate of UIC with average growth rate of market:
(Detail as appendix 1& 2 Source: Annual report of Vietnam Insurance market 2008-2012)
Chart 4.2: Market share of UIC comparison with the main competitors
Chart 4.3: Premium revenue of UIC compared with direct competitors
Chart 4.4: Revenue growth rate comparison of UIC and average of maket
Remarkable, in 2009 UIC had a change of shareholder when Mitsui Sumitomo withdrew their capital from UIC This big change caused that UIC lost numbers of big customer to Mitsui Sumitomo group and turnover decreased dramatically (-31%) From 2010, UIC has strengthened, rebuilt human resource, as well as regain the impressive growth rate In 2012, the growth of the UIC has more than three times the average growth rate of the market:
Currently, UIC provide insurance services to customers mainly through direct sale channel, agents, insurance brokers, financial institutions such as banks and financial leasing companies More specifically, direct sale channel contributes more than 65% of total premium revenue; agent channel is very modest with only 8% of total revenue Premium revenue, which came from brokers and financial institutions, is dramatically increasing with 18% and 9% Structure of premium revenue is changing from direct sale to indirect sale
With advantage of small company, UIC easily and quickly apply new modern technology application to improve effectiveness of operation
Company has a server system fixed at head office, which can process and store all data of company Since 2011, UIC buy and utilize web- based comprehensive software which allows all activities of different department connected
However, UIC is still very weak in applying new technology in selling insurance and serve customer Website of company is very low updated; UIC doesn’t have online selling tool.
S UMMARY OF QUANTITATIVE RESEARCH RESULT
Total surveyed questionnaire is 150, was sent by mail and directly to interview clients The number of questionnaire collected is 142 filled questionnaires After eliminating 14 invalid filled questionnaires due to a lot of unanswered question, thus, the total number of valid votes is 128 valid questionnaires
Most of surveyed customers are FDI companies thataccount for 30.47%; this is accordance with business particulars of UIC as company focus on serve Japanese, Korean and FDI companies The next big portion of respondent came from Joint Stock Company and limited company; these categories have relatively 22.66% and 23.44% Customer of private company and representative office are limited:
Chart 4.5: Business type of surveyed customer
Human scale of insurance customer is divided in 5 categories Most of surveyed companies have 50-100 persons – 33.59%, small company with 20-
50 person account for 26.56% There are only 7 companies, which have more than 500 persons
Chart 4.6: Human scale of surveyed customer
58.13% of surveyed customers are using property insurance, 38.28% of them bought personal insurance and 34.38% bought car insurance
4.2.2 Result of measurement scale testing 4.2.2.1 Cronbach’s alpha
Service quality scale was measured by 19 observed variables The result of Cronbach’s alpha reliability coefficient shows α = 0.983, all of 19 variables have high correlation coefficients on the total – all are above 0.7 Therefore, there are no variables need to be eliminated and 19 variables have good correlation in scale
The result of EFA factor analysis is presented at appendix 7 Accordingly,
19 variables has weighted factor- loading upper than 0.4 (the lowest factor loading is 0.792), thence 19 variables is accepted to use for EFA factor analysis 19 variables are grouped in 5 factors (defined as model of 5 dimensions), and total variance is extracted as 86.48% It means that there is 86.48% possibility of using these 5 factors to explain 19 variables
The result of multi linear regression is presented at appendix 8 The multi linear regression function performs relations of 5 service quality dimension and customer satisfaction is as below:
Y = a + b1 X1 + b2 X2 + b3 X3 + b4 X4 + b5 X5 Y: Dependant variable presenting prediction of customer satisfaction a, b1,b2,b3,b4,b5: regression coefficients X1, X2, X3, X4, X5: independent variables with respective order:
RELIABILITY, RESPONSIVENESS, SERVICE CAPACITY, CUSTOMER CARE, CONVENIENT INSURANCE ACCESS
After running multiple linear regressions, method based on a (Enter) results: R 2 = 0.74 and R 2 adjusted = 0.732, showed that the correlation variable strength between customer satisfaction with the service quality variables
Tested F Sig F < 0.05 shows that using of linear regression to find the relationship between these factors is appropriate
Thus, the regression equation is defined as follows:
Customer satisfaction = 0.176 (RELIABILITY) + 0.091 (RESPONSIVENESS) + 0.297 (SERVICE CAPACITY) + 0.252 (CUSTOMER CARE) + 0.382 (CONVENIENT SERVICE ACCESS)
Comparing beta coefficients in the regression equation shows that the influence of independent variables on the satisfaction level of customers are sorted in ascending as follows: Responsiveness (0.091), Reliability (0.176), Customer Care (0.252), Convenient service access (0.382)
A NALYSIS OF ACTUAL SERVICE QUALITY OF UIC
In this part, I will present the analysis regarding service quality of UIC based on result of the research implemented The analysis is showed according to each dimensions of SERVQUAL model of insurance service quality Statistical indicators mainly used for analysis are frequency statistics, mean and standard deviation
Surveyed customers positively evaluated the reliability of UIC insurance business 58.85% respondents see that the insurance service of UIC is reliable while only 13.54% of them have opposite opinions
Chart 4.8: Evaluation ratio of reliability of insurance service
Ethics of staff / insurance agent 0.78% 14.84% 32.81% 36.72% 14.84% 3.5 0.947 Brand reputation of the insurance company
Table 4.2: Summary customer evaluation of Reliability of UIC
