ROLE OF SOME FACTORS ON CUSTOMER SATISFACTION IN THE INSURANCE

INDUSTRY IN KAGESHWORI MANAHARA, WARD NO. SIX

A Project Report

Submitted to the

School of Mathematical Sciences

Institute of Science and Technology

in

Partial Fulfillment of the Requirements for the

Bachelor’s degree of Mathematical Science

Submitted By

Sanjeeb Khatiwada

School of Mathematical Sciences

Roll No: BMS128/075

T.U. Reg. No: 5-2-28-70-2018

 TABLE OF CONTENTS

Content Page

TABLE OF CONTENTS ii
LIST OF TABLES v
TABLE OF FIGURES vi
LIST OF ACRONYMS /ABBREVIATIONS vii

CHAPTER I: INTRODUCTION 1-3

1.1 Background of the Study 1

1.2 Statement of the Problem 2

1.3 Objectives of the Study 2

1.4 Hypothesis of the Study 2

1.5 Significance of the Study 3

1.6 Limitations of the Study 3 1.7 Organization of the Study 3

CHAPTER II: LITERATURE REVIEW 4-8

2.1 Introduction 4

2.2 Review of Related Literature 4

2.3 Research Gap 8

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CHAPTER III: RESEARCH METHODOLOGY 9-16

3.1 Conceptual Framework 9

3.1.1 Variable Definition 10

3.2 Research Design 12

3.3 Type of Research 14

3.4 Sampling Area 14

3.5 Population and Sample Size 14

3.6 Sampling Technique 14

3.7 Survey Technique 14

3.8 Model Specification and Data Analysis 15

3.9 Analysis Software 16

CHAPTER IV: DATA PRESENTATION AND ANALYSIS 17-25

4.1 Introduction 17

4.2 Demographic Information of Respondents 17

4.3 Factors Impacting Customer Satisfaction 18

4.4 Structural Equation Modeling 20

4.4.1 Assessment of the Measurement Model 20

4.5.2 Structural Model 22 CHAPTER V: SUMMARY, CONCLUSION AND

RECOMMENDATION 26-27

5.1 Summary 26

5.2 Conclusion 27

5.3 Recommendation 27

REFERENCES 28-29 ANNEX 30-33

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 LIST OF TABLES

Table No. Table Name

Page
4.1 Demographic Information of Respondents 17
4.2 Statistical Value of Likert Scale Measurement 18
4.3 Construct Reliability and Validity of Reflective Constructs 20
4.4 Discriminant Validity – Fornell Larker Criterion 20
4.5 Discriminant Validity – Heterotrait-Monotrait (HTMT) Ratio 21
4.6 Model Fit 22
4.7 Path Coefficient and p-values 23
 LIST OF FIGURES

Figure No. Figure Name Page no.

Figure 3.1 Schematic Diagram of Conceptual Framework 10

Figure 3.2 Stages of Research Design 13

Figure 3.3 Structural Model with Path Coefficients and P-values 23

 vi

LIST OF ACRONYMS /ABBREVIATIONS

SPSS Statistical Packages for Social Sciences

CS Customer Satisfaction
CI Customer Image

PV Perceived value

PF Price Factor

CL Customer Loyalty

SQ Service Quality

PLS SEM Partial Least Square Structured Equation Modelling

AVE Average Variance Expected

HTMT Heterotrait-Monotrait

Std. Deviation Standard Deviation

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 CHAPTER I INTRODUCTION

1.1 Background of the Study

The emphasis on customer-centric marketing theories has drawn a lot of attention from scholars and
practitioners in the marketing literature. Both practitioners and scholars are increasingly looking for ways
to understand, attract, retain, and build intimate long-term relationship with profitable customers (Kotler,
2006; Gronroos, 1994). Making sure that current customers are happy is one of the major targets of the
customer-centered marketing paradigm. Organizations have therefore been researching and creating
techniques to please customers and provide customer delight. Because of the liberalization of the
financial services sector, insurance companies are operating in a highly competitive market so
consequently focus on enhancing customer satisfaction and loyalty by improving service quality,
customer interaction, image, and reputation. As an important component of their marketing strategy,
service quality, customer satisfaction, and customer loyalty are now recognized by businesses as being
increasingly important for maximizing profit. Customer satisfaction is a basic concept in
marketing an and important goal for the organization (Rizan, Ari and Dewa, 2014). Customer
satisfaction is a cornerstone of all marketing activities.

