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CHAPTER II
REVIEW OF LITERATURE
2.1 Introduction
2.2 Life Insurance
2.3 Customer Relationship Management
2.4 Customer Satisfaction
2.5 Customer Retention
2.6 Customer Loyalty
2.7 Service Quality
2.8 Research Gap
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2.1 INTRODUCTION
Many studies have been conducted from time to time to examine the various
aspects of insurance industry such as service quality, customer satisfaction, customer
retention, customer loyalty etc. No effective research can be carried out without critically
studying the literature that already exists in relation to it in the form of general literature
and specific studies. The review of literature can lead to some significant conclusions that
serve as a guideline for any study. It helps to eliminate the duplication of what has
already been done. It also gives a fair chance to identify the gaps that exists in the area of
research. A review of these studies is presented in this chapter in chronological order.
2.2 LIFE INSURANCE
R.L.Dhanda1 (2004) in his article titled, “Divisional Performance Evaluation of
LIC Business in Northern Zone” has found that the ratio between first insurance business
and new business was more than 60 per cent in the northern zone. They had reported that
a majority of respondents preferred the introduction of computers to increase the
efficiency level and improve the service quality. He had also suggested that performance
can also be improved by good training programmes. The responses showed an expected
rate of return on insurance products in the range between 0-10 per cent. The highest
percentage of policy holders from different segments preferred the money back policies
over others. A majority of the respondents had desired the amount of premium amount to
be reasonable while around 30 per cent of them rated the present premium to be high.
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R.Kumar and K.Vaidya2
(2004) in their article tiled, “Differentiation Strategies of
Insurance Companies” had studied that customer relationship management tools must be
used extensively and effectively to identify cross selling opportunities. They had also
foreseen the use of e-service, namely, customer service through Internet that could play a
major role in facilitating the process of servicing insurance products to their policy
holders.
H.S. Sandhu and N. Bala3 (2006) in their article “Marketing of Life Insurance
Services Revisited” have suggested that life insurance sector had grown with time. Its
importance had significantly increased in the post liberalization era. The study concluded
that owing to the changing and newly evolving scenarios in the life insurance industry,
the research needs to be expanded further by including various other aspects like the role
of information technology, bank assurance and customer relationship management.
B.S. Bodla and S.Verma4 (2007) in their article entitled, “Life Insurance Policies
in Rural Area: Understanding Buyer Behaviour” have showed that the maximum number
of policyholders belonged to the age group of 31- 40 years, and 70 per cent of them had a
monthly income of 8000 and only 12 per cent of the total respondents were females.
Most of the respondents were from private business and had an education only up to
school level. Agents were found to be the main source of information and motivation to
rural people. LIC had the maximum (93%) penetration in the rural market as compared to
other players with the most preferred policy being the money back policy followed by
endowment policies. The role of advertisement was found to be able to make an impact to
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motivate rural people to buy insurance policies. It was also observed that people had less
faith in private players.
R.Jampala and V. Rao5 (2007) in their article on “Distribution Channels of LIC”
have found that although a number of intermediaries or distribution channels like
corporate agents, brokers and referrals had emerged over time, LIC was not able to
capitalize on them and hence could not make good business from these channels. They
had bemoaned that during the year 2004-05, the new distribution channels contributed
just 1.12 per cent of total business of LIC. However, the effect of these emerging
distribution channels on the private players was significant as their business grew by
40.70 per cent during 2004-05. The study concluded that unless LIC uses these new
emerging distribution channels effectively and efficiently, it cannot survive in the highly
competitive insurance market. LIC needs to find new measures and apply them to
improve its business further.
M. Rajkumari6 (2007) in her article on “A Study on Customer’s Preference
towards Insurance Services and Bancassurance” has showed that among the different
types of policies available, the awareness of life insurance policies was the highest at 86
per cent, followed by pension policies at 56 per cent, money back policies at 52 per cent
and children policies at 45 per cent only. Apart from these, people also had awareness
about house plans, health insurance policies, travel insurance, motor insurance etc. The
analysis also showed that the percentage of people, who took a policy, was much low as
compared to the awareness levels. The prime reason for customers to buy an insurance
policy was found to be income tax deduction followed by returns, protection, savings and
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others. The study concluded by suggesting that more exposure had to be brought through
media and other sources to improve the awareness of bancassurance.
H. Delport et.al.7 (2011) in their article entitled, “Relationship Intention of South
African Banking and Life Insurance Customers” have found that the banking and life
insurance firms were now focusing on retaining and building long-term relationships with
their existing customer base by implementing a relationship marketing strategy.