Regarding first factor, respondents rated the “ability to make commitments” at highest (mean is 3.77), there are 67.97% of agreed opinion for this factor This matches with insurance business philosophy of company from the beginning of operation As traditional Japanese company, UIC always put the implementation of the commitments for customer as the priority in service; this philosophy is communicated to all functional parts of the company, especially sale/consultant and claim department that work closely and directly with customer In many cases of indemnity, claim staff of UIC always settle claim fairly to help customer to maintain their production and business activities
Considering the factor of ethic of staff/insurance agent, the evaluation is rather good in comparison with other factors of group Noteworthy, there are only 15.63% of respondents found that there are ethical problems of staff/ agent of UIC In fact, staffs of UIC are mostly people who have long years experience and well-trained, especially moral insurance, thus negative evaluation mainly came from agents In long time, UIC has loosed controlling agent network; the selection and screening agent has not be done properly since company doesn’t have a independence department to look over agent business Currently, building and controlling agent network is implemented through cooperation among admin, sale and underwriting department; thence there some reported situation that agents tried to propose customer to cheat company in order to received invalid claim
Brand reputation is quite well evaluated by surveyed customers with 57.03% agree, 29.69% neutral opinion and only 13.28% disagree, mean score is 3.56 In insurance business – risk business, brand prestige is very important indicator for customer to select an insurance company In Japanese, Korean business community, UIC has a good and familiar reputation with some other brand names like MSIG, BVTM and SVI Good evaluation of this factor depends on that the brand of UIC appeared in early step of non-life insurance market along with investment wave of Japanese and Korean companies in Vietnam In more than 15 years, most of UIC customers have become loyalty customers However, with or the market segment such as Vietnamese companies, UIC is still not as popular as other domestic insurers; it’s partly due to strategy of UIC to not strongly expand Vietnamese companies market ( considerable higher risk than UIC’ traditional market)
Basically this dimension refers to the willingness to serve and help customers in providing them good, quality and fast service According to respondents, this dimension is considered the weakest dimension in overall service quality of UIC There are only 35.94% of respondents gave positive evaluation while more than 1/4 respondents (25.78%) think that UIC really need many improvements
Chart 4.9: Evaluation ratio of responsiveness of UIC
Diversity of insurance products 1.56% 20.31% 37.50% 34.38% 6.25% 3.23 0.900 Content of insurance terms
Information and advises about insurance products 9.38% 17.97% 32.81% 30.47% 9.38% 3.13
Table 4.3: Summary customer evaluation of responsiveness of UIC
The detail statistical data of factors is shown in above frequency table In general, all of factors in this dimension have very high ratio of negative opinions
Concerning “diversity of insurance product”, 40.63% of surveyed customers satisfy with current insurance products, 37.50% quite agree and
21.88% of respondents think that UIC should provide insurance products to meet increasingly diverse demand For the early development stage of Vietnamese non-life insurance market, the need of insured customers is basis products; however, along with the development of market, the insurance need became more sophisticated and required insurance company to provide new products Since its establishment UIC mainly focus on providing traditional insurance products like property insurance, personal insurance, cargo insurance, car/motor insurance…; customer service of company was valued more important than launching new products For 3 recent years, company has developed 5 new products but company still met some difficulty to launch those new products, some reasons are: UIC didn’t have sufficient market information or market research before developing product, new products model are copy from overseas (more developed) market lacked tailor-made to suit with Vietnamese market particulars
The next factor is “content of insurance terms” which have very high percentage of negative opinion from customer surveyed – 27.34% disagreed
Insurance term is forming and essential part of an insurance contract, which define the insurance coverage and condition of receiving claim indemnity of customer Despite of insurance term’s importance, customer rarely check full content of insurance term when signing contract just because the content was presented too complicated to understand All insurance terms are required to have both Vietnamese and English version, as insurance term is original from foreign insurance company Still UIC are using some insurance terms that are not yet translated in Vietnamese For some complicated technical product if insurance term is not interpreted clearly and understandable, customer cannot catch meanings of terms which may affect claim indemnity and insurance rights of customer
Form of the contract is higher evaluated compared with 2 above factors
There are 41.41% respondent agreed that form of insurance contract of UIC is nice and well designed, 24.22% of them have do not satisfy with current insurance contract form of company An insurance contract always expressed carefulness, thoughtfulness and respect of insurance company to their valued customers Actually, UIC periodically review contract form based on contributed feedback of customer and update new insurance regulation The contract form is designed by policy processing, however this department do not directly provide service to customer therefore feedbacks, complaints of customer concerning contract form may take a lot of time to become changes in contract form
