Cultivation of Customer Loyalty Within the Insurance Industry

Introduction

Hong Kong presents an environment that can be described as excellent to the insurers and reinsurers despite the global trends of convergence. Of all the financial markets and economic industry, the capital markets in Hong Kong are sophisticated and managers have concentrated their finances in the country. The country is one of the leading insurance centres in Asia. With this, Hong Kong has been able to attract a lot of the international top insurers. As at December 1998 the insurance stock was 4.1 billion US dollars as foreign direct investment, from then on Hong Kong has risen to become the fourth receiver of FDI in the world. Hong Kong also has the highest number of authorized insurance firms in the region. With all these support, the industry has also produced a very big number of professionals. The industry has been growing steadily since the 1980s.

In august of 2004, Hong Kong was hosting 181 authorised insurers and out of these, 117 were offering their services as general insurers. 45 insurance companies were long term while the rest were composite insurers. In 2003, the total gross premiums saw a growth rate of 14.6%. This enabled the industry to reach 102 Hong Kong dollars which was about 8.3% of the country’s gross domestic product. By the year 2007, these premiums were 197 billion HK$ and this was 12.2% GDP. The long-term insurers had increased on the market to take up 87% of the market share. General insurers only comprised 12%. Many foreign insurers have been able to take advantage of the liberal market environment in Hong Kong to expand their services through the region. With China accelerating to the World Trade Organisation, the processes have been accelerated. For this, the insurers in Hong Kong have increased their coverage in the region so that they can be able to take care of the developing regional insurance market. Hong Kong insurance has also benefited from the CEPA accord as a result of Chinese liberation of its market by joining WTO.

With such prowess in the insurance sector of Hong Kong, competition has become very stiff. Cancellations of orders and seeking new clients can be very devastating to the company. This is the reason why insurance firms in Hong Kong have to assess customer loyalty and seek means of treating clients through this philosophy (Chinn et al, 1999, p. 489). This study therefore addresses the means through which instances can be able to attain customer loyalty as this assures company sustained profitability through repurchase and recommending to other clients.

Problem Statement

Insurance industry in Hong Kong is on the verge of becoming very saturated considering that the rate at which it is increasing is very fast that even the population growth may not counter such developments (Heskett, 2005, p. 355). The products that are being offered are therefore becoming more commoditized as the insurers attempt to keep the customers they already have and struggle to attract new ones. Customers on the other hand decide on their insurers entirely based on the cost (Baldinger & Rubin son, 1996, 23). Due to the increasing technology and use of internet for accessing online insurers, clients are now presented with a very wide base of choices of insurers to select from. Considering that insurance product have very limited differentiation among them, it has become extremely dangerous for these companies to retain their clients and this has translated to very poor loyalty and expensive to own a policy (Rigby et al 2003, p. 5; World Insurance Report, 2007). Retaining the correct policy hold is pertinent for profitability. This is because it is very expensive to acquire new ones. The cost is about 10 that of retaining existing ones. It is said that premium revenue increases dramatically with little retention achieved.

The Objectives of Study

There are several goals that this research sought to achieve. Basically getting the best means of attaining customer loyalty was the main objective that guided the research. However to enable the client to be able to attain this goal, the study was conducted with the following objectives in mind (Rigby et al, 2003, p. 5).

• To assess the factors that affect customer loyalty in Hong Kong’s insurance industry. And to offer the best model of attaining customer loyalty
• To analyse the impact of customer satisfaction, perceived quality and trust on the customer. This would include analyses of commitment, switching cost and value in relation to loyalty (Rigby et al, 2003, p. 5).
• To evaluate the impact of the perceived quality on customer satisfaction.

The Rationale

The rationale of this investigation was to develop the current investigation report on the insurance industry of Hong Kong with regard to its means of customer loyalty, satisfaction and the eventual profitability. This research was mainly interested in evaluating and assessing the capacity of the insurance industry of Hong Kong to handle the few customers as the insurers are increasing at a faster rate than clients (De Ruyter et al, 1998, p. 437). At the same time this study was concerned about the overall profitability of the industry since profit making is the objective of every business. Considering that this sector satisfaction would translate to repurchase of policies in insurance and that treating existing customer was cheaper than developing new policies and attracting new clients (Reichheld, 2001, p. 77). The study focused mainly on the client’s satisfaction means in attempting to attain loyalty since loyalty and profits would only follow if the customer is satisfied by the services.

Hypotheses

This research sought to identify the link between consumer loyalty and the ultimate performance of the insurance companies. Nonetheless, there has not been so much concurrence of ideas over the factors that drive customer loyalty. For instance, Rigby et al research purport that satisfied customers tends to develop loyalty to that particular company (De Ruyter et al, 1998, p. 437). On the other hand, Heng brought about examples that showed customer satisfaction did not necessarily result in customer loyalty; rather they showed that brand image and the quality of the product were the main factors that influence consumer loyalty.

This research has brought about three main determinants of consumer loyalty that are significant statistically. Logistics regressions were used for assessment. The generated hypotheses include;

1. The customer loyalty was directly affected by the quality of the product
2. Service quality is a positive determinant of customer loyalty
3. Brand image has been found to motivate customer loyalty

Research Questions

Customer loyalty can be achieved by use of various tactics and many are usually very unique to the company dealings with the clients directly (Thompson, 2007, p. 3). However with the limited resources that are currently available and the scope of the strategy that is adopted by the insurance firms, the first question is that are there some particular aspects of customer loyalty that these firms can concentrate on? Furthermore, brand equity has over the past been considered as the survival tool when other marketing models are not doing fine to bring out customer loyalty (De Ruyter et al, 1998, p. 437). Is this the same case for the insurance industry in Hong Kong? What are the antecedents of attaining customer loyalty in market situation of Hong Kong insurance? Is it possible to specify a model that can be used for achieving customer loyalty in insurance sector of Hong Kong? What factors affect customer loyalty in Hong Kong? (Reichheld, 2001, p. 77) And how do these factors interrelate. In order to find the best answers for the research, the following are the specific questions that were defined for study:

• Does client satisfaction manipulate loyalty in insurance industry in Hong Kong?
• Can switching cost affect loyalty of clients in insurance industry of Hong Kong?
• Does trust affect loyalty among client in insurance sector of Hong Kong?
• Is commitment a factor of determining loyalty among consumers of policies?

The Significance of Study

The study will be beneficial in understanding the interconnection among customers’ satisfaction, loyalty and the eventual profitability to the insurance companies in Hong Kong. There are several factors that have been addressed in these three thematic phrases (De Ruyter et al, 1998, p. 437). Perceived quality, perceived value and trust usually develop out of satisfaction that the client gets or satisfaction can instigate development of trust and dedication as well. Therefore these factors are intertwined in a complex manner that when properly understood by the marketers, then effective marketing to retain clients can be done, World Insurance Report, (2007). Insurance is a major source of income, rather revenue of Hong Kong as noted from the greater percentage it takes on the overall GDP of the country (Reichheld, 2001, p. 77). This follows that the industry has to be maintained and expanded because it is a very significant portion of economic activity in the country so as to keep the insurance profitable to investors.