The impact of satisfaction on business performance, on the other hand, can be viewed from two aspects -
behavioral and psychological. The first aspect relies on understanding that customer satisfaction
influences the resulting behavior, such as: re-purchase (Trasorras , 2009), customer loyalty (Bowen and
Chen, 2015), giving recommendations to others (Ulaga and Eggert, 2006), but also purchase cessation,
complaints, negative verbal advertising, in case of lower satisfactory degree of complete dissatisfaction.
The second, psychological aspect of customer satisfaction is emphasizing satisfaction dimension that
does not have to be linked to the future behavior of the customer, but to his inner feeling, in terms of
"with consuming, the customer fulfills some need, desire, goal, etc. which gives satisfaction". This means
that the satisfaction has to be viewed as a predictor of coordination and continuity in the process of
relation developing (Ulaga and Eggert, 2006). Therefore, through the satisfaction and continuity of the
relationship, both sides have to develop desire for growth. The presence of both dimensions determines
the cumulative satisfaction which is a necessary but not sufficient condition for buyer's loyalty.

Numerous studies have shown that perceived quality of service is an important determinant of customer
satisfaction and loyalty (Lovelock and Wirtz, 2011; Wilson, 2012; Moreira and Silva, 2015). This

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 influence can be reached through degree of satisfaction, considering that the concept of customer
satisfaction and service quality concept are connected, and often they are identifiable. The customer is the
ultimate arbiter of what constitutes customer satisfaction. We will be better able to win their trust and
establish ourselves as their go-to supplier if we recognize and embrace our consumers' perceptions of our
products and services as reality as soon as possible. The choice of the most significant aspects that satisfy
customers over others is the most important strategic planning choice in the quest of customer
satisfaction. Further research on the key factors of satisfaction and loyalty in insurance should be
emphasized, and studies should include quality, image, price, etc. to examine the perception value that led
to customer satisfaction and loyalty.

1.2 Statement of the problem

Due to intense competition, practically all businesses struggle to attract new customers and keep hold of
their current customers. The insurer experiences policy holders switching to competitors despite their best
attempts to keep clients with them. Customer retention is one of the most important difficulties the
insurer faces. Long term retention of customers is a significant issue.

Hence, this study works around the research question whether the factors Corporate Image, Service
Quality, Price, Perceived Value affect customer satisfaction in the insurance industry in kageshwori
manahara, ward no. 06?

1.3 Objective of the Study

The objective of the study is to analyze the role of corporate image, service quality, price, perceived value
on customer satisfaction in insurance in kageshwori manahara.

1.4 Hypothesis of the Study

The hypothesis of the study is:

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 i) There is significant role of corporate image, service quality, price, perceived value on customer
satisfaction in insurance in kageshwori manahara.

1.5 Significance of the Study

The study will be significantly helpful to the management of insurance firms, the findings and conclusion in
this study will offer a more trustworthy scientific measure and perspective for describing and evaluating the
degree of their customer satisfaction. The study's primary contribution will be to examine the effects of many
elements on customer satisfaction in the insurance industry, including price, corporate image, service quality,
and perceived value. The analytical findings will show the importance of quality and image in influencing
perceived value and customer satisfaction and offer management suggestions for Nepalese insurance
businesses to consider to build a loyal customer base.

1.6 Limitations of the Study

i) The area of study is limited to Kageshwori Manahara, Ward no.06 which may constrain the quality of
study. ii) Data collected through questionnaires may be biased, due to perceptual biasness. iii) All the
limitations of the primary data will be applicable. iv) Limited variables are used in this study.

1.7 Organization of the Study

Chapter one includes background of the study, statement of the problem, objectives of the study,
hypotheses of the study, significance of the study and limitation of the study. Chapter two includes
relevant literature review and research gap. Chapter three includes conceptual framework, research
design and types of research, sampling design, statistical tool, and analysis software.