Providing insurance information and advice to customers is important factor, sometimes can be considered as selling point The survey showed that customers do not agree that UIC’s employees / agents clearly explain the insurance terms Disagree percentage is quite high 27.34% while 39.84% of respondents agree, the rest of respondents have neutral opinion This survey result clearly shows that: though insurance knowledge of the customer is limited, insurance terms of many products of UIC are complex, but customers hardly received sufficient explanation and advises from their insurance providers Moreover, although prescribed by the Law on Insurance Business that customers must be fully informed about the insurance content before approving insurance, but employees / agents of company normally pass to customer content summary of insurance term and contract but rarely they spend more time on make insurance content clearer to customer This is especially popular for small customers and whom participating in the compulsory insurance In addition, insurance staffs / agents only care about immediate benefit, the criteria for the number of customers and premium revenue generated, do not focus properly to serve client, to create the trust and long term loyalty Consequently, the above problem caused many questions, complaints or suspicions of transparency over business activities of UIC
The last factor of this dimension is promotion There are only 23.44% of surveyed customer highly evaluate promotional activities of UIC, while more than that number- 28.13% of surveyed customer see that promotional activities is very weak Promotion is surely one of weakness marketing activities of UIC While domestic company like Bao Viet, Bao Minh, PVI… or foreigner invested company like BVTM, MSIG or SVI frequently have programs of premium reduction There are some reasons for this situation:
- Do not make good customer care, lack of information or do not timely capture information, thence UIC is short of incentive policy for customer in their special occasions like establishment ceremony, birthday etc
- Tight financial management mechanism of Japanese managers causes inflexibility of customer supporting policy
- UIC do not have creative and impressive promotion program to make differentiation with other insurance providers
This dimension represents the company's ability to serve customers Higher service capacity can be more likely to improve the company's service quality
Service capacity of an insurance company can be expressed in qualification of staff, number of staff, experience of staff and behavior of staff
Regarding service capacity, UIC has been generally well assessed by customer with 44.535% of respondents agree that service capacity of UIC is adequate; 33.01% have neutral answers and 22.46% underestimate service capacity of UIC
Chart 4.10: Evaluation ratio of responsiveness of UIC
Number of staff and agent network 6.25% 27.34% 36.72% 27.34% 2.34% 2.92 0.944 Working experience 3.91% 21.09% 30.47% 35.94% 8.59% 3.24 1.010 Behavior of staff 0.78% 14.84% 30.47% 40.63% 13.28% 3.51 0.931
Table 4.4: Summary customer evaluation of service capacity of UIC
Concerning the first factor, 50% of asked customer highly assessed qualification of UIC staff and only 15.63% of them still feel unsatisfied with qualification of staff Insurance is a very special type of service that humans do all of its processes, high qualified staff can help insurance company to generate bigger premium volume, better serve customer, save more operational cost… 100% of UIC’s staff graduated from prestige universities in Viet Nam, some of them got foreigner diploma Every year, UIC co operate with Sompo Japan Insurance to set up oversea training course for UIC staff, the training program is designed to suit with market demand UIC also sent staff to join many educational programs organized by domestic organization like Ministry of Finance, Institute of insurance research and training… UIC staffs are always been encouraged to learn from colleagues of UIC and others in market In addition, UIC has build internal database contain many insurance material for studying of all staff Regarding agents, UIC periodically organize short training course for agent as agent still lack a lot of insurance knowledge
Number of staff and agent network is the only factor that receives most negative evaluation from surveyed customer – 33.59%, there are only 26.69% positive evaluation and 36.72% of neutral opinion, mean of this factor is only 2.92 In the process of customer service of insurance company, the requirements, paperwork from customer arise every day, so if company’ human source scale is too small; it will lead to overload of staff and reduce the service quality UIC has received many complaints from customers and partners about some simple procedures that has been postponed or delayed
Of course, this is not the cause of staff qualification but due to shortage of human However, through analyzing customer complaints, the delay of service does not take place regular but in specific period, for example: the end of the year or the beginning of the year, which are the time of renewal of many insurance contracts In other period of year, the workload is not exceeded service capacity of current staffs Therefore, the enlarging human scale needs to be considered with effectiveness
SOLUTIONS AND RECOMMENDATIONS TO IMPROVE
O BJECTIVE AND DIRECTIONS OF DEVELOPMENT OF UIC
Oriented development strategy of the UIC is focusing on sustainable development, expand market share along with effective business development:
Firstly, Enforcing UIC brand to make UIC brand associated with high quality insurance services in Vietnam market
Promoting the development of potential traditional customers:
Japanese, Korean While expanding business to Vietnamese customer by indirect channel to achieve a minimum of 5% of the domestic insurance market and maintain average annual growth rate of 20% over the next five years
Focusing on developing highly specialized products, to create a competitive advantage for new products
Promoting the application of information technology in internal processes and in the delivery of products and customer service
Finally, building corporate culture of UIC characterizing such as internal solidarity, a high professional level, formal and modern working style, attentive and dedicative customer service in accordance with the uniform regulations.