With a lot of investors coming to Hong Kong through FDIs, and taking a greater percentage of GDP, then it’s evident that insurance is playing a very big role in supporting economy of the country. Therefore, cultivating customer loyalty would mean that most of the client will come back to re-purchase policies and even recommend to their friends and other people they know (Rigby et al, 2003, p. 5). This is a positive characteristic that insurers have to learn in order to keep their market up since retaining clients is cheaper. Since as economic activity, it earns the country revenue, provides employment, insurance industry is therefore not only beneficial to the insured’s but the country at large in business and financial sectors among others (Romano & Fjermestad, 2006, p.53).

Scope of the Study

Over the recent past, there have been some great developments in the financial sector of Hong Kong despite the global curse in finance and economic stability in general (Baldinger & Robinson, 1996, p. 23). These drastic changes resulted in creation of a market that is characterised by very aggressive competition, minimal growth of the basic demand, heightened deregulation and innovativeness. Government of Hong Kong has made very imperative changes by privatization of the banking sector, allowing free markets and easing regulation of the business especially the insurance sector which is more liberal (De Ruyter et al, 1998, p. 437). This has increased competition and complexity in the insurance industry. Being able to retain a place in the market niche has become essential to the long range sustainability and ultimate profitability of the companies in insurance business. This can be achieved by acquiring new customers or maintain and gaining new ones (Baldinger & Robinson, 1996, 24). This study focused on the major determinants of consumer loyalty in Hong Kong’s insurance sector so as to assist this major industry to obtain that wider look for supporting the clients and gaining their loyalty and even more.

Literature Review

Introduction

The insurance market of Hong Kong is considered to be the most dynamic in the world today. The strategic geographic locality, credible legal organization and efficient regulation structure has assisted it to turn into a top insurance hub in Asia. For this reason, many firms have been attracted to this market including the topmost in the market, the world class providers (Baldinger & Rubinson, 1996, 23). In the recent past, the demand for the services increased rapidly and the same was expected to continue substantially in the future. However, the more companies ventured into this market, the demand reduced as population is not growing as fast as the companies are. There has not been any significant influence on economy and market as customers have not stopped purchasing insurance policies but just change the options (De Ruyter et al, 1998, p. 439). Some customers switch to other companies in search of polices that are less risky and have not as much of exposure to the open market. Thus, the reduction of demand for investment-associated service is being counterbalanced by increasing traditional insurance to some degree.

To be able to avoid this customer shift, and attain sustained growth, insurance firms are seeking to achieve customer loyalty. Customer loyalty is described as the type of customer behaviour that result into repurchase of policies – repeat clients, those who provide good rating or positive comment of the company, god review and testimonials (Reichheld, 2001, p. 79). Some clients usually do a certain firm a great service of offering recommendation to others just by mere word of mouth which achieves great publicity concerning products of that company. This adds to the number of clients and they are likely to become loyal customers. Nonetheless, customer loyalty entails so much more. It’s a procedure, a program or a combination of programs that are doctored towards keeping the customer satisfied so that he/she can be a source of more business (Romano & Fjermestad, 2006, p.53).

Fred 1993 suggests that Customer loyalty can be assured some times in some cases by ensuring high quality product with a strong guarantee. Customer loyalty is also attained via free offers, incentives, faster processes and customized services (Fred, 1993, p. 45). The ultimate objective of customer loyalty arrangements is to make sure that customers are happy and that they will come back to purchase more or persuade others into using the firm’s services (Reichheld, 2001, p. 81). This translates to profitability and contented investors.

The Position of Hong Kong Insurance

This report studied the way customer loyalty can be achieved. In order to do this, the background information about the insurance industry has to be understood. Current industry trends are very crucial to the growth of the industry and also determine the future outlook (Romano & Fjermestad, 2006, p.53). Property insurance, long-term insurance, Retirement schemes, life and accidents & Insurance services are some of the main services that insurance industry offers. The values of the industry have been rising steadily. Receipts in 2007 saw a 41.7 percent increase. In 2008, there was a growth of 12.5 percent in gross and net premiums specifically for the general insurance services. The same trend was observed in 2009 as well. There was also an overall surge in the underwriting profits to 638 million Hong Kong dollars from 441 million. The outcome was largely contributed to by the property damage service and this saw a profit of 151 million Hong Kong dollars. Health and accidents also had great business with 136 million HKD, (DAFSA, 2001, p. 187).

Direct business gross premiums rose from 12.5 percent to 14 percent (6,244-4,588 million HKD) in the first quarter of the fiscal year 2003. This was majority attributed to the accident and health services which recorded the highest premiums of 2,103 million HKD as gross premium. Taking advantage of the progress in the Hong Kong market due to the financial crisis that was experienced in the 1990s, many investors in the Hong Kong Insurance industry make use of the liberal position to expand their coverage in the region so that they can cater for the fast development that are being witnessed in the region (DAFSA, 2001, p. 187). The mainland firms are also working together with foreigners so as to cover the mainland. Many of the insurers offering services to Hong Kong Market are incorporated abroad and most of them are focusing in the general business area (De Ruyter et al, 1998, p. 439). The united stated and the United Kingdom is the main holders of the incorporated insurers overseas. The market has had dominant companies controlling the market sector.

Studies indicate that the first ten insurers in this body carry more than 80% of the market with life time services. Short term ventures in insurance are supported by the sharp recovery of the financial activities in the region. Mandatory Provident Fund has also inspired the short term prospect since inception in 2000. The scheme has been estimated to inject over 4 billion US dollars every year of retirement money. This is expected to go on for the next 30 years until the maturity of the system is attained. Garbarski (2003) indicates that Insurance companies are charged with the duty of not only administering this fund but also have the duty to operate master trusts and put money to several external finance managers (Garbarski, 2003, p. 153).

In 2004, Standard and Poor’s found out that the insurance sector in Hong Kong was steady. The company however warned of probabilities of incorporation in divisions where the sector was uneven. S & P also noted that, “the local market had been very strong though there was an economic decline and its ability to survive the intense competition, aggressive market and the outbreak of the health problems in the region like SARS, bird flu etc. Whereas ratings on the local industry companies are not likely to fall due to the repressive pressures, S & P cautioned that the smaller firms had unsustainable and defendable niche and could be edged out of the market”(Buttle 2004, p. 359). Maybe the most evident fault afflicting the industry on both sides would be the disparity that is observed in bigger as well as the smaller operators (Romano & Fjermestad, 2006, p.53).

