The role of “trust” in building customer loyalty in insurance sector- A study

Abstract

Numerous policyholders are indispensable for insurers for their survive and prosperity in today"s competitive business environment. Customers can purchase different and more policies from the same providers and renewal their agreements before expiry date if they have trust on their respective providers Insurers provide to customers promises so that trust is more essential for insurance sectors. "Trust is particularly important within service industries because of the abstract nature of most service products"(Coulter and Coulter3,2003). It is observed that Ethiopian insurance industry faces a challenge of high customer churn rate. Customers are lapsed increasingly from the existing providers in which the defect customer damages the company by spreading company bad experiences to others and decreasing income of the company as they may not renewal one or two or three of the policies. An empirical insurance survey (Ernst & Young 2012) made on Indian life insurance shows that 33% of customers explained price is a factor in their insurance provider selection, company trustworthiness (69%), customer service (43%) and convenience (38%). This means that trustworthiness is uniquely essential in insurance sector as insurance company is selling promises. Thus, this study aims at to analyze the role of trust in building customer loyalty in the insurance sector. In order to achieve this objective, non-experimental study was designed for this study and to elicit policyholders" attitude, structured questionnaires were designed, and then analysis is made and results are explained. Pearson correlation and Regression analysis were used to examine the relationships between customer trust and customer loyalty using SPSS 16.0 and the result of the study indicates that customer trust has direct and positive relationships to customer loyalty.