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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.

32

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

33

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

34

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.

35

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

36

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

37

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

38

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

39

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

40

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

42

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).

43

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

44

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

45

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.

46

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.

47

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

48

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

49

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.

50

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

51

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.

52

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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