Since life and on-life policies are already overcrowded, the smaller firms that cannot define their niche in the market could find themselves on the brink of falling out of the market (Buttle 2004, p. 359). Insurers and reinsurers still hold the perception that Asia and especially China as the region that has the capability of offering greater growth in the long run and assist to balance global risk concentrations away from America and Europe, M2 Presswire (2008). To exemplify this trend, insurer form France AXA group which is a very reputable company international set its headquarters for Asia-Pacific in Hong Kong in its effort to tap the future insurance market (De Ruyter et al, 1998, p. 441).

Customer Loyalty Determinants

Hong Kong Insurance Market the level of competition is very high. To be able to stay in the market and compete with other firms including foreign firms, insurers have to be the best in the market (Buckinx et al, 2007, p. 32). Corporations have to ensure that they retain their customers and attract even more. This is a major problem for many managers since it is very hard to keep to terms with all the aspects of insurance that are on demand for by customers. Still many of these firms continue to improve their services by innovation and creativity. They realize that they can create services that are customer-based and focus the specific needs of their customers. This is the reason why quality and customer satisfaction is important in insurance (Buckinx et al, 2007, p. 32).

Many insurance firms in Hong Kong are now devising retention strategies to enhance customer loyalty for the benefit of the organizations. Many firms that have mastered the way to achieve loyalty have a leg up when it comes to competition (Buckinx et al, 2007, p. 32). Handling customers has been a challenge to Hong Kong insurers considering that the world suffered a financial crisis that adversely affected the economy of the nation and the whole world at large. This situation has presented both opportunities and threats that insurance industry has to deal with to improve operations (Andreassen & Lindestad, 1998, p. 109). In order to be able to survive this test, insurers will have to deal with aggressive regulation that is anticipated and other issues in the market relating to financial situation of clients. Improvement in information technology and the impact of globalisation presents opportunities for improvement (John, 2003, p. 69). There are several factors that have been proposed in literature as the main determinants of loyalty. They are explained in theory and supported by empirical investigations. These determinants can be categorised into two groups; perceptual and behavioural determinists.

Perceptual Determinants

These are the determinants that include factors like customer satisfaction and trust among others. This category has over the past gotten more attention compared to the behavioural group. This is because there is consensus in real practise that the behavioural determinants are influenced by the perceptual factors (Heavey, 2007, p. 12). Moreover the hypothesis around perceptual factors can be generalised to cover a wider range of products and services. However in many occasions, the behaviour factors could be the only information that marketers have concerning the customers (Yang & Wu, 2008, p. 246). This could be collected through loyalty or via information systems that support operational process.

Behavioural determinants

These determinants include factors like the number of policy held, customization of services and products and cost. These factors are studies from the information system that support operational processes of the company (Yang & Wu, 2008, p. 246). Regardless of the many studies, it’s still very difficult to assess the way these determent work to influence loyalty and also to determine the major one that marketers in insurance can concrete on (Chu, 2001, p. 5). This is the reason why this study has tried to narrow down to the group that is perceived to be common and therefore probably the main influencers of loyalty (Heavey, 2007, p. 12). The factors here include customer satisfaction, customer switching expenses, trust, commitment and the quality perceived.

Loyalty Concept

According to Sodurland (2001) loyalty can be categorised into two groups. First is the group of the loyal consumers. Here there are both satisfied and unsatisfied clients. Basically satisfaction here is not considered as being very necessary for loyalty to thrive and hence satisfied clients do not have to be loyal though there is some significant correlation between loyalty and satisfaction (Yang & Wu, 2008, p. 246).

At times, customers who are not satisfied can be loyal. This is usually because of the attachment they develop and become committed to a certain supplier company. When satisfied customers lose trust or commitment to a certain company, they switch to another service provider who has got better quality services and products (Dick & Basu, 1994, p. 101). This is referred to as false loyalty. Unsatisfied client remain committed to their providers. This loyalty could be affected by other external factors which the customers feel are in their way and hence stop them from switching or going to seek another provider (Creswell, 2003). These are mainly the switching costs. Currently, the world is technologically developed and internet introduction into insurance has made it very difficult to retain clients. Clients have more options and the competition level is very high and every supplier attempts to attract clients through various packages (Guillen et al, 2008, p. 209). Within a very short time clients can surf the internet and access information on numerous companies overall policies that are being offered. This has lead to defections rates going up at a very fast rate (Dick & Basu, 1994, p. 101). An insurance firm that seems impressive at 80% rate of retention will lose over 60% of the clients in the next 5 – 10 years. By retaining more clients, costs are decreased considerably as profits phenomenally rise.

Perceived Quality Concept

This is a concept that is intimately linked to satisfaction and therefore likely to result into loyalty. The difference has not always been clear but the phrase is used occasionally indistinctly. Anderson and Sullivan, 1993 explain that satisfaction is derived from previous consumption encounter and also relies on the price while quality can be perceived even when the product or service has not been experienced by consumer and in most cases does not depend on the price (Dick & Basu, 1994, p. 104). However, in some few occasions where there is very little information about the product or when assessment of quality is very hard to attain, then the price of the product is used as an indicator of the quality. In this sense, some scholars have concluded that constructs are very different and that they are affected by different determinants (Chen et al, 1999, p. 29). Service quality as a factor that has been discovered to have the greatest impact on the level of satisfaction a client feels (Smith et al, 2004, p. 184). This has contributed to development if grater loyalty when defined as the product of comparison by the clients between the service given and the expectations.

According to Anderson et al, (2007) when the customers discover that the perceived quality is less than what they expected, then there is a high probability of switching their supplier to the other competing business with hopes of getting better services (increasing perceived quality). These contribute to the reduction of the loyalty (Smith et al, 2004, p. 184). Even with technology, human integration cannot be replaced, insurance firms need to involve their personnel who will make sure that job descriptions are followed, there is adequate training, compensation processes are in place and customer based strategies are implemented, Client’s perception of the quality given influence satisfaction (Dick & Basu, 1994, p. 106).

Customer Satisfaction Factors

This is a very important trait and it has to be upheld in high regard especially when competition is very high like Hong Kong’s insurance. Its plays a very important role when shaping customer loyalty (Guillen et al, 2008, p. 209). In insurance, clients would question themselves concerning the degree of services and decide about lack of significance accorded to them and then make a decision about repurchase subsequent to the use the services (Smith et al, 2004, p. 184). The degree of satisfaction is in most cases high when a client spends less and gets maximum use and benefit. Dissatisfaction however result when prices does not suit the demands of the clients. This is the same with insurance, the cost of premiums in relation to the risk being insured, cost of processing claims and compensation plans usually pose a bone of contention between the customers and policy providers (Axinn & Pearce, 2006, p. 76; Berry, 1998, p. 23). The response of the clients plays a pivot duty at the overall score of the satisfaction scale of the providers. Satisfied clients are unlikely to switch because at least they are getting what they want (Cummins & Venard, 2001, p. 78). This means that they would stay with the same provider for longer.