CHAPTER II

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 LITERATURE REVIEW

2.1 Introduction

This chapter includes review of studies already carried out both at national and international level in the
insurance sector. The review of literature can provide information and an overview of the topic and it’s
existing research findings. Some of the important journal articles and working papers related to research topic
have been reviewed from their primary source.

2.2 Literature Review

Bhuvaneswari and Sinchu (2016) published a journal article titled “A Study On Customer Satisfaction Level
Of LIC With Special Reference To Customers Of Malappuram District”. The main objective of the study was
to analyze the customer satisfaction level of LIC. Other objective were to analyze what are the factors
consumers consider while thinking of an investment and to suggest necessary recommendations for
improving the services of LIC. Data was collected from both primary and secondary sources. Study was
confined to Malappuram District. 80 Customers were selected for study. Random sampling technique was
used. For the purpose of analysis, the data was further processed by using statistical tools. The statistical tools
were simple percentage and graphs.

The major findings of the study were that out of 80 respondents who were taken for the study , it was
identified that (80%) of the respondents were male, (45%) whose age group was above 30 to 40 years, most
(60%) were above graduate, customers belonging to the income group of 50,000 to 200,000 were taking
most (35%) of the LIC policy, most (40%) of the customers were selecting LIC policy due to its credibility,
most (60%) of the policy holders were satisfied with the LIC, most(65%) of the customers were satisfied
with agents after sales services, most (75%) of the policy holders were satisfied with the speed of claim
settlement, most (50%) of the customers investing in LIC were for generating current income and growth in
investment.

The recommendations of the study were measures were to be adopted for increasing the awareness about the
policy among customers. There was need to adopt effective performance appraisal system to increase the
efficiency of agents and employees. More intimate customers relationships helps the corporation to retain

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existing customers and to capture more and more customers. Change their traditional style because the young
people give preference to private insurance companies.

The limitation of the study was that the analysis based on the questionnaire covered only policy holder from
Malappuram district and the sample was relatively small compared to entire population. Also, the study used
only simple percentage-based analysis.

Gamage and Perrera (2019) had conducted a study on “Determinants of the Customer Satisfaction in Motor
Insurance “. A case of Colombo, Sri Lanka. The main objective of this study was to identify the existing
situation of service quality and customer satisfaction, to identify the relationship between customer
satisfaction and consumers behavioral intentions and to identify the key service quality determinant provided
by the motor insurance industry in Sri Lanka towards the customer satisfaction. The population of this study
was the motor insurance policy holders in Western Province and the data was collected from a sample of 125
motor insurance policy holders to represent five general insurance companies. Data collection was done via
primary data collection method with the use of structured questionnaires. Primary data collection for this
study was obtained via policyholders of Sri Lanka. Self-administered structure which includes closed
questions in retrieving data affecting customer satisfaction and retention. The questionnaire was developed in
order to collect primary data with five-point Likert’s scale of Strongly Agree (5), Agree (4), Neither agree nor
disagree (3), Disagree (2) and Strongly Disagree (1). The secondary data has also been collected from the
Annual Reports of Insurance Board of Sri Lanka, journals, books, magazines, and from the search of web
sites etc. Collected primary data was analyzed using Minitab software and SPSS technique. To extend the
objectives of the research, data were analyzed using descriptive statistical techniques, correlation coefficients
analysis and regression analysis.

The major finding of this study was that Tangible and assurance are functional quality dimensions it can
found that motor policyholders were almost disagree with their existing situation. Other functional quality
dimensions such as reliability, responsiveness, and empathy, it can identify that motor policyholders were
neither disagree nor agree with their existing situation. Furthermore, it can identify that reliability has the
highest mean value when compare with other variables. Price, technical quality, and image quality
dimensions it can be identified that general policyholders were almost disagree with existing price
affordability, but when consider about the technical quality and image quality can be found that general
policy holders were neither disagree nor agree with their existing situation. When considering about the

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existing situation of customer satisfaction it can be identified that averagely motor policy holders were
neither disagree nor agree with the existing situation.

