Determinants of Customer Satisfaction in the Life Insurance Industry in Kenya

Abstract

Customer service is an integral part of any life insurance company. It is necessary to identify the key success factors in the life insurance industry, in terms of customer satisfaction, so as to survive the intense competition and increase insurance penetration. The project is based on 67 life insurance customers from the 23 life insurance providers in Kenya. The study intends to promote a better theoretical understanding and recognition of the complexities to service quality and its measurement with respect to life insurance.

Customer satisfaction has been researched extensively and as put by many researchers satisfaction of the customer is indispensable for the retention and loyalty of customers and contented customers serve as excellent sales people. Customer satisfaction is one of the most important factors responsible for the sustained growth and profitability of organizations. Application of concept of customer satisfaction provides numerous benefits to the organizations vis customer retention, customer loyalty, repurchase intentions and business performance.

For this a descriptive study was undertaken to better understand the key dimensions of customer satisfaction. Further, the study investigates the causal relationship between these service quality dimensions and overall customer satisfaction. The study collected data from 67 policy holders of different insurance companies in Nairobi using a random sampling method. A structured questionnaire was used to collect data from the respondents.

It was found that most customers prefer customer care staff who are enthusiastic, listen carefully, responsive, courteous and proactive. This clearly reflects the priorities of the policyholders. Customers want the services provided to them to be efficient (prompt and hassle-free) as they perceive life insurance as a guard against the uncertainties of the future. Further they demand flexible solutions and convertibility options related to investment options and consequently they desire that the services should be personalized involving efficient handling of these changing preferences. Customer will not settle for anything mediocre in the context of functional services because it is the major contributor to their perception of quality and thereby satisfaction vis-à-vis insurance services. On the other hand, ‘satisfaction with the insurance company’ has much lower influence upon overall satisfaction. This might be attributed to the fact that in life insurance, there is not much contact between the insurance companies and the policyholders.

The study recommends that life insurance providers and managers should be aware that customer satisfaction is primarily based on service quality. They should consider the relative value (contribution) to customer satisfaction of each dimensions of the service quality and consequently allocate different levels of resources according to this hierarchy. They should have a clear concept of what constitutes customer satisfaction before they can attempt to measure it and its relationship with service quality dimensions. Thus quality improvements by management should not just focus on improving customer satisfaction but also target on improving the customers’ perception of service quality. In other words, the service providers should try to continuously improve both service quality and customer satisfaction.