However, they found that not all customers were willing to invest in building long-term
relationships. So, firms needed to identify and target those customers who had a high
relationship intention that is those who intend to support long-term relationships with the
firm they are currently associated with.
2.3 CUSTOMER RELATIONSHIP MANAGEMENT
F.Dretske8 (2000) in his study on “Knowledge and the Flow of Information” has
studied the role of technology in the implementation and its requirements and concluded
that business intelligence and analytical capabilities, unified channels of customer
interaction, support for web-based functionality, centralized repository for customer
information, integrated workflow, integrated with ERP application were the major
essentials needed for the implementation of the CRM programme that resulted into
increase in customer satisfaction, increased customer loyalty, decrease in customer
defection, ability to identify profitable customers, measuring customer profitability and
measuring customer lifetime value.
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Hemachandra Murlidhar Padukar9
(2000) in his book entitled, “Working
Knowledge” had seen that the CRM as a strategy used to learn more about customer
needs and behaviours in order to develop stronger relationships with them There were
several electronic components used to support CRM that had made the concept as
e-CRM. According to him the electronic components were very significant as it provided
better customer service, cross sell products more effectively, helped sales staff close deals
faster, simplify marketing and sales processes, discover new customer and increase
customer revenue.
Deepali Singh10
(2001) in his article titled “Information Technology enabled
Customer Relationship Management” had found that the development of information
technology and opening up of digital market enabled the marketers to provide customized
products/services and thereby develop value-based long lasting customer relationships.
The only strategy that was perceived to make sense in the emerging marketing
environment was that the marketers should learn and practice customer relationship
management.
Joe Peppard 11
(2001) in his article entitled, “Customer Relationship Management
(CRM) in Financial Services” has stated that many financial services organisations are
rushing to become more customer focused. A key component of many initiatives was the
implementation of customer relationship management (CRM) software. His study had
highlighted that most institutions take a rather narrow view of CRM and as such, benefits
were limited. While second generation CRM demerged to embrace the total organization,
success in general was still not widespread. He had presented a framework, which was
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based on incorporating e-business activities, channel management, relationship
management and back office/ front-office integration within a customer centric strategy.
Lynette, Ryals and Adrian Payne12
(2001) in their article titled, “Selectively
pursuing more of your customer’s business” have summarized that relationship marketing
is concerned with how organizations manage and improve their relationships with
customers for long-term profitability. Customer relationship management (CRM), which
is becoming a topic of increasing importance in marketing, is concerned with using
information technology (IT) in implementing relationship-marketing strategies. They
further reported the adoption and use of CRM in the financial services sector.
K.Ramachandran13
(2001) in his article entitled, “How customer relationship
management can be strengthened beyond the hype” had suggested that since customer
needs are dynamic, new dimensions have to be added to the set of customer relationship
management tools based on information technology.
T. Shainesh and R.Mohan14
(2001) in their book entitled, “Status of CRM in
India- A Survey of Service Firms” has discussed that Customer Relationship
Management: Emerging Concepts, Tools and Applications had revealed that aspects such
as business processes, information technology, employee empowerment, quality
assurance and customer knowledge strategies should be made more customer-centric.
M.P Gupta and Sonal Shukla15
(2002) in their article titled, “Learning from
Customer Relationship Management (CRM) Implementation in a Bank”, have stated that
the customer relationship management was gradually picking up and is definitely
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considered as a viable proposition by banks in improving services to their customers.
Since there is resistance to change, while implementing the customer relationship
management, high commitment is required in those who are implementing it.
S.T.Ramachandran16
(2002) in his article entitled, “Customer Relationship
Management – Emerging Strategies” has concluded that for laying the right foundation
for a better customer relationship management, the banks should be customer-centric and
give importance to the retention of existing customers than acquiring new ones for
promoting cross-selling and re-purchase of products.
M.L.Agarwal17
(2003) in his article entitled, “Customer Relationship Management
and Corporate Renaissance” has recommended a line of action for an effective CRM
implementation towards a quicker corporate renaissance. He also urged business schools
of South Asia to incorporate CRM in their teaching curricula so that the business and
academics can continue to stay relevant to each other.