Switching Cost

Jones et al defines switch cost as those obstacles that actually make it unpleasant or very hard or very expensive for the clients to change their policy providers. This is also a major determinant of loyalty though it could at time influence loyalty in a negative manner (Axinn & Pearce, 2006, p. 46). The cost here is influence financially, technically or psychologically thus making it very costly for the customers to switch between policy providers. Recent years have seen an increasing interest in assessing the factors that influence customer loyalty (Cummins & Venard, 2001, p. 78). As a consequence, there are several works in market which try to describe the connection between brand loyalty and the several variables that are viewed as antecedents, the most substantial being consumer happiness and to some lesser extent, the switching costs (Yu & Dean, 2001, p. 234; Lee et al, 2001, p. 235).

For this reason switching costs can be looked at as the opportunity cost that curbs or deters the old clients from seeking other services from the rival firms. It can be described as the factors that clients experience in attempt to switch and seem to be too costly with little reward or benefit (Axinn & Pearce, 2006, p. 46). When this happens, there is very high probability that the consumer will still be loyal and make repurchase rather than risk seeking new services from new company as the expense involved is too high or the appeal of the alternative is so low (Lee et al, 2001, p. 235).

A client who has collected enough information in order to reduce the feeling of anxiety concerning wrong purchase of service will base the decision of the past purchase experiences. This phenomenon has been called the post-purchase cognitive dissonance (Axinn & Pearce, 2006, p. 46). Clients compare the services expected and the ones that they are already getting and figure out the differences. Having developed very strong interpersonal relationships and imposing switching expenses just form the additional strategies of retention. These types of barriers are beneficial to the firms that have already acquired business with the customers, Economy Watch (2010). They help companies in fostering greater retention and since they could help the firms weather fluctuations in short-term, the strategy is important in avoiding defections (Andreassen & Lindestad, 1998, p. 109).

Trust

This is the willingness of clients to rely on the insurance firm for services due to the confidence in the quality of the services or the reliability and integrity of the provider (Cater & Cater, 2009, p. 1162). Since insurance covers critical issues in life like health and life insurance, accidents cover, general insurance and cover for accidents and property, it’s imperative that companies in Hong Kong work harder to meet their goals in serving the customers. This builds confidence. With many international firms venturing in the Hong Kong insurance market, customers will only go for the companies that are reliable (Cater & Cater, 2009, p. 1162). This means that integrity and reliability of a company impacts the loyalty of their customer. This means that the stated function of the services are met and dedication is build thus decreasing the process of negotiating contract and reducing the fear of opportunistic character of service providers (Hilll & Alexander, 2000, p. 259).

Trust in insurance is built on two foundations of which many firms in Hong Kong are trying to build. These include honesty and benevolence. Honesty is when the company keeps their word in covering the claims or show genuine interest in the welfare of the customers (Yu & Dean, 2001, p. 234).

Commitment

This is the desire to keep the relationship between two parties, policy providers and the clients. It’s a pledge of service continuity or resisting change. There are affective, continuance and normative types of dedication (Yu & Dean, 2001, p. 234). Affective is the emotional connection that develops between the providers and the customers when individuals tend to identify themselves with a certain firm based on the values of that company or the quality of services (Cater & Cater, 2009, p. 1164). Trust in a relationship builds dedication and thus loyalty. Perceived quality, customer satisfaction and cost of switching increases loyalty (Guillen et al, 2008, p. 211)

Research Methodology

This study is considered to be deductive as the research was started by carrying out a literature review and this clearly compared the empirical results and the major ideology is drawn from the theories that already exist in the research sector Economy Watch, (2010). The hypotheses were developed and after that, the study strategy was designed. In this study, a lot of information was collected by use of questionnaires which were distributed to the participants mostly online. Most of the information was numerical with some few cases of qualitative study that helped in describing and offering explanation of some factors. The methodological procedures used here were hence qualitative and quantitative (Saunders et al, 2003, p. 45). The questions in the study were set in a manner to help in identifying the factors that affected customer loyalty in Hong Kong insurance industry.

The aforementioned opinions were assessed by responding to the likert-type questions of five point as 1 = greater extent to level 5 – as lesser extent as to whether they agreed or disagreed with the types of questions asked or stated statements that characterized the loyalty factors in insurance industry (Saunders et al 2003, p. 45). The researcher distributed 354 questionnaires and the response was overwhelming as 325 were returned completely filled. This research selected the customer satisfaction ideology, perceived quality; trust in the service provider and commitment as the factors of analysis after looking at the bigger picture of Hong Kong’s social and cultural situation (Andreassen & Lindestad, 1998, p. 109).

Data Collection

In most researches, collection of data usually range from very simple observation in restricted location like within a company setting to expensive surveys in multinational firms across the world in different countries (Saunders et al 2003, p. 45). The research method can be very important and determines the way data is collected. Standardized tests, observation reports and questionnaires all collect the raw data primarily from the sources (Saunders et al 2003, p. 45). When collecting information to meet the aims of this study and the questions there two options involved here – primary information and secondary.

Following validation of the model, in order to use it in Hong Kong’s insurance sector, the researcher designed a questionnaire which was then distributed to the study sample and therefore the method that was used for this study to collect primary data was via questionnaires (Saunders et al, 2003, p. 45). The complete list of the studies cases form a sampling frame for any probability research from which the sample is drawn. As for the study questions in this case concern insurance company claims, so the sampling frame is composed of the complete list of the insurance clients in Hong Kong (Dick & Basu, 1994, p. 99). Use of all probability samples is very significant, it’s imperative to out into consideration the response rate. Business studies have in most cases shown very low response though questionnaires have a bigger response rate of up to 92%.

The researcher hence asked the clients in the study to answer the questions. The people who declined to take part in the study cited lack of time as the main reason for not participating. Questionnaires were given one on one hence about 93% response rates (Athanassopoulos, 2000, p. 193). To collect qualitative data, a survey was done to assess the model of customer loyalty in Hong Kong insurance industry. To assess the connection between the factors reported in observational reports of the survey, the questionnaires were used. For doing this in this manner, the factors of loyalty used in literature were evaluated.

Sample Selection

Random sampling technique was considered the most convenient and significant for this research. This means that all the members of the population had an equal opportunity of being chosen to take part in the study and there were no definite specification to participate than being a client of an insurance firm in Hong Kong (Sergio 2010, para. 3). Primary data was gathered specifically for a reason and the information was collected by the specific questions

Questionnaire Design

Due to the aforementioned reasons, the research used self-administered questionnaire to collect information, the primary data. Pertinently, this was a study being replicated after having been done in China before. The questions were designed to be able to fit the environment in Hong Kong. They contained personal information questions to collect information like age, sex and occupation among others.

The questions integrated all the factors that were found to influence loyalty from the literature review. Satisfaction, perceived quality and switch cost factors were investigated to greater extent by the questions designed (Athanassopoulos et al, 2001, p. 687). Trust and commitment also got to the questionnaire for investigation as they were indicated to be influential.

Main questions to meet objectives of study: these are the main questions that were purposely designed to evaluate the factors that influenced loyalty.