The strength of this study was the use of correlation coefficient analysis, it can be identify that there was
strong positive relationship between functional quality dimensions with customer satisfaction, except tangible
and assurance dimensions; When consider about the P value of functional quality, price, technical quality, and
image quality, it can be recognize that P values of all four variables less than 0.05, except functional quality
tangible dimension. The present study provides empirical support that customer satisfaction in the industry
could be significantly influence by improving upon the customer perception of the Reliability of the service
provider.

Leninkumar (2019) published a journal article titled “Antecedents Of Customer Satisfaction”. The objective
of the study was to analyze the relationship between service quality and customer satisfaction, to analyze the
relationship between customers perceived value and customer satisfaction, to analyze the relationship
between customer trust and customer satisfaction, to analyze the relationship between bank image and
customer satisfaction. The study population comprised of customers of selected commercial banks in
Northern Province of Sri Lanka. Primary data was collected through questionnaire which consisted of three
parts namely, Part-I,
Part-II, Part-III. Part I comprised introductory questions like customers’ primary bank, type of account,
frequency of visit per month and Part-II related to demographic information such as age, gender, education
level and monthly income. Part-III encompassed research information which included the statement focusing
on the constructs service quality, perceived value, customer trust, bank image and customer satisfaction.
Fivepoint Likert scale was used to measure the response. Questionnaires were issued to 300 customers of
four commercial banks and 237 were selected for sampling. SPSS was used to analyze the data.

The major findings of the study were that it indicated the Cronbach alpha of service quality was 0.882,
perceived value 0.8, customer trust 0.837, Bank image 0.705 and for customer satisfaction 0.893 which
showed that all estimations of Cronbach alpha were above 0.7 which was acceptable, and it revealed that the
service quality, perceived value, customer trust, bank image and customer satisfaction have good internal
consistency. Related to the characteristics of respondents it was found that respondents of government banks
dominate (62.6%) percent compared to respondents of private banks. Majority of the respondents (74.2%)

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have savings account while remaining are the account holders of current deposits, fixed deposits, and loan.
Judging the period of relationship with the bank showed 37.5% of respondents have been with the bank for
more than 10 years and nearly (43%) of respondents were with the bank for last 3-10 years. It was also clear
that female respondents (53.9%) are higher than male respondents. Based on the age group of respondents,
the group aged 28 to 37 years has the highest percentage, which is (49.1) %. The mean value of all the
constructs were between
3.6879 and 3.9431 which shows the higher levels of constructs. The result of Pearson’s Product Movement
Correlation analysis between perceived service quality and customer satisfaction, the correlation coefficient
was 0.768, which was significant at the p- value of 1% (sig. 0.000). As per this test, the null hypothesis was
rejected, and the alternative hypothesis was accepted since r>0. Similarly, correlation coefficient between
perceived value and customer satisfaction was 0.431 which was significant at the p-value of 1%, correlation
coefficient between customer trust and customer satisfaction was 0.624 significant at p-value of 1%,
correlation coefficient between bank image and customer satisfaction was 0.672 significant at 1%.

The major recommendation of the study was that the influence of service quality on customer satisfaction
was comparatively higher than other constructs so, improvement in the service quality was very essential to
increase the customer satisfaction where the customers also expecting high quality of service in all their
interactions due to the high competition in the banking industry. When higher the quality of the service then,
higher the customer satisfaction. Thus, banks should find out the ways to improve the quality of service more
than their competitors. Bank should give more benefits to the customers than the cost spent by the customers
which can create more delighted customers.

The strength of the study was that it measured the internal consistency of the variables. To test the hypothesis
Pearson’s Product Movement Correlation Analysis and regression analysis were used. The study gave
suggestion for the future research. In future researchers were suggested to focus on the factors uncovered in
this study. All the limitations of the primary data were applicable to this study. There is a chance the
respondents were biased.