J.Injazz Chen and Karen Popovich18
(2003) in their article entitled,
"Understanding Customer Relationship Management (CRM): People, Process and
Technology" have stated that customer relationship management (CRM) is a combination
of people, processes and technology that sought to understand a company's customers. It
is an integrated approach to managing relationships by focusing on customer retention
and relationship development. CRM has evolved from advances in information
technology and organizational changes in customer-centric processes. Companies that
successfully implement CRM would reap the rewards in customer loyalty and long run
profitability. However, successful implementation of CRM was elusive to many
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companies, mostly because they did not understand that CRM required company-wide,
cross functional, customer-focused business process re-engineering. Although a large
portion of CRM was technology, viewing CRM as a technology-only solution was likely
to fail. Managing a successful CRM implementation requires an integrated and balanced
approach to technology, process, and people.
Jain and Dhar19
(2003) in their article titled, “Measuring Customer Relationship
Management” have discussed that customer relationship management emerged as a core
business process for maintaining and enhancing the competitive edge in modern business
affairs. In the area of bank services, the issue of customer relationship management had
held much importance. Many a time, it is the CRM that became the deciding factor in the
selection of services. Customer loyalty is directly related to the CRM efforts made by the
service sector companies.
Peer Mohamed and Elgina Sweetline20
(2003) in their article titled, “Call Centres
and Strategic Tools for Customer Relationship Management” have attempted making a
cost-benefit analysis. The authors proved that web based call centres were much more
cost effective. It was further found that organizations were evolving strategies to attract
and retain customers, who desire to be listened to, recognized, cared for and responded to
by the organization. Call centres emerged as strategic tools in building such customer
relationship.
K.Tapan21
(2003) in his study on “Creating Customer Life-Time Value through
effective Customer Relationship Management in Financial Services Industry” has
stressed the importance of the customer relationship management in financial services
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industry. Customer data management gave clues about the probability of customer
demand and the technology, helped in tracking the characteristics and categorization of
customers depending on their part behaviour. He has concluded that with increased
competition customers were moving very fast from one firm to another. It was essential
to have an integrated customer relationship management strategy across the whole
organization for generating higher customer’s life-time value.
J.Werner Reinartz and V.Kumar22
(2003) in their article titled, “The Impact of
Customer Relationship Characteristics on Profitable Lifetime Duration” have stressed the
relevance and importance of establishing customer relationship management capabilities.
Customers were heterogeneous on an important life-time relationship. Under such
condition, an appropriate firm response should be made to develop customer relationship
management capabilities, which will help such firms to establish competitive advantage
in the market.
G. Ganesan and D. Rajagopalan23
(2004) editors of the book titled, “Service
Excellence, Trends and Strategies” have highlighted that competitive environment,
eroding margins, need to reduce costs and keeping customers were the prime drivers for
the organizations to embrace e-CRM. They have concluded that a well executed e-CRM
strategy could result in a number of quantitative benefits including greater ability to sell
and cross-sell, improved customer retention besides reduced cost of service.
T. Maria Salazar, Tina Harrison, Jake Ansell 24
(2004) in their study on “CRM in
the Insurance Industry: An Attempt to Use Survival Analysis in Retention and Cross
Selling” have stated that relationship marketing emphasized the benefits associated with
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customer retention over new clients’ acquisition. However, financial organizations were
not still completely enhanced with this idea. In order to improve the retention ratios of
organizations, cross-selling has been identified as a very effective strategy with positive
benefits for companies. This identification of new business opportunities depended on the
detection of product acquisition and timing evaluation.
Lynette Ryals25
(2005) in her article titled, “Making Customer Relationship
Management Work: The measurement and profitable management of customer
relationships” had demonstrated that the implementation of the customer relationship
management activities delivered greater profits. The study finds that the changes in
customer management strategies signified the value of the customers. These changes lead
to a better firm performance. The study suggests that the important issue was not
customer loyalty or customer retention but it was profitable customer retention and
profitable customer portfolio management.
Satish et.al.26
(2005) in their study on “The Role of Relational Information
Processes and Technology use in Customer Relationship Management” have showed that
relational information processes played a vital role in enhancing an organizations’
customer relationship performance. By moderating the influence of relational information
processes on customer relationship performance, technology used for customer
relationship management performed an important and supportive role. The study
provided insights into why the use of customer relationship management technology
might not always deliver the expected customer relationship performance outcome.
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Rahman, Zillur27
(2006) in their article entitled, “Customer Experience
Management - A Case Study of an Indian Bank” has discussed that loyal customers were
considered to be the key to survival and success in many service businesses, in particular
in the hospitality, insurance and financial sectors. The assumption was that with customer
satisfaction; loyalty, retention and profitability will automatically follow. They explored
the relationship between experience and loyalty and concluded that, on average, a
majority of customers were satisfied with the present functioning of the banks but would
definitely be delighted if the bank changed its interface with the customers to become
more cognitive (intelligent), emotional, physically pleasing and well - connected.