Switching intentions: Here, the questions included likert-scale questions. The response was set to 1 – strongly disagree, 2- disagree, 3 – don’t know (undecided), 4 – agree and 5 – strongly disagree. Questions were as; are you planning to switch your service provider? Do you plan on seeking services of another provider? (Medalla, 2007, p. 67) Would change your provider in the next 2-3 years?

Satisfaction: there were also rated on a five scale likert questionnaire with the main questions being as; are you satisfied with the services of your insurer? On the whole is your insurer doing enough to meet the promised service objective? Does the insurer meet your needs as a customer of insurance? (Binder & Ngai, 2009, p. 78). Is there a company that treats its clients better? Does the insurance company solve your problems?

Perceived quality: this is one major aspect of loyalty and the main questions here included; are you getting value for money services? Are your satisfied by the compensation plan set by the insurance company? Are the services being offered relevant to you as a customer? (Binder & Ngai, 2009, p. 78).Do the services or products meet the standards that you expect?

Results

Quality Service

The factors of service quality in insurance were extracted by use of the principle components model. Product quality (PQ) was described in six descriptions;

• PQ 1 – the insurance firms offers services that are considered to be of very high quality
• PQ 2 – the services offered by that particular firm are of higher quality than competitors
• PQ 3 – customer make repeat purchases because the services are excellent
• PQ 4 – the services and product that are provided by the firm are of consistent quality
• PQ 5 – the services/products always meet the expectations of clients and measure of standards (Medalla, 2007, p. 67)
• PQ 6 – the workers are courteous and friendly and are willing to go extra mile to assist clients

For the brand image (BI), it was rated as o assess whether the provider has established a good brand image in the industry. The derived customer loyal from the perceived quality would be they the customer recommend s the product to others (Bloemer, et al, 2006, p. 1372).

Table 1: Loading Factors for Product quality constructs

Item that loaded heavily on any particular factor imply that that factor was very essential. As noted, every item on every factor, the loading is more than 0.5 meaning that there was uni-dimensional variation that was backed by the high loading on every factor (Bloemer, et al, 2006, p. 1372). Also the Eigen factors also indicate that the values were greater that 1.0 which mean that the factors are not redundant with the previous extracted influencers.

When assessing how the satisfaction factors and perceived quality affected customer loyalty, it was noted that over three quarter of the responders agreed or strongly agreed (Buckinx et al, 2007, p. 32). Few were undecided on the issue while those who disagreed were just a handful at 10%. Observations were made at every level and the categorical variables and estimates of parameter obtained from every one of them. Quality is represented by six indicator variable and therefore the resulting in regression model by use of the variables to a standardised regression model as no scales were available (Buckinx et al, 2007, p. 32). This is critical in the interpretation as it allowed comparison of the coefficients in both direction and magnitude.

The tests were to be assessed before being allowed for use in the analysis. In order to assess how the model had conformed to the data, a computation of the McFadden Pseudo-R² was done. The mode gave a 17.2% pseudo –R² measure and this meant that the power of the model was superior to the contact probability. Likelihood ratio test like the proportional odds test was also done to compare equal probability of the mode. Test values were less than one and this allowed the process to proceed as it was good for the data.

Hypothesis Outcomes

Hypothesis 1 – this deals with product quality. This hypothesis shows that when a client perceives that the insurance firm was giving superior products or products of higher quality, and then the client would not wish to leave; rather she/he would recommend the company to friends and other peoples around them, Business Monitor International, 2010. Considering that the analysis if the PQ gave a positive result, then the hypothesis is supported and it’s statistically significant with high confidence interval. Odds interpretation of the product quality is that with one unit increase of the PQ, the will be a consequential odds increase that the client would strongly agree rather than disagree way to the question about loyalty when the other variable are held constant in this model (Sergio, 2010, para. 3). With a very high coefficient estimate of the PQ, the customers perception is increased regarding the product quality also implying that the customer would react in the direction of strongly agree when asked the customer loyal question when quality of service and the brand construct are held constant (Don, 2004, p. 68).

Hypothesis 2 – purports that when the customer purports that they are getting services of high quality from the providers, and then this customers are likely to recommend the firm to their friends and family. The coefficient of service quality was calculated to be +0.63885 and its statistical significance were at the level of 1%. The interpretation of this was that a unit increase in the service quality lead to increased odds that a client would react in the strongly agree way as opposed to the strongly disagree direction when responding to the customer loyalty issue when all variables are held constant (Don, 2004, p. 68). This hence increases the clients perception that service is of higher quality also suggesting that the clients would react to the loyalty question in the direction of strongly agree when brand image and quality of the product are held constant (Don, 2004, p. 379).

Hypothesis 3 – predicts very high probability that the clients would recommend the service to others when they are convinced that the brand image of that specific company is strong or when they are extensively aware of the brand. Brand image coefficients were calculated and found to be significant at a significance level of 5%. Moreover, these coefficient increases in size as the level of the brand image awareness increases and positive impacts customer loyalty and therefore supporting this hypothesis (Medalla, 2007, p. 67).

The odds interpretation of the brand coefficients and estimate of seven brand image level show that estimated odds that a clients who strongly agree that the insurers have good brand reputation, would as well strongly agree to loyalty question when product and service quality are held constant (John, 2003, p. 69). The same kind of interpretation applies to other brand coefficient of 5, 6 and 4. As seen, these coefficients are far much greater than the product and service quality. This is a clear indication that in the insurance industry, the client perception of the good brand company is likely to impact on loyalty more positively than perception of quality of product alone.

The study also observed that at a medium level of perceived quality of the product, there was an estimated 67 percent rate of customers who agreed that the provider had a strong brand image. Only 4 percent disagreed to this. This percentage would still recommend the services to others. About 38 percent of the clients who disagreed that the provider did not have a good brand were neutral or undecided about recommending the product to others (Sergio, 2010, para. 3).

Analysis

The analysis was carried out to test the reliability of the scales that were used in measuring the variables of the research especially in determining customer loyalty (IOD, 2009). The reliability of that variable indicated strong reliability. Hence it could be supposed that those factors that were integrated to assess customer loyalty were reliable. There was also a bivariate correlation that was set with the value of spearman’s rho and helped the researcher in drawing conclusions concerning the connection of the various variables as below. Customer loyalty was set as the dependent variable while brand, switching cost and trust or dedication as the independent variables (IOD, 2009). It’s pertinent to set the minimal points of selecting the hypotheses. Thus statistical idea means the two conditions of choosing to accept or reject hypotheses if P ≠ 0 and if α was less (<) than 0.05. It can be translated that the alpha value showed a two tailed graph test with significant level of less than 0.05. The p value was not equal to zero hence leading to acceptance of the hypotheses.

Table 2: Linear Regression

The above table reveals the value of R square to be 0.892, a value that suggests a variability in the dependent variable. This there follows that customer loyalty can be described 89.2% by the variability of the independent variables which are trust brand image and the cost of shifting. This also mean that linear combination of the independent variables when regression analysis is done forecast entire variance of the dependent variable; 89.2%.