S OLUTIONS TO IMPROVE SERVICE QUALITY OF UIC
This is a high level important dimension contributing to customer satisfaction This also the factor that UIC’ customers have given not good reviews
UIC must review and systematize all applied process and procedures to ensure scientific and insurance principal in each phase This systematization must aim to reduce transaction time for customer, create favorable condition for customer to receive compensation quickly and compatible with commitment in insurance contract
Currently, completion of claim documents is still mainly paperwork
Therefore, claim department should cooperate with policy processing department to make automatic template claim form The automatic form will help claim clerk contact with clients more quickly and make it easier to explain about claim On other hands, UIC should have specific and mandatory guidelines for sales / marketing staff in explaining to customers about the process in advance of signing insurance contract This will help customers to avoid difficulties in following claim procedures in case of claim arising
5.2.1.2 Solve the problems of office/service network through diversifying distribution channel
With the lack of a network of offices, UIC has difficulties in reaching customers, but expanding network of offices in different areas is not really effective because:
The Vietnamese insurance companies already establish their network at those areas
Investment would be not effective while the targeted customers of UIC are located in those areas
Therefore, expanding distribution channel out of traditional distribution channel is an appropriate solution Distribution channel should be focus on developing are:
Through companies in same group, cross-selling: NKSJ Group and
LIG (2 founding shareholder of UIC) have system of subsidiaries, associated companies operating in many different sectors in Vietnam including banking – Mizuho corporate bank UIC should establish a scheme of operating to bind and stimulate the close coordination among the members of the group in order to create favorable conditions for the cross-selling products between the member units This solution can saves a lot of costs, increase business efficiency, promote synergy in the whole system UIC can invite companies to join some insurance training and sign agent contract with UIC
Through bancassurance, and intermediary financial institution:
Bancassurance is the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance products This distribution has many advantages such as abundant potential customers, saving costs, making convenience and saving time for customers Practice of developed insurance market proved that premium revenue from this channel account for a large proportion of the total revenue of the insurance companies Thus, UIC need to speed up the development of distribution channels through the signing of the cooperation contract; investing capital to turn these organizations become active partners in the supply insurance products to customer The normal scheme likes that:
Figure 5.1: Cooperation model with Banks
Through online channel: Following rapidly developed trend of e- commerce, applying e-commerce is essential for insurance company to approach and sell insurance products to customer UIC website was outdated and need to rebuild completely UIC can learn and follow some companies that have been success with online distributing such as BIDV insurance, Liberty insurance… Moreover, UIC should set up online distribution department, which will be responsible to work with outsourcing company Insurance products are suitable for this distribution channel including personal insurance, car insuranceand travel insurance
5.2.1.3 Improving the flexibility of insurance premium policy
Customer are fairly enjoying the flexible insurance premium of UIC, however UIC should apply measures to create a more classified insurance premium for different categories of customers:
Abundant customer source, advising and selling insurance product for UIC
Invested, deposit idle capital, commission as agent
UIC should statistic and update periodically loss history of customer to adopt differentiated premium policy for customers: increasing premium for high risk customer or customers who have poor risk prevention means, decreasing premium for customers who carefully implement risk prevention and low loss history for years
5.2.2 Improving responsiveness 5.2.2.1 Improving diversity of products
Facing increasingly severe competition in market with more insurers to participate, market sharing and losing accounts are inevitable In such conditions, diversifying products is very important to maintain market share, make good the losing services with new services, response to customer demands better On the one hand, UIC need reinforce traditional products, which are advantage products: property insurance, personal insurance, car insurance, cargo insurance… On the other hand, UIC can develop new products: Professional indemnity insurance, Trade credit insurance, Product recall insurance and health care insurance These new product are high-class products, but the demands for them will increase significantly Here are some proposals to develop new products:
The deployment of new products should be based on carefully surveying market to understand customer demands and to determine suitable product promotion To archive this, products research and development team should be established under underwriting department; this team will develop and amend products to meet customer demand but still comply underwriting guideline of UIC
Advantage of UIC in developing of new products is the technical and experienced support from parent company - Sompo Japan Insurance Inc
Sompo Japan has successfully implemented these insurance products in other mature market, and some similar market of Vietnam as Thailand, Malaysia and Indonesia Thus, different from Vietnamese companies, UIC would have no difficult to find reinsurance support and to apply products model more quickly as well UIC should take advantage of this to offer new insurance products for global accounts of Sompo Japan operating in Vietnam In additions, UIC may appoint staff of products development section to participate in the training programs of Sompo Japan to develop new products
UIC can focus on developing new products through promoting program of State, such as trade credit insurance This is a completely new product with only 5 insurance companies providing Following pilot promoting program, State subsidizes 20% of premium for insurance buyer Developing new products through such pilot promoting program will help UIC to approach customers easily at first stage and to save marketing cost For financial- insurance product like trade credit, UIC can negotiate with bank partners to use insurance policy as collateral for insurance buyer This is win-win business for 3 parties: insurance buyer could both reduce credit risk and have more bank loans, banks could both reduce risk and increase profit by more lending, and UIC could increase premium revenue
Health care insurance is very popular insurance products in the world In the current circumstance, more and more people of Japan and South Korea come to Vietnam for long-term working, this leads to very high demand for health care insurance for Japan, South Korea people With the advantage of large network of Japan and Korean customers, UIC should rapidly deploy health care insurance to create business advantage in early stage of market
Foreigners often prioritize to use service of foreign hospitals as SOS hospital