Timothy Bohling, Douglas Bowman, et.al.28
(2006) in their article titled, “CRM
Implementation Effectiveness Issues and Insights” have viewed that customer
relationship management (CRM) had been widely embraced by businesses. In practice,
however, the diffusion of CRM into organizations continues to be a slow process and/or
where CRM implementation outcomes have fallen short of expectations. Successful
implementation depends on a number of factors such as fit between of a firm’s CRM
strategy and programs and its broader marketing strategy, and intra-organizational and
inter-organizational co-operation and co-ordination among entities involved in the
implementation.
Freimut Bodendorf and Andreas Schobert 29
(2007) in their article on “Enhancing
e-CRM in the Insurance Industry by Mobile e-services” have observed that with
customers increasingly demanding full-scale solutions, insurance companies were more
and more forced to continuously increase their portfolio of products and services. As
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customers also expect high quality and variety of services when needed, insurance
companies had to find ways to present the right service at the right moment and with the
right quality.
Madhu Jasola30
(2008) in her study on “CRM: A Competitive Tool for Indian
Banking Sector” has pointed out how CRM had emerged as a popular business strategy in
today’s competitive environment. It is a discipline which enables the companies to
identify and target their most profitable customers. CRM involved new and advance
marketing strategies which not only retain the existing customers but also acquire new
customers. It was observed that customers in the CRM, rated its services far more
favourably than those in the non – CRM, which was an indicator of the superior level of
services in the former. This could be further attributed to CRM – a closer understanding
(of) and individualized service to the customer. There was a direct relationship between
perception and satisfaction, commitment and loyalty, which underlined the significance
of CRM in service industry. For those planning to up-sell and cross-sell, raising customer
perceptions is all the more important.
Mohammad Almotairi31
(2008) in his article titled, “CRM Success Factors
Taxonomy” has stated that despite the promising future and the attractive benefits
expecting from CRM projects, the outcomes of many implementations were still below
these expectations and the failure percentage of CRM is still relatively high. The author
had focused on the success factors that could facilitate successful implementation of
CRM. The author had aimed to provide taxonomy for success factors based on the
analysis of the main components of CRM (People, Processes and Technology).
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Tapal Dula Babu32
(2009) in his article titled, “An Analytical Study on Industry
Perceptions on e-CRM” has revealed the customer classification and preference giving
same priorities about the critical aspects. Therefore, features of e-CRM (as it is rated
number one) can be developed further with the latest features to suit exactly the needs of
market. Besides, in this dynamic competitive and technological business world, every
company should look for GCTC (getting closer to the customer). The e-CRM helps very
much in this respect to build an image and reputation for the company.
S.S. Hugar and Nancy H. Vaz, D'Costa33
(2010) in their article entitled, “ A
Model for CRM Implementation in Indian Public Sector Banks” have declared that India
is on the threshold of a stark global competition, especially so for the banking sector with
the likelihood of the economy opened for global banks soon. The Indian public sector
banks, which have come face-to-face with competition just since last decade, are found
wanting both with regard to performance as well as their customer orientation. The CRM
practices of the banks can help them in retention of their existing customers in the
competitive market.
CH. Raja Ramesh34
(2010) in his article entitled, “Customer Relationship
Management System with Actionable Knowledge Discovery Approach of Domain
Driven Data Mining” has pointed out that customer relationship management is one of
the newest innovations in customer service today. CRM involves gathering a lot of data
about the customer. The data is then used to facilitate customer service transactions by
making the information needed to resolve the issue or concern readily available to those
dealing with the customers. This results in more satisfied customers, a more profitable
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business and more resources available to the support staff. Furthermore, customer
relationship management systems are a great help to the management in deciding on the
future course of the company. CRM is a strategy and process used to develop stronger
relationship with customers, and CRM is the essential guide.
Anand Deo Rai35
(2011) in his article on “CRM in Insurance Industry” has
observed that insurance industry is in a complex and competitive environment tinged
with little stability. This is due to the fact that the big fish in the insurance industry
dominates the sector, which had become increasingly difficult for this sector to gain
profits while curtailing costs. Customers tend to lose out as they were not buying from
the right provider. In addition to this, the internet had increased the pressure for insurance
companies in capturing the market. All this had succeeded in making the insurance world
more complicated. CRM helps insurance companies to ensure that the customer is
understood better.