Table 3: Stepwise Regression

Predictor: trust, brand, and switching cost

The above table reveals that only one independent variable (trust in this case) described the variability (88.2%) in the dependent variable – customer loyalty. This translates to mean that variability is described only (0.8% which is 89.1 to 88.3) by variability of customer loyalty, cost of switching only 0.1% by the other variability, the brand image. This can be translated that trust plays a bigger role in this research that expenses of switch from one company to the next alternative (Kindurys, 2009, p. 67).

Analyzing the Determinants to Understand Loyalty

There is a clear connection between the cost of switching and the development of customer loyalty. The product of the correlation analysis indicated that the expense of switching (r=0.839, p<0.01) had a strong positive connection with customer loyalty that could be validated significantly in the context of insurance in Hong Kong. Thus the outcomes of the correlation analysis have offered support for this premise. The outcomes of the stepwise regression analyses is a depiction of the switching expenses have impacted on the regression and allows indication of switching costs as being significantly associated with development of customer loyalty (Kuusik, 2007, p. 78). Switching cost alone explains the 0.8 percent of the entire changes observed in customer loyalty. Consequently, the outcomes of the stepwise regression have offered support for this idea.

The explanation to these findings is that the clients of insurance industry in Hong Kong are concerned about the cost of switching and thus show loyalty to that firm (Chen et al, 1999, p. 31). As many instance companies are presently competing against each other with strategically lower rates but competitive prices for clients and offer better services, customer find themselves with more time to shop. Introduction of switching fee restricts people from seeking other brands (Chinn et al, 1999, p. 659). As a consequence, having higher cost of retaining clients is an efficient instrument in insurance in Hong Kong (Chen et al, 1999, p. 31). This is the reason why the variability of customer loyalty was not explained by switching expenses.

There is a connection between brand and customer loyalty (r = 0.841, p<0.01) which has had a positive and significant relationship between the two factors of customer loyalty. The product of the correlation therefore offered the support of the ideology developed. Stepwise regression illustrates that brand image is incorporated in regression equation. This indicates that brand image is directly linked to customer loyalty. This is also the same as corporate branding or image. This further supports the ideology. Many customers in Hong Kong are not concerned about the brand the insurance companies built because many companies are foreign and therefore determining how these companies were perceived was hard (Chinn et al, 1999, p. 659). The branding of the company is of least priority since customers only look at the more objective factors when they lack information about the company (Dan, 2006, p. 123). Therefore they would rather consider factors like price of policies and the service delivery efficiency etc when selecting brands. This is why variability here was not described by big percentage.

Trust was seen to have a greater correlation with customer loyalty in the insurance industry of Hong Kong. Stepwise regression analyses indicate that trust was significantly correlated with customer loyalty in insurance. Trust as a factor was able to explain the 88.3% of the entire variation observed in customer loyalty. Hence the outcomes of the stepwise regression offered support for the claim that rust influenced customer loyalty. Trust in a firm played a critical role in developing loyalty among the insurers in Hong Kong (Dan, 2006, p. 123). This is a positive description of the findings. Since there were many firms in the market, there was a very competitive pricing strategy and better services in the market. Since many of them have managed to offer these competitive prices, customers now use their natural tendency of selecting the policy providers that offer trustworthy services and without cases or implications of dishonesty and iniquitous practices (John, 2003, p. 69; Sheth & Mittal, 2004, p. 487). This translates to mean that the customers have to firs developed the trust in order to be able to develop the customer loyalty (Foster & Cadogan et al, 2000, p. 185). Some companies have over the past been implicated in unfair practice, cheating and unethical operations taking advantage of the fact that Hog Kong was just a developing country recently and is now growing very fast. Since customers fear being cheated, they always look for recommendation from other people who have the information like fellow customers etc concerning the trustworthiness of the firm (Foster & Cadogan, et al 2000, p. 185). This is why trust is very critical in building consumer loyalty in insurance.

Discussion

Attitude or State of Mind?

Many marketers have often approached the idea of customer loyalty from two different perspectives as implied by the analyses of this study. First is the customer loyalty as an attitude thing while the second option purports that customer loyalty is behaviour (Ha & John, 2009, p. 1743). These two directions are all valid but they can have totally different impact on the company and result in different strategies of business.

From the attitude’ perspective, marketers have thought that customer loyalty was a state of mind. This means that customer would be loyal to a firm or a certain brand when they are positively influenced or referred by others (Ha & John, 2009, p. 1743). They just like the firm and its products and would prefer to buy from the rather than seek another competing company (Sheth & Mittal, 2004, p. 487). This way, clients can be willing to pay premium prices for the products of that particular company over another cheaper brand even when the products could be virtually the same (Ha & John, 2009, p. 1743). The factor here is the willingness aspect rather than the action of buying. Sometimes this is closely linked to satisfaction and firms using this strategy tend to focus on improving the quality of the product and branding to beat competitors.

In terms of behaviour, loyalty is built by the actual character of the customer despite the attitude or preferences that inspire that kind of act. This case, customers make a habit of buying from one firm and make re-purchase even recommending it to others (John, 2003, p. 72). Firms here focus on customer satisfaction, pricing and product quality because they know that the purchases are not as a result of actual loyalty but a behaviour that seem to be bring about some kind of loyalty. This approach is simple and practical as a company can use whatever resources and venture in any tactic that works fro them rather than spend a lot of time trying to understand the attitude of clients (John, 2003, p. 72).

However despite all the attempts to understand customer loyalty, the financial results of this have always been connected to the definition of loyalty because the objective of a business is to make profits (Kandampully, 1998, p. 431). The strategies that companies will use to increase customer loyalty would translate to profitability.

Loyalty Implication

The study has shown that there are several determinant of loyalty. In the insurance firms, switching costs is very important as a determinant. This is the cost that the client will have to incur in case she/he attempts to change company offering the services (Kandampully, 1998, p. 431). These are usually regarded as sunk costs. The insurer has to ensure that they fulfil their pledges or at least satisfy the expectations of the customers. When they fail to do this, the customers feel that they needs have not been satisfied. And can shift to another supplier whom they expect to fulfil their expectations (Michael, 2004, p. 81). Insurer can ensure that they do maximal time investment, money and energy in the clients that they find it very hard to switch. Here the customer will stay because of the perceived personal loss or sacrifice in terms of effort, time and other factors that have been built with the insurance firm.

Corporate image and branding of a firm in insurance is usually a tough job. However, these perception about and organization or a company can linger in the minds of the consumers for years (Michael, 2004, p. 81). This has been descried as the picture that comes to the mind of clients when a certain firm is mentioned. Basically the idea of branding is very successful in some cases since this is what sells the company to clients. Since the customer can be manipulated to believe certain things and their behaviour changed, getting into the mind of the customer is imperative for the success of this approach (Michael, 2004, p. 83). When customers are convinced that a certain brand is superior or that it caters for their needs, then they will tend to go back for repurchase of that brand hence developing customer loyalty. It’s been found that this is stimulated by the feelings and experiences that the customer is able to remember after encountering a product from a certain company (Román, 2003, p. 916). This information can at time be obtained from word of mouth or good adverts. Each client has unique hopes and discernments about a firm and its products or service’s quality. This directly affects re-purchase when the expectations are met or fail to be met (Peck, 2010).