Viet-Nhat hospital…, so UIC need access and select prestigious hospitals in order to make competitive advantage for product
5.2.2.2 Improving the clarity of insurance term and contract
The ambiguity in insurance term and contract would lead to customer dissatisfaction Therefore, the UIC should quickly improve this problem:
Currently a number of insurance terms and contracts form of UIC are only available in English UIC should review all insurance term/ contract forms and update Vietnamese version for missing ones
Sale staffs and agents should regularly receive feedback from customers about unclear insurance term or contract form, then collect and send customer’s feedback to underwriting department to make reasonable, punctual adjustment in contract terms and insurance
5.2.2.3 Enhancing consultancy and communication to customer
Sale staffs and agents should regularly receive feedback from customers about unclear insurance term or contract form, then collect and send customer’s feedback to underwriting department to make reasonable, punctual adjustment in insurance term and contract
As analyzed in the previous policy, UIC has poorly done the responsibility to provide necessary insurance information and advice to customer This will cause dangerous consequences especially in case of insured liability arisen
With the goal of providing the highest quality service, providing sufficient insurance information and advice is indispensable for UIC service Solutions that UIC should take to improve the situation:
R ECOMMENDATION
5.3.1 Recommendation for Insurance Supervisory Authority – Ministry of Finance
Currently, the unfair competition in insurance market is widespread and tends to increase more and more, so the authorized organization should continue to study and complete the Insurance Business Law; review and complete normative law documents related to business insurance In parallel, they must strengthen inspection, supervision and apply strict discipline regarding violations, in order to create a good and fair competition environment for insurance companies
Insurance business law and regulations also need to be more strictly to illegal insurance profit by rising penalties for both insurance buyers and sellers in case of illegal insurance profit
It’s quite common situation that state corporations established insurance companies of their sector Ministry of Finance and Insurance Supervisory Authority should have mechanisms to limit the exclusive coverage in some areas…
5.3.2 Recommendation for Vietnam Insurance Association (VIA)
Vietnam Insurance Association is an organization established to contribute in propagation and dissemination of knowledge of insurance to public; to perform an intermediary role in monitoring and addressing relevant issues arising among insurance companies However, the role of inspection and supervision of VIA is still weak In the near future, in order to fulfill their role better, VIA should:
Enhancing the inspection activities, monitoring to detect member- insurance company violating law and proposing measures and strict discipline to make fair competition in market
Forming collective information system of loss for all insurance companies This co-operation will prevent the illegal insurance profit and unfair premium based competition of insurance companies
VIA also need to promote cooperation among insurance companies to deliver better service to customers, thence making a better image of insurance industry
In this chapter, based on analysis result of previous chapter I proposed solutions to improve insurance service quality of UIC through improving each weak factor of insurance service quality model The solutions include:
- Improving favorable insurance service access: by simplifying procedures/regulation, diversifying distribution channel of insurance product, improving flexible premium policy
- Improving responsiveness: by diversifying insurance product, enhancing consultancy and communication with customer, improving clarity of insurance terms and contract, improving promotion
- Improving service capacity: by expanding agent network, establishing standard behavior and ethics of UIC staff/agent
- Improving customer care: by improving after-sale service, upgrading claim handling, improving risk prevention support
Besides, I propose some recommendation for insurance authorities and association to support insurance companies in make a fairly competitive insurance market
Based on theoretical basis of service quality with the core theory is SERVQUAL model by Parasuraman and Co authors, I utilize the methodology including quantitative and qualitative research to form model for measurement of insurance service quality This is basement for actual analysis and solutions proposed to improve UIC service quality
The result of quantitative research with group and dual discussion has defined 19 factors affecting insurance service quality Measurement scale of insurance service quality was formed by combining those 19 factors with 5 dimensions model – SERQUAL, which includes: reliability, responsiveness, service capacity, customer care, convenient service access
The qualitative research process is conducted through surveying customer assessment by questionnaire The collected data is processed and used for testing the measurement scaled and analyzing actual service quality of UIC
Testing of scale showed that all factors of insurance service quality model have good internal correlation and grouping of factors is reliable for measuring service quality
Analyzing actual service quality of UIC shows that customers assess insurance service quality of UIC relatively low Therein, there are several weaknesses of UIC insurance service quality: limitation of insurance class; insurance term and contract are complex; customers do not receive adequate information and advice; promotion is not satisfied customers; number of staff/agent is still limited; customer care service is weak and customer found difficult to access UIC insurance service
Based on defining weaknesses of insurance service quality of UIC, I propose solutions and recommendation to improve service quality for UIC
The solution is proposed based on actual situation of market and UIC capacity
During the implementation process of thesis, I have been received many helps and advices from Dr Nguyen Viet Dung as well as my colleagues
However, due to time and resource limitations, the thesis cannot avoid some shortcomings I am expecting to receive feedbacks from the teachers and friends to complete this and thereafter research
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“SERVQUAL: A multiple item scale for measuring customer perceptions of service quality”, Journal of Retailing, p12- 40
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11 United Insurance Company ( 2008-2012) “ Annual report”
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13 Hiệp hội bảo hiểm, Báo cáo nhanh 2012 Thị trường bảo hiểm Việt Nam
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Appendix 1: GROSS PREMIUM OF ALL NON-LIFE INSURANCE
Source: Annual report of Vietnam insurance market 2008-20012
Appendix 2: GROSS PREMIUM OF ALL NON-LIFE INSURANCE COMPANIES
Source: Annual report of Vietnam insurance market 2008-20012
Dear Sir/Madam Thanks your attending in this discussion Please kindly provide your opinion about below issues:
1 Based on customer perspective, which are important factors influencing your decision of insurance company selecting
2 With above stated factors, according to your assessment, how should insurance company perform to make customer satisfaction?