Sarmad, Younas, Raza, Razzaq and Younas (2020) published a journal article titled “Impact Of Customer
Satisfaction And Attitude Towards Insurance Company”. The objective of the research were to study
customers satisfaction towards investment in life insurance company, to study customers attitude towards
investment in life insurance company, to study the willingness of the policy holders to buy life insurance

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policy, to study the market values of life insurance companies, to measure the awareness about life insurance
policies. Descriptive research method was designed for measuring the customer satisfaction and attitude
towards Life Insurance Companies. Primary data was used to analyze the satisfaction and were collected
through questionnaire. The raw data was collected through survey and online methods. Suitable statistical
tools like percentage analysis, cross tabulation was used.

The major findings of the study were that out of 103 respondents who were taken for the study, it was
identified that most (69.9%) of the respondents were male, (40.8%) of the age group 20-30, most (48.5%)
were performing permanent jobs, most (62.1%) are earning 40-50k per month. Most (68.9%) respondents
were aware about insurance policies, most (84.4%) have invested in insurance sector, most (41.7%) were
satisfied with their investment in insurance sector, most (60.1%) were interested to invest in Government
companies, most (54.3%) were of the opinion that Children Benefits policy as a better. Most (63.1%)
disagree that insurance provide Wide risk coverage, most (37.8%) strongly disagree that insurance there was
reasonable premium charged, most (38.8%) disagree that there was quick settlement of claims, most (42.7%)
were neutral to the image and goodwill. Most (39.8%) were investing in insurance for family protection, most
(49.5%) were influenced by friends & family to get insured, most (86.4%) didn’t receive any insurance
claims, most 66.9%) believed that insurance is good to secure risk, most (53.3%) think that insurance is not
necessary. The findings show that there was significant impact of customer satisfaction towards the insurance
sectors.

The limitation of the study was that there were no major recommendation. All the limitations of the primary
data were applicable to the study. The study only used Simple percentage-based analysis. The study was
restricted to Burewala area and hence the result of the study cannot be generalized.

2.3 Research Gap

After reviewing the literature related to customer satisfaction certain gap has been found. Although customer
satisfaction and loyalty in the insurance industry have recently drawn more attention, few other scholars in
Nepal have looked at these topics. It is impossible to generalize for the Nepalese market from results from
studies of other countries. It is important to understand the factors that affect customer satisfaction and

8
loyalty in the insurance sector of Nepal as it enters this phase of expansion. This study examines the crucial
elements for customer satisfaction and loyalty in the insurance industry in Nepal in order to fill a gap in the
literature. As a result, it is useful to identify and recognize factors affecting Customer satisfaction in the
insurance market.

CHAPTER III

RESEARCH METHODOLOGY

3.1 Conceptual Framework

Measurement Theory

This theory indicates the measurement of latent variables through reflective and formative approach.
Corporate Image (CI), Service Quality (SQ), Price Factor (PF), Perceived Value (PV) and Customer
Satisfaction (CS) are modeled on the basis of reflective approach. The measurement model represents the
theory that specifies how measured variables come together to represent the theory (Statistics Solutions,
2022).

Structural Theory

Structural theory represents the theory that shows how constructs are related to other constructs. This theory
specifies the path relationships between structural models (Statistics Solutions, 2022). The variables on the
left side of the path model are independent variables, and the variable on the right side is the dependent
variable.

By identifying variables, the following conceptual framework is developed. The framework is presented in
Figure 3.1

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 Figure 3.1-Schematic Diagram of Conceptual Framework

3.1.1 Variables Definition

Customer satisfaction: Woodruff (1997) defined customer satisfaction as an overall positive or negative
feeling about the net value of services received from a supplier.

It evaluates whether the customer was satisfied with the insurance services, insurance transaction, and their
relationship with the insurance company.

CS1: I feel satisfied with the services provided.

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CS2: I feel satisfied with my insurance company.

Corporate image: Ene and Ozkaya (2014) defined corporate image as all kinds of impressions that the
community makes about a corporation.

It evaluates the extent of customer perception on media channels, corporate social activities, innovative
activities, and business ethics of the insurance company.

CI1: The insurance company frequently appears in media channels (newspaper, social media…)

CI2: The insurance company is open and always interacts well with customers.

CI3: The insurance company always shows business ethics.