Trust is very critical in business especially for insurance firms. This is because it’s from this that company and customer build long-term relationships (Román, 2003, p. 916). This means that customer can be able to purchase long term policies like life insurance, health insurance and others. This cannot be easily predictable but rather depends on the confidence that the firm can offer amid risk (Perppard, 2000, p. 312). Trust hence builds loyalty as indicated in the results and analyses since it not only predicts quality of services but also counteract insecurity that is usually present when making purchases. Trust builds confidence which translate into repeat purchases hence loyalty.

Achieved Loyalty

Loyalty is when a customer makes repast purchases for a particular firm as a result of positive attitude or better perception of the services being offered. The customer in this case only focuses on using that provider in case need arises. This creates very high possibility or renewing contracts, the customer would offer word of mouth recommendation to others and increasing patronage (Perppard, 2000, p. 312).

There are several benefits that come with the cost of switching on the firms that have a direct impact on customer loyalty. For instance, it reduces the customers’ price sensitiveness and even the level of their satisfaction (Reichheld et al, 2000, p. 46). When required to make a choice from a range of functionally similar products switching cost will always make the customers choose the product they are already using hence company loyalty. Switching cost directly affect the customer sensitivity to price level hence eventually affecting loyalty (Reichheld et al, 2000, p. 46). Switching cost increases satisfaction level.

Customers tend to remain loyal to an insurance company when they feel that the company has a positive image on the society or other consumers. Company image and brand are considered strong influencers of loyalty since it’s this image and brand that the customer use in drawing conclusions about a certain company (Ruyter et al, 1998, p. 436). Therefore companies have discovered that for them to remain in business, they have to keep a good image and develop customised brand that takes care of the needs o them consumers. The assessment of the Hong Kong market in insurance revealed that there are some physical and behavioural characteristic that influenced the image and its brand. The name of the company was a factor in this regard (Ruyter et al, 1998, p. 436). Other attributes included the types of services and products being offered, location of the company, and the way its staff communicate with the customers.

Developing long-term relationships in business can only be built on trust on a single provider. Many providers have cited trust as essential for business and the reason behind this s that customer would want to engage in less risky deals (Shankar et al, 2003, p. 153). When there is trust, the perceived risk is reduced and hence business between the clients and the provider thrives. This is also because trust results in positive assessment of the products of a firm in question like customised insurance services. This has a great impact on the attitude of the clients developing positive feelings.

No loyalty Guaranteed

Despite the fact that customer satisfaction was strongly associated with developing loyalty, there wee still some customers who strongly suggested that they would switch providers (Shankar et al, 2003, p. 153). This is a great challenge in insurance. The world report on insurance had stated that satisfied customers no longer guarantee loyalty in insurance. Whereas very few clients in Hong Kong had indicated being dissatisfied by the series of their providers especially policies like non-life insurance, about 40 percent switched between providers (Verhoef & Donkers, 2001, p. 189). The increased use of the internet was identified to have increased transparency in the industry and customers are better placed in accessing information about the companies thy liked or the type of product they needed and the specification as a well as the cost (Pirc, 2008, p. 67). With this, there is also increased bargaining power.

The impact of this technology has been that customers are growing to become self-sufficient, more price conscious and even less loyal to single providers (Verhoef & Donkers, 2001, p. 189). To serve customers who are more informed is very difficult and service providers will have to hone their tactics of retaining customers and work hard to achieve an intensive yet discerning perception of the exact things that the customers are looking for before making the decision to purchase their services (Homburg & Annette, 2001, p. 43). To enhance their capacity to more efficiently meet the needs of the customers and eventually attain profitability and retain clients, insurers have to look for gaining the comprehension of the exact drivers of customer loyalty – and fully collaborate with them for added value for customers (Sirdeshmukh et al, 2002, p. 16).

Recommendations and Conclusions

Customer Retention Strategy

A successful policy of retaining customers requires that there be an analysis of the data that the most convenient and proper level (Michael, 2000, p. 58). This is the client level. Regrettably, Hong Kong insurance has been sluggish in this sector and has only focused on analysing the profitability of the policies’ levels. The process of data mining can help the insurance firms to be more accurate in determining the policies and services that they can profitably offer to their clients (Don, 2004, p. 68b). This technique will also help the companies to carry out the sequential market assessment on the customer segmentation (Binder & Ngai, 2009, p. 78). For instance, analysing the percentage of the clients that own new auto insurance services or determining those who have purchased the home insurance.

The retention campaign should target the type of clients that are likely to change their services to another firm (Andreassen & Lindestad, 1998, p. 9). Database segmentation and the sophisticated techniques for modelling can help the analysts to be able to make more choices that are accurate for the target groups to be retained. The current policy owners that are likely to shift can be identified from the predictive model. Campaigns can then target these people for more positive outcome (John, 2003, p. 69).

Insurers should develop client relationships that will end up being long lasting in the insurance business. Many small firms are advantaged in this sector, as they are able to interact with their client on a more personal basis (Michael, 2000, p. 58). Nonetheless, the organisations grow and when they are larger, then the marketing and sales management start thinking in terms of the product development and disregard the client relationship (Ruyter, et al, 1998, p. 436). It is not unusual that in case the marketing units need to concentrate on how fast the insurance company can attract mass-appeal services to the market instead of how they can serve the individual needs (Kandampully, 1998, p. 432).

Customer-centric model is becoming very effective in get clients. With this in mind, many insurers are shifting from their traditional product-oriented designs of the past to this new model for better service provision (Michael, 2000, p. 58). The customer needs are addressed and the means of understanding the customers are being improved constantly. The market campaign analyses offer in-depth responses of what customers expect and this has served as the foundation of the service development for the future (Ruyter, et al, 1998, p. 436). Addressing clients’ needs, reactions and desires is necessary for implementing customer-centric model. The model is effective when the data mining process and customer management processing are integrated. This integration instigates cyclic relationship that can be used to assess the character of the customer as per what the marketer needs. The model can then help in predicting the behaviour of the clients (Lee, et al, 2001, p. 35).