Thank you very much for your cooperation
Kính chào Anh/Chị Cảm ơn anh chị đã tham gia buổi thảo luận này
Xin anh chị vui lòng cho biết ý kiến của mình về các vấn đề sau:
1 Đứng trên quan điêm khách hàng, yêu tố nào theo anh chị là ảnh hưởng đên quyết định chọn doanh nghiệp bảo hiểm của khách hàng
2 Với những yếu tố đã nêu, theo đánh giá của anh chị, công ty bảo hiểm cần thực hiện như thế nào để tạo ra sự hài lòng cho khách hàng?
Rất cảm ơn sự hợp tac của Anh/Chị
Survey of service quality United Insurance Company (UIC)
Thank you very much for spending time to conduct our survey Information of this survey will help us to serve you better
From question 1 to 5, please use for your choice
1 What’s business type of your company
2 How big is the size of your company labor?
3 From which channel you can get UIC information ( you can chose more than one)
4 When considering to buy insurance, which factors do you care about ( you can chose more than one)
Quality of company staffs /agents 4
5 Which insurance class do you use in UIC
From question 6 to 25, please chose for number from 1 to 5 ( for each question) that is suitable with your assessment
6 UIC always comply all commitment with client 1 2 3 4 5
7 Staff/agents of UIC have very good professional ethic 1 2 3 4 5
8 UIC brand create an assurance for client 1 2 3 4 5
9 Insurance classes provided by UIC meet insurance needs of client 1 2 3 4 5
10 All insurance terms are interpreted clearly and understandable 1 2 3 4 5
11 The insurance contract form of UIC is standard and nice 1 2 3 4 5
12 Employee / agent of UIC always clearly explain contents of the insurance terms to client 1 2 3 4 5
13 The promotion programs of UIC are attractive to client 1 2 3 4 5
14 Employees of UIC are highly qualified 1 2 3 4 5
15 Number of employees of UIC is enough for servicing client 1 2 3 4 5
16 Employees of UIC have good working experience 1 2 3 4 5
17 Employees of UIC are professional and thoughtful 1 2 3 4 5
18 Employees of UIC regularly contact client to resolve inquiries, complaints 1 2 3 4 5
19 Business matters are rapidly settle in UIC 1 2 3 4 5
20 UIC has many support for client in risk preventing 1 2 3 4 5
21 The premium of the UIC can be changed flexibly in according to competitiveness 1 2 3 4 5
22 Procedures and regulations of UIC is simple 1 2 3 4 5
23 You can easily contact UIC employees/ agents 1 2 3 4 5
24 Offices of UIC make good impression to client 1 2 3 4 5
25 You satisfy with UIC service 1 2 3 4 5
We sincerely thank your co-operation We hope to continuously deliver best service to you!
Bản câu hỏi đánh giá chất lượng dịch vụ Công ty bảo hiểm Liên Hiệp (UIC)
Rất cảm ơn Ông (bà) đã dành thời gian để trả lời bài điều tra này Những thông tin này sẽ giúp chung tôi phục vụ quý công ty tốt hơn trong thời gian tới