. M.V.S. Srinivasa Rao36
(2012) in his article entitled, “Customer Relationship
Management in India: An Empirical Analysis on Implementation of Selected Industries”
has observed that CRM implementation differed from organization to organization as
there were many factors that could influence the success of CRM implementation. In
most cases the technology would have less to do with the CRM success. Therefore it was
important to focus as much importance on communication training and other aspects as
much as the technology involved. Employees implementing CRM and forming a part of
the CRM process ranged from the lower level right to the grade of management. It was
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imperative that the business ensured that the CRM software chosen was easy to use and
implement by not only by a few employees but by everyone using the system.
2.4 CUSTOMER SATISFACTION
C.S.C Cheris37
(2000) in his study on “Making Insurance A Way of Life: Cultural
Resistance and Global- Local Dynamics in the Creation of Life Insurance Market in
China – A Proposal” has identified four major reasons for resistance to CRM – low sense
of need of life insurance, low degree of trust in insurance agencies, a superstitious belief
against life insurance and the desire for the products that were not profitable to the
insurers. He had found that demand for life insurance was far below the capacity of life
insurers and the growth potential of the foreign and joint ventured insurers was quite
slow. More than half of the prospective customers regarded life insurance as equivalent to
saving while some others believed that they were money grabbing institutions and were
not trustworthy. He suggested that the insurance companies must employ various
marketing strategies to deal with the people’s resistance.
Forbes38
(2000) in his article titled, “Delivering Customer Service Excellence”
has attempted to analyze the methods of delivering excellent customer service in the
insurance industry. The author argued that outstanding customer service was difficult to
achieve. He thought it took quite a long time to be part of the fundamental philosophy of
the organization understood and embraced by everyone. It had to be built into products
and processes and accordingly systems had to be designed to deliver it. Above all, the
people, who make up the organization needed to have the skills, passion and commitment
to make it work.
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R.Saibaba, B. Prakash and V. Kalyani39
(2002) in their article titled, “Perception
and Attitude of Women Towards life Insurance Policies” have reported that majority of
the people were found to be satisfied with the services provided by LIC. .The reasons for
the dissatisfaction of the few included difficulty in depositing the premium, lack of
awareness regarding new policies and lack of proper advertisement. The study also
suggested that the reasons for the popularity of insurance were risk coverage, housing
loans etc. It was not considered to be a source of getting good returns on investment. It
also suggested that improved services, good marketing strategies, high benefit policies
need to be introduced by LIC for improving relationship with customers.
Yurong Xu, David.C.Yen, Binshan Lin,David and C.Chou40
(2002) in their study
on “Adopting Customer Relationship Management Technology” have emphasized the
need for adopting customer relationship management technology for effective
implementation of CRM. They found that CRM impelled the growth of all the firms in
the world and it required more empirical and sharpened techniques to offer customer
satisfaction through CRM. The authors developed an extended concept of CRM from
micro and macro perspectives. They had underpinned the problems of relationship
between implementation of CRM, suitable to customer attitude.
Harris41
(2003) in their study titled, “A Study about Life Insurance Policies” has
concluded that only 67 per cent of females and 57 per cent of males had a positive
attitude towards the business practices of insurance companies whereas 4 per cent of both
male and female had no idea about these business practices.
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Rajkumar Venkatesan and V.Kumar42
(2004) in their article titled, “A Customer
Lifetime Value Framework for Customer Selection and Resource Allocation Strategy”
have viewed that CRM in service industry is measured in customer life time value and
their demarcation of their framework. They emphasized the usefulness of customer
lifetime value and the need for implementing CRM at all levels. The identification of
empirically tested, purchase frequency model and customer selection strategy model are
found indispensable for the comparison of CRM metrics for customer selection and
ultimately customer satisfaction. They also noted that customer lifetime value
transformed the effects of CRM in the form of higher profits and customer centric values.
The paper concludes that there is potential increase in the profits when CRM was
implemented properly along with the lines of maximized customer lifetime value.
Adrian Payne and Pennie Frow43
(2005) in their article titled, “A Strategic
Framework for Customer Relationship Management” have viewed
that the conspicuous
three alternatives of CRM perspectives were explored and also emphasized the need for a
cross functional, process oriented approach that positions CRM at a strategic level. The
study narrows down the relationship between holistic approach of CRM and
implementation of technology in CRM. They had ultimately concluded that a company
must be customer centric, and the only solution to achieve customer centric aspect is to
implement and maintain the customer focused CRM tool at all the levels for proper
interaction with the customers.