Complaint Management

Effective campaign management seem to be the main tool to heal insurance firs survives the competition. Customer retention continues to be touted as the main sale driver in the insurance sector but the policies are only considered as commodities (OECD, 2009). For so long, the main factor in insurance has been the pricing of the policies. This has often subjected the customers to continuous barrage of the marketing messages concerning services that are affordable and convenient to pay (Lee et al, 2001, p. 35). Many people would not keenly assess the difference between one policy and another unless they are able to tell the difference in the pricing. This is why Hong Kong insurers get a hard time in retaining insured when it comes to prices and a time of renewal (Kandampully, 1998, p. 432). With websites available for clients to make comparisons, the situation is exacerbated. The consequence of this is that the individual companies then need to put more effort in explain the differences they have from the competitors. They are also forced to create better mean of engendering loyalty so that retention is assured. Being able to retain clients means profits for the insurance company (Foster & Cadogan, 2000, p. 185). This is because; upon renewal, the administration cost usually goes down. The expense of acquiring a new client is much higher to at least five times more than retaining. The habit has been developed because most client based on the price before deciding to buy new polices, however, it is the service that paradoxically keep them with the same company or want to switch to another (Foster & Cadogan, 2000, p. 185). According to research, moderately higher percentage of customers (57%) would purchase services at slightly higher prices if they were guaranteed of excellent services.

To be able to understand clients, the firm has to be an understanding one. Customer information is very critical and it builds the strategy to be used. The company can use information to identify the opportunities that are unexploited within the customer base (Perppard, 2000, p. 312). Many firms seem to overlook the fact the more efficient and more effective they handle customer complaints the more they influence the customer loyalty, which translates to more retention.

The way to move forward is to ensure that the complaint management is done effectively. The process should ensure total transparency over the customers, even the brokers, and the firms (Athanassopoulos, 2000, p. 192). The process should address difference viewpoints and use the feedback from the market and within itself to improve productivity. As the insurers implement procedures like the enterprise-wide model, of handling issues, consistency has to be assured (Michael, 2000, p. 58). When the firm managers to maintain data integrity across its services, then it is able for fulfil every gaol and serve every client well. Each complaint can be handles in time thus reducing the accumulation of complaints (Sirdeshmukh et al, 2002, p. 16). When there is transparency in managing complaints.

Manipulating the Loyalty Factors

As identified above, many researchers have linked customer retention with better claims management. This then translates into profits- Many firms have people dealing in the post- underwriting procedures or part of the business and have been able to make a wide range of meaningful improvements that translated into reduced workload for the claims personnel (Pirc, 2008, p. 67). Communication is also enhanced between underwriters and the clients (Michael, 2000, p. 58).

Currently there are a number of cases that prompt, efficient and targeted claims process that is essential in reducing the ratios and increasing service quality and hence customer loyalty. This is why investors portend that automation of all the process of insurance would be salvation for the understaffed firms or for the inadequately trained personnel (Pirc, 2008, p. 67). Giving this a more stringent assessment, public’s perception of the business is what matters. It is important that the firms also look into the fact that customers can lose trust in the form base on the automation process. This is because of security reasons considering that the private information with be on the websites or the company database (Reichheld & Markey, 2000, p. 45).

Customer loyalty can be enhanced by giving the customer full information about the products. Clarity in policy establishment is very critical because some clients fail to buy services from the firm because of complications in describing the services. If a client does not understand, how he/she will be served in the event they suffer the claim insured against (Ha & John, 2009, p. 1743). It is good to refer customers to other offices where they take a very long process to get compensation.

Implementing a good communication channel is very critical. Any organization needs to share information across the work staff and along the hierarchical ladder. Exchange of information is very critical as in most cases, it is through such types of information that people get to learn of very important skill and expertise (Ha & John, 2009, p. 1743). The firm also needs to improve on the customer relations. Dealing with clients with integrity is very important as it one of the ways that a company can create customer loyalty. In essence, the customer is the boss and final right of making the purchase. He/she has the money to spent, the need and the authority to make the decision to the company is obliged in most case to accommodate the wishes of the clients (TheLowtax.com, 2010, para. 4).

In order to overcome the resistance by clients to make actual purchases on line, the businesses will pioneer the use of visual tools, personalize the services and adopt a liberal delivery and return policy (TheLowtax.com, 2010, para. 4).. The business will also offer a small token to online shoppers to fill information regarding their likes, preferences and tastes in customer database. The business will exploit the fact that everyone likes being appreciated and as a result the clients who frequently visit the website will be sent emails of appreciation, magazines, and newsletters (Pirc, 2008, p. 67).

Internet marketing has been very important over the recent past since it is the fastest growing media in the world. Business is turning on line because of the ability of the media to reach a wider audience or clients (Chinn et al, 1999. P. 659). On the other hand being a direct method of selling and as a consequence, there are many sales that can be seen this way (Ha & John, 2009, p. 1743). Considering then cost, internet is cheaper compared to other media of promoting sales and since apparel and accessories are currently advertised through paper and electronic media and the internet, the selling on the internet is appropriate.

Conclusion

If there insurance sector is experiencing a silver lining amid financial meltdown, then this is it, reestablishment of fundamental business principles that appear to have been abandoned may not have been correctly instituted in the first place. The existing economic shakeout offers a chance for the insurance companies to place themselves in the economy for long-term successes. The only choice that Hong Kong insurer has so as to ensure sustained profits is by offering greater quality to their customers. Becoming customer centric and optimizing the client lifetime quality, insurers have to put into consideration the following five variables that can develop value to the consumers and insurance providers.

Coverage: here is where the firms should consider the type of cover to offer for every client. It’s evident that different people have different degrees of tolerance to threat. This means that they also have different requirements for their insurance covers. The type of coverage has varied needs and preferences like a new couple, youths etc. The firms should proactively provide the proper coverage options for every clients and the appropriate time.

The Cost: at what proper price should the services be offered? The pricing of services is still the traditional risk-based model that concentrates on the insurance from the viewpoint of the insurer, and fails to consider the client viewpoint. Insurers can improve their prices by realizing that there are important parameters that matter and affect price for different customers and incorporate such things into their product-service-price strategies for every client.

Convenience: how vital is expediency and time to the client? Customers have different preferences when convenient comes to question. Whereas some would like to work via an agent, others would rather deal online. Convenience to cost comes first to some clients and prefer bundled solution with ease to the one stop shopping phenomenon. Others like to visit different areas of shopping to get the best prices. Being able to understand such preferences for every client and how to adjust with time can assist in matching the services of the insurer to the needs of the clients.

Care: what is the degree of service and care that have to be given to every client? Though a claim is perceived as an expense commodity to the insurer, it gives the firm an opportunity to increase customer satisfaction, develop loyalty and boost retention. The customer lifetime worth offers the insurer the capacity to optimize the claim procedure in order to balance these expense and retention model and maximize the worth for every client.

Compliance: how call everything that regard insurance while still maintaining compliance with regulating rules still in place. To ensure that there is a good consumer relationships, the lifetime quality maximization structure have to include regulations, which are dissimilar from state and state and also in different nations. The outcomes of value optimization could be greatly rewarding. Insurers that have already used this approach have achieved greater growth and profitability in the Hong Kong’s competitive market of insurance.

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Tables

Table 1: Loading Factors for Product quality constructs

Table 2: Linear Regression

Table 3: Stepwise Regression