Từ câu 1 đến câu 5, Ông(Bà) đánh dấu cho lựa chọn của mình
1 Loại hình doanh nghiệp của công ty bạn
2 Quy mô lao động/nhân viên của công ty bạn?
3 Ông (bà) biết đến UIC qua các nguồn thông tin nào ( có thể chọn nhiều câu trả lời)
1 2 3 4 nhân viên/đại lý UIC
Truyền thông/quảng cáo chương trình khuyến mãi
4 Khi cân nhắc mua bảo hiểm , yếu tô nào mà Ông (bà) quan tâm nhất
Giám định và giải quyết bội thường 3
Chất lượng nhân viên/đại lý 4
Mạng lưới văn phòng và đại lý 5
Các chính sách khuyến mãi 6
Truyền thông và quảng cáo 7
5 Loại hình bảo hiểm nào mà công ty của Ông (bà) đang sử dụng tại UIC
Bảo hiểm tài sản Bảo hiểm xe
Từ câu hỏi 6 đến 25, Ông(bà) hãy chọn cho 1 số từ 1 đến 5 ( mỗi câu hỏi) mà Ông(bà) cho là phù hợp nhất với đánh giá
Rất không đồng ý Rất đồng ý
Số Nội dung Thang đo
6 UIC luôn thực hiện đúng những gì đã cam kết với khách hàng 1 2 3 4 5
7 Đội ngũ nhân viên/ đại lý của UIC có đạo đức nghề nghiệp trong sáng 1 2 3 4 5
8 Thương hiệu UIC tạo ra sự an tâm cho khách hàng khi tham gia bảo hiểm 1 2 3 4 5
9 Các loại hình bảo hiểm đang triển khai tại UIC là đáp ứng đầy đủ các nhu cầu về bảo hiểm của khách hàng 1 2 3 4 5
10 Nội dung các điều khoản bảo hiểm của UIC được diễn giải dễ hiểu 1 2 3 4 5
11 Hình thức hợp đồng của UIC chuẩn mực và đẹp 1 2 3 4 5
12 Nhân viên/Đại lý của UIC luôn giải thích rõ nội dung các điều khoản bảo hiểm khi khách hàng tham gia bảo hiểm 1 2 3 4 5
13 Các chính sách khuyến mãi của UIC là hấp dẫn đối với khách hàng 1 2 3 4 5
14 Nhân viên của UIC có trình độ chuyên môn cao 1 2 3 4 5
15 Số lượng nhân viên hiện nay của UIC là đủ để giải quyết nhanh các nhu cầu của khách hàng 1 2 3 4 5
16 Nhân viên của UIC là những người có kinh nghiệm làm việc 1 2 3 4 5
17 Nhân viên của UIC là những người có tác phong chuyên nghiệp, cẩn thận 1 2 3 4 5
18 Nhân viên của UIC thường xuyên liên hệ với khách hàng để giải quyết các yêu cầu, khiếu nại 1 2 3 4 5
19 Thời gian giải quyết công việc tại UIC là nhanh chóng 1 2 3 4 5
20 UIC có nhiều hoạt động hỗ trợ khách hàng để phòng tránh các rủi ro 1 2 3 4 5
21 Phí bảo hiểm của UIC có sự thay đổi linh hoạt theo tình hình cạnh tranh 1 2 3 4 5
22 Các thủ tục quy định giải quyết công việc tại UIC là đơn giản 1 2 3 4 5
23 Khách hàng dễ dàng liên hệ với nhân viên/ đại lý của UIC 1 2 3 4 5
24 Hình thức của các Văn phòng phục vụ khách hàng của UIC gây ấn tượng tốt với khách hàng 1 2 3 4 5
25 Ông (bà) hài lòng đối với chất lượng dịch vụ bảo hiểm của UIC 1 2 3 4 5
Chúng tôi chân thành cảm ơn sự hợp tác của Ông(bà) Chúng tôi hi vọng sẽ tiếp tục được phục vụ cho Ông(bà) tốt nhất
Variable label Variable name Variable content
REL2 ST ETHIC Ethics of staff / insurance agent
REL3 BRAND Brand reputation of the insurance company
RES4 PD DIVERSITY Diversity of insurance products
RES5 IC TERM Content of insurance terms
RES6 IC FORM Form of insurance contract
RES7 ST INFO Information and advises about insurance products
SC9 ST QUALIFICATION Qualified staff
SC10 ST NUM Number of staff and agent network
SC12 ST BEHAVIOR Behavior of staff
CC13 ST SPIRIT Servicing spirit of staff CC14 CL TIME Time of handling request/claim of client CC15 CS RISK PREVENT Risk prevention support for customer CSA16 PR FLEXIBILITY Flexibility of insurance premium CSA17 CS REGULATION Procedures regulated
CSA18 OF NUM Offices and service network
CSA19 OF FACILITY Office facility
SFY20 SQ SATISFACTION Satisfaction degree of service quality TYP21 BUSINESS TYPE Business type of customer
SIZ22 HUMAN SIZE Size of human resources
CH23.1 CH FROM STAFF From staff/agent CH23.2 CH FROM PR/AD From public communication/ advertising
CH23.4 CH FROM SPONSOR From sponsorship
Chose through insurance classes BUY24.2 BUY PREM Chose through insurance premium BUY24.3 BUY CLAIM Chose through claim survey and indemnity
Chose through quality of staff/agent
BUY24.5 BUY OFFICE Chose through offices/agent network BUY24.6 BUY PROMOTION Chose through promotion program BUY24.7 BUY ADVERTISING Chose through communication and advertising CLS25.1 PRODUCT PERSON Personal Insurance
CLS25.3 PRODUCT CAR Car Insurance
Factor 1 RELIABILITY Factor formed from variables CL COMMIT, ST
Factor 2 REPONSIVENESS Factor formed from variables PD DIVERSITY, IC
TERM, IC FORM, ST INFO, PROMOTION
Factor 3 CAPACITY Factor formed from variables ST QUALIFICATION,
ST NUM, ST WORKING EXPERIENCE, ST BEHAVIOR