S. Durvasula et.al.44
(2005) in their article titled, “Relationship Quality Vs.
Service Quality: An Investigation of their Impact on Value, Satisfaction and Behavioural
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Intentions in the Life Insurance Industry” have showed that both service quality and
relationship quality had a strong connection with satisfaction, value and behavioural
outcomes and also significant predictors of satisfaction, value and behavioural intentions.
They had concluded that neither service quality nor relationship quality alone is a single
useful predictor, but both need to operate together.
K. Sayulu, and G. Sardar45
(2005) in their article titled, “A Strategic Framework
for Customer Relationship Management” have stated that customer value and satisfaction
were the important ingredients in the marketers for success. The insurance companies
today must develop stronger bonds and loyalty with their ultimate customers and pay
close attention to the customer defection rate and undertake steps to reduce it.
P. Goswami46
(2007) in his article entitled, “Customer Satisfaction with Service
Quality in the Life Insurance Industry in India” has indicated the responsiveness was the
key to maximum satisfaction to the customer. Responsiveness included promptness and
timeliness in service as well as willingness to help the customers. She also had suggested
that customer relationship management must be introduced. She concluded by saying that
the challenge before insurance companies was not only to gain new customers but also to
retain the existing ones.
S. Khurana47
(2008) in his article titled, “Customer Preferences in Life Insurance
Industry in India” has showed that the customers still preferred public sector companies
as compared to the private sector. Protection was found to be the main reason for buying
a policy as compared to factors like tax rebate, returns, saving etc. The study also showed
that only a few faced some problems and all of these had policies of LIC. The satisfaction
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level of the customers of HDFC Standard Life, ICICI Prudential, Kotak Life, Max New
York and Birla Sun Life was 100 per cent while that for LIC, Tata AIG and Bajaj Allianz
were 45 per cent, 50 per cent and 50 per cent respectively. Also, only 56.3 per cent of the
customers intended to buy new plans from the same company.
M. Siddiqui, H. Sharma and T.Ghosh48
(2010) in their article titled, “Analyzing
Customer Satisfaction with Service Quality in Life Insurance Services” have described
how life insurance players have started realising that their business depends on customer
service and customer satisfaction. The study proposed a six dimensional service-quality
instrument namely, assurance, personalized financial planning, competence, corporate
image, tangibles and technology in life insurance. The study proposed a framework
suggesting what life insurance service providers could do to create satisfied customers by
providing quality services.
J. Arulsuresh49
(2011) in his article titled, “Empirical Study on Satisfaction of the
Policyholders towards the Services Provided by LIC of India in Madurai Division” has
observed that the success of the life insurance business depends on the awareness of the
policyholders about the products and satisfaction regarding the service rendered by LIC
of India. Life insurance being a service sector is no exception to this principle. The basics
of customer relationship management included a business strategy that focuses on
developing and retaining the relationships that existed between customer and
organization. CRM also provided the customer with a much needed avenue to find
expression for his problems, ideas and suggestions.
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D. Upadhyaya and M. Badlani50
(2011) in their paper titled, “Service Quality
Perception and Customer Satisfaction in Life Insurance Companies in India” have
identified that despite high satisfaction levels, there remained a lot to be done by the
management of the retail life insurance companies to maximize their customer
satisfaction and improve the quality of service. The satisfaction of the customer with the
services of life insurance companies was found to be linked with the performance of the
service. Further, a need was felt to integrate technology features into interpersonal
relationships and not to replace them.
2.5 CUSTOMER RETENTION
Mornay Roberts-Lombard 51
(2011) in their article titled, “Customer Retention
through Customer Relationship Management: The Exploration of Two-way
Communication and Conflict Handling” have observed that the organizations such as
banks and short-term insurance organizations became more aware of the importance of
customer relationship management (CRM) and its potential to help them acquire new
customers, retain existing ones and maximize their lifetime value. A close relationship
with customers will require a strong coordination between information technology (IT)
and marketing departments to provide a long-term retention of select customers. One
independent variable had exerted a statistically significant positive influence on the
intervening variable (CRM), while two-way communication exerted a statistically
significant negative influence on the intervening variable (CRM). The intervening
variable (CRM) positively influenced the dependent variable (Customer Loyalty). If
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short-term insurance organizations communicate accurately, and are skilled in conflict
handling, greater loyalty would be created among customers.
Anju Nitin Khandekar and U.M. Deshmukh52
(2012) in their article titled,
“Customer Relationship Management Practices in Insurance Companies” have stated that
Globalisation had brought drastic changes in Government policies towards insurance
industry as a whole. Hitherto, the protected and monopolistic insurance industry suddenly
found itself in the midst of severe competition with the opening up of insurance sector to
foreign investors. Plethora of private insurance companies entered in this field within a
span of ten years in the past. This had naturally brought professionalism and severe
competition in this sector. Naturally, the CRM got the prime importance for every
player. In-depth study of CRM vis-a-vis loyalty of customers in insurance sector revealed
that better the CRM practices, greater will be the loyalty of customers resulting in more
retention of customers leading to enhanced profitability.
2.6 CUSTOMER LOYALTY
S.Michael, Mc.Carthy and H. Eugune Fram53
(2000) in their article titled, “An
Exploratory Investigation of Customer Penalties: Assessment of Efficacy, Consequences,
and Fairness Perceptions” have emphasized that the increase of customer loyalty was
highly probable through successful relationship marketing. They identified that the
customer penalties were intended to increase customer complaints with purchase
agreements. They meticulously observed that the consequence of customer penalty
policies rapidly reduced customer loyalty and increased negative word of mouth
communications.
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Liz Lee-Kelley, David Gilbert, Robin Mannicom54
(2003) in their article titled,
“How e-CRM can enhance customer loyalty” have felt that price sensitivity was found to
be a primary confounding element on loyalty and was included in the study for control.
The findings revealed that e-retail companies (with CD, DVD, video and book products)
should consider customers’ perceptions of relationship marketing efforts, as they were
fundamental to enhancing customer loyalty and that an enhancement of customer loyalty
reduces price sensitivity.
Rajagopal and Romulo Sanchez55
(2005) in their study on “Analysis of Customer
Portfolio and Relationship Management Models: Bridging Managerial Dimensions” have
stated that the customer’s affinity towards an organization was developed through the
successful planning process of CRM. They also had identified the effectiveness of
relationship management in helping organizations to create new strategies to increase the
customer loyalty. The managerial perspective of organization aims at improving
strategies to optimize the lifetime value of customers.
R.Satishkumar56
(2005) in his article titled, “CRM as a Catalyst for Building
Brands” has attempted to bring out the emerging trends and changing dimensions in
using CRM as a catalyst for building successful brands in India. He had stressed that the
effective use of CRM would ensure customer loyalty and convert them into life-long
customers of the company. He concluded that the growth in retail banking, deregulation
of cellular and basic telephoning market, retaining and acquiring customers are critical
for survival. In industries, CRM plays a pivotal role in providing total customer
satisfaction.
53
Young-Hoon Park and Eric.T. Bradlow57
(2005) in their article titled, “An
Integrated Model for Bidding Behaviour in Internet Auctions: Whether, Who, When, and
How Much” have identified that the seller design the action which is optimizing the
customer population. The bidding behaviour seemed to have good inclination towards
customer satisfaction. The fundamental understanding of the bidding behaviour also
triggers brand loyalty and increase in service quality parameters.
2.7 SERVICE QUALITY
M.K. Brady and C.J. Joseph58
(2001) in their article titled, “Some New Thoughts
on Conceptualizing Perceived Service Quality; A Hierarchical Approach” have
concluded that evidence proved that customers form service quality perceptions on the
basis of the three primary dimensions: interaction, environment and outcome and
customers based their evaluation of these primary factors on their assessment of three
corresponding sub factors. The combination of all these constitute the customers’ overall
perception of the service quality. The results also indicated that reliability, responsiveness
and empathy are important for providing superior service quality.
P. Pathak and S. Singh59
(2003) in their article entitled, “Customer Services in Life
Insurance” have examined the effect of the entry of private players into the insurance
sector. It was concluded that although the insurance companies were spending a lot of
money on advertisement not enough money was being allocated for research and
development of new products. It was also suggested that the agent’s pre- recruitment
training must be ensured to provide efficient and effective customer services.
54
L. Ronald, Hen, Jr. Sankar Ganesan and Noreen M. Kpein60
(2003) in their article
titled, “Service, Failure Recovery; The Impact of Relationship Factors on Customer
Satisfaction” have revealed that customer relationship can help to shield a service
organization from the negative effects of failures on customers’ satisfaction. Customers
who expected the relationship to continue had been satisfied with service recovery
expectation, which in turn resulted in greater satisfaction with the service performance
after recovery.