Factor 4 CUSTOMER CARE Factor formed from variables ST SPIRIT, CL TIME,
Factor formed from variables PR FLEXIBILITY, CS REGULATION, OF NUM, OF FACILITY
Appendix 6: CRONBACH’S ALPHA TESTING RESULT
Scale Mean if Item Deleted
Scale Variance if Item Deleted
Cronbach's Alpha if Item Deleted
Appendix 7: EFA FACTORS ANALYSIS RESULT
Kaiser-Meyer-Olkin Measure of Sampling Adequacy .977 Bartlett's Test of Sphericity Approx Chi-
Ethics of staff / insurance agent 1.000 851
Brand reputation of the insurance company 1.000 960
Information and advises about insurance products 1.000 845
Number of staff and agent network 1.000 874
Time of handling request/claim of client 1.000 898
Risk prevention support for customer 1.000 852
Extraction Method: Principal Component Analysis
Ethics of staff / insurance agent 866 052 -.044 -.304 061
Brand reputation of the insurance company 757 511 300 062 178
Information and advises about insurance products 914 007 006 -.005 092
Number of staff and agent network .847 -.273 -.073 016 276
Time of handling request/claim of client 852 -.105 137 -.167 -.339 Risk prevention support for customer 918 -.051 005 -.079 009 Flexibility of insurance premium 909 -.053 144 -.163 -.072
Extraction Method: Principal Component Analysis a 5 components extracted
Ethics of staff / insurance agent 286 338 646 382 303 Brand reputation of the insurance company 294 219 267 192 847
Information and advises about insurance products 434 489 431 323 356
Number of staff and agent network .352 712 436 181 141
Time of handling request/claim of client 346 304 335 733 193
Risk prevention support for customer 410 468 457 418 286
Extraction Method: Principal Component Analysis
Rotation Method: Varimax with Kaiser Normalization a Rotation converged in 10 iterations
Extraction Method: Principal Component Analysis
Rotation Method: Varimax with Kaiser Normalization
Implementation commitments -.030 -.015 125 035 047 Ethics of staff / insurance agent -.385 -.150 691 066 -.012 Brand reputation of the insurance company -.266 -.071 -.163 -.270 1.153
Diversity of insurance products 453 -.154 -.278 055 007 Content of insurance terms 707 -.296 -.136 -.215 -.018 Form of insurance contract -.104 -.378 726 -.078 023 Information and advises about insurance products -.057 152 100 -.152 105
Number of staff and agent network -.162 676 223 -.520 -.192 Working experience -.172 142 -.068 380 -.148
Servicing spirit of staff -.061 357 100 -.229 -.079 Time of handling request/claim of client -.139 -.364 -.080 1.001 -.230 Risk prevention support for customer -.111 053 165 089 -.048 Flexibility of insurance premium -.345 -.037 117 451 038
Procedures regulated 504 -.091 -.580 253 -.009 Offices and service network 315 -.155 -.111 179 -.142
Extraction Method: Principal Component Analysis
Rotation Method: Varimax with Kaiser Normalization
Ethics of staff / insurance agent -.385 -.150 691 066 -.012 Brand reputation of the insurance company -.266 -.071 -.163 -.270 1.153 Diversity of insurance products 453 -.154 -.278 055 007 Content of insurance terms 707 -.296 -.136 -.215 -.018 Form of insurance contract -.104 -.378 726 -.078 023 Information and advises about insurance products -.057 152 100 -.152 105
Number of staff and agent network -.162 676 223 -.520 -.192
Servicing spirit of staff -.061 357 100 -.229 -.079 Time of handling request/claim of client -.139 -.364 -.080 1.001 -.230 Risk prevention support for customer -.111 053 165 089 -.048 Flexibility of insurance premium -.345 -.037 117 451 038
Extraction Method: Principal Component Analysis
Rotation Method: Varimax with Kaiser Normalization
Appendix 8: MULTI LINEAR REGRESSION RESULT
Satisfaction degree of service quality
Satisfaction degree of service quality
Satisfaction degree of service quality
Satisfaction degree of service quality
** Correlation is significant at the 0.01 level
Error of the Estim ate
R Square Change F Change df1 df2
1 862 a 743 732 514 743 70.531 5 122 000 a Predictors: (Constant), CONVENIENT ACCESS, CUSTOMER CARE, CAPACITY,
Sum of Squares df Mean Square F Sig
Total 125.305 127 a Predictors: (Constant), CONVENIENT ACCESS, CUSTOMER CARE, CAPACITY, REPONSIVENESS, RELIABILITY b Dependent Variable: Satisfaction degree of service quality
7.266 002 a Dependent Variable: Satisfaction degree of service quality