U. Jawaharlal and N. Pareek 61
(2004) in their article titled, “Service Quality
and Customer Satisfaction in Life Insurance Market” have examined the importance of
having efficient customer services in the life insurance industry. Due to severe
competition in the insurance industry, it was found that the life insurance providers were
creating new strategies to improve service quality. For the upgradation of the service
quality, certain areas had to be considered. These included analyzing the need for having
a policy, giving advice to lapsed policy, suggesting nomination methods, transferring of
policies etc. The major lapse in service quality was found at the time of claim settlement.
The main components were lack of education and training of customers, agents, brokers
etc that rendered them unfit for facing many challenges.
T. Vanniarajan and M. Jeyakumaran62
(2007) in their study on “Service Quality
and Customer Satisfaction in Life Insurance Market” have identified a total of 50
dimensions of service quality and rated them on a five point scale. The factor analysis
based on the score of these 50 service quality variables led to nine important service
55
quality factors namely distribution network, product, responsiveness, customer
relationship management, empathy, brand building , promotion and tangibles.
A. Ahmad and Z. Sungip63
(2008) in their study on “An Assessment on Service
Quality in Malaysia Insurance Industry” have discussed that a huge gap between
customers’ perception and expectation for reliability, responsiveness and empathy. Out of
these, reliability showed the highest gap. Also, though the dimensions such as tangibility,
responsiveness, assurance and empathy were found to be important measures for service
quality, reliability emerged as the most critical determinant of SERVQUAL measure for
service quality. The authors concluded that for an insurance company to survive in the
competing environment they must improve customer service and quality efforts so that it
improves reliability. So, the challenge identified for insurance sector was to meet
customer expectations faster, better service in the face of rising, increasing price
competition and to bring innovative solutions to clients while making them realize the
value of those services provided.
R.S.Arora64
(2008) in his thesis entitled, “Marketing of Services: A Study of LIC
in Jalandhar Division” has explained that service quality to be a multidimensional
construct. The research indicated that the five dimensional structure of service quality
was not only industry specific but also country specific. The results also showed that out
of the seven factors used to define service quality, responsiveness had the strongest
correlation and was the best predictor of the overall quality. Product convenience was
found to have the greatest influence on customer satisfaction followed by assurance and
tangibility. The results regarding the intermediaries showed that the agents attached
56
more weight to all aspects as compared to bank employees. The agents gave more
importance to good customer service and regular updating of knowledge, whereas the
bank employees stressed more on providing objective information. No significant
difference was found in the demands of customers of both agents and bank employees.
The data analysis revealed that agents had better success rate as compared to the bank
employees in selling products and that agent’s perceived lower competitive pressure than
bank employees.
R. Kumar65
(2010) in his thesis entitled, “Performance Evaluation of General
Insurance Companies: A Study of Post-Reform Period” has explained that the public
sector exhibited higher underwriting losses in the post-reform period than the pre-reform
period. The higher investment return of the public sector general insurance companies
compensated their underwriting losses. The author had suggested that productivity of the
private insurers was higher than the public insurers due to their hi-tech environment and
modern technology features supported by them. The study suggested methods to improve
the performance of these companies. The results showed that private sector companies
provide significantly higher service quality than the public sector general insurance
companies.
Singla 66
(2010) in her thesis entitled, “Impact of Service Quality on Customer
Loyalty: A Study of Hotel Industry in Punjab and Chandigarh” has modified the
SERVQUAL scale to include six dimensions. The gap scores were significant for a
number of attributes and these attributes were different for different categories of hotels.
The performance was found to be below the expectations of the customers. So, they were
57
unable to deliver the service according to customers’ expectation. The study also showed
that the managers over estimated and were also too self assured about the delivery of a
particular service. Lastly, the study had suggested measures for improving customer
loyalty.
Deepika Upadhyaya and Manish Badlani67
(2011) in their paper on “Service
Quality Perception and Customer Satisfaction in Life Insurance Companies in India”
have identified the key success factors in life insurance industry, in terms of customer
satisfaction so as to survive in intense competition and increase the market share. The
study emphasized the role of technology to improve quality and hence customer
satisfaction.
2.8 RESEARCH GAP
This chapter brings forth various findings relating to customer relationship
management practices at insurance industry and its implementation, service quality
perception in LIC. It can be observed that the researchers individually studied the various
problems and prospective elements at different perception levels. None of these studies
had, however, made any effort to analyze the customer relationship management in LIC
in Sivagangai District. The reviews were quite helpful to identify the gap and it provides
an insight to carry out the thesis in the right perspective. In the next chapter, the
conceptual frame work of CRM is also discussed.
58
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