Perceived value: Zeithmal (1998) defined perceived value as the customers overall assessment of the utility
of a product or service based on perceptions of what is received and what is given.

It evaluates the degree to which customers believe that the advantages, insurance protection, and value of
insurance products.

PV1: The company’s insurance policy provides additional benefits.

PV2: The insurance coverage meets my expectations.

PV3: I am generally aware about the value of insurance products that I had purchased.

Service quality: Gronross (1984) explained the service quality as the outcome of the evaluation process
where the customer compares his/her expectation with the service he/she perceives while he/she actually
received.

It measures the extent of customer perception of the terms and the clause of the insurance contract, keeping
promises, customer services, and insurance policies of the insurance companies.

SQ1: The insurance company provides the services as promised.

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SQ2: The insurance company provides customer service quickly.

Price:

It describes the extent of customer perception of insurance charges, and promotions of the insurance
company.
PF1: Insurance charges are very reasonable.

PF2: Insurance company has many attractive promotions for customers.

3.2 Research Design

This research is qualitative in nature. It will focus on the factors affecting customer satisfaction and loyalty in
insurance sector. This research describe factors influencing customer satisfaction and loyalty regarding
insurance. It was conducted via survey for primary data. A research questionnaire was provided for the
survey.
The research design is presented in Figure 3.2.

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13
Figure 3.2- Stages of Research
Design

Role of some factors on customer satisfaction in insurance industry

Exploratory
Research
Technique

Primary Data: Survey

Research Objective:
To analyze the role of corporate image, service quality, price and
perceived value on customer satisfaction in insurance industry in kageshwori manahara
-06.

Methodology Design: Qualitative

Descriptive Questionnaire

Likert scale Nominal, Ordinal and Interval sacle

Selection of
ExploratoryResearch

ConvenientSampling

Data Gathering

Data Processing and Analysis

Conclusion and Report

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3.3 Type of Research

Qualitative type of data is used. The self-administered questionnaire is used in order to collect related
information from policyholders.

3.4 Sampling Area

The Sampling is conducted in Kageshwori Manahara, Ward no. 06, Kathmandu via field survey.

3.5 Population and Sample Size

Respondents are insurance policyholders from Kageshwori Manahara, Ward no. 06, Kathmandu. A sample of
100 policyholders was collected.

3.6 Sample Technique

Convenient sampling technique is used for the collection of data from the respondents.

3.7 Survey Technique

Different questions on different sections were presented in the questionnaire. The questionnaire consisted of
single response and Likert scale for collecting the information from the respondents. 5-point Likert scale is
used ranging from “Strongly Disagree” to “Strongly Agree”.

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3.8 Model Specification for Data Analysis

After the collection of data, the data is to be edited, tabulated and programmed in accordance to the variables
identified. After that, the data obtained was descriptively analyzed using statistical measures like mean,
median, mode and standard deviations. Further, Partial least squares structural equation modelling, PLS-
SEM, is used to explore and confirm the causal relationship between variables which have been defined
above.

The measurement model is:

For reflective measure,

𝐶𝐼1 = 𝜆𝐶𝐼1𝐶𝐼 + 𝜀𝐶𝐼1 𝐶𝐼2

= 𝜆𝐶𝐼2𝐶𝐼 + 𝜀𝐶𝐼2

𝐶𝐼3 = 𝜆𝐶𝐼3𝐶𝐼 + 𝜀𝐶𝐼3

𝑃𝐹1 = 𝜆𝑃𝐹1𝑃𝐹 + 𝜀𝑃𝐹1

𝑃𝐹2 = 𝜆𝑃𝐹2𝑃𝐹 + 𝜀𝑃𝐹2

𝑃𝑉1 = 𝜆𝑃𝑉1𝑃𝑉 + 𝜀𝑃𝑉1

𝑃𝑉2 = 𝜆𝑃𝑉2𝑃𝑉 + 𝜀𝑃𝑉2

𝑃𝑉3 = 𝜆𝑃𝑉3𝑃𝑉 + 𝜀𝑃𝑉3

𝑆𝑄1 = 𝜆𝑆𝑄1𝑆𝑄 + 𝜀𝑆𝑄1

𝑆𝑄2 = 𝜆𝑆𝑄2𝑆𝑄 + 𝜀𝑆𝑄2

𝐶𝑆1 = 𝜆𝐶𝑆1𝐶𝑆 + 𝜀𝐶𝑆1

𝐶𝑆2 = 𝜆𝐶𝑆2𝐸𝑂 + 𝜀𝐶𝑆2

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The structural model is:

𝐶𝑆 = 𝜆𝑋𝐶𝑆𝑋 + 𝜀𝑋𝐶𝑆

Where,

X= CI, SQ, PF, PV

ε = Error term

𝜆x = Path coefficient of respective path x.

(Tachhekar & Khadka, 2020)

3.9 Analysis Software

SPSS is used for descriptive analysis of the collected information and Smart PLS 4 was used for analysis of
collected data.

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 CHAPTER IV

DATA ANALYSIS AND PRESENTATION

4.1 Introduction

In this chapter, the collected data is presented along with the interpretation of different statistical tools applied
for the analysis of the data followed by the discussion of the findings of the research report.

4.2 Demographic Profile of Respondents

Table 4.1: Demographic Information of Respondents

Demographics Values Percentage

(%)
Gender Male 70%
Female 30%
Age Group 20-29 35%
30-39 34%
40-49 23%
50+ 8%
Level of Education SLC or below 2%
+2 completed 13%
Bachelor's Degree 47%
Master's Degree or above 38%
Occupation Student 13%
Employee 49%
Business 19%

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 Self Employed 13%
Retired 6%
Monthly Income Below 20000 13%
20000-39000 27%
40000-59000 30%
Above 60000 30%
Source: Survey 2022

4.3 Factors that impact Customer Satisfaction

In this section, statistical analysis of responses of questions asked in a five-point Likert scale which represent
the factors that impact Customer Satisfaction and Loyalty is presented in Table .4.4. Table 4.2 Statistical
Value of Likert Scale Measurement
Statement Mean Percentage of Std. Deviation Mode
Mean
CI1 3.84 76.8 0.884 4
CI2 3.91 78.2 0.944 4
CI3 4.05 81 0.936 4
SQ1 3.61 72.2 0.973 3
SQ2 3.48 69.6 0.926 4
PF1 3.49 69.8 0.999 3
PF2 3.89 77.8 0.993 4
PV1 3.84 76.8 1.37 5
PV2 3.8 76 1.054 5
PV3 3.49 69.8 1.078 3
CS1 3.39 67.8 0.931 3
CS2 3.66 73.2 0.966 4
Source: Survey 2022

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The first statement is “The insurance company frequently appears in media channels (newspaper, social
media…”. The mean value for this statement is 3.84 which means that 76.8% of the respondents agree with
this statement. The mode value is 4 which indicates that the respondents agree with this statement.

The second statement is “The insurance company is open and always interacts well with customers”. The
mean value for this statement is 3.91, which means that 78.2% of the respondents agree with this statement.
The mode value is 4 which indicates that the respondents agree with this statement.

The third statement is “The insurance company always shows business ethics”. The mean value for this
statement is 4.05, which means that 81% of the respondents agree with this statement. The mode value is 4
which indicates that the respondents agree with this statement.

The fourth statement is “The insurance provides the services as promised”. The mean value for this statement
is 3.61, which means that 72.2% of the respondents agree with this statement. The mode value is 3 which
indicates that the respondents are neutral with this statement.

The fifth statement is “The insurance company provides customer service quickly”. The mean value for this
statement is 3.48, which means that 69.6% of the respondents agree with this statement. The mode value is 4
which indicates that the respondents agree with this statement.

The sixth statement is “Insurance charges are very reasonable”. The mean value for this statement is 3.49,
which means that 69.8% of the respondents agree with this statement. The mode value is 3 which indicates
that the respondents are neutral with this statement.

The seventh statement is “Insurance company has many attractive promotions for customers”. The mean
value for this statement is 3.89, which means that 77.8% of the respondents agree with this statement. The
mode value is 4 which indicates that the respondents agree with this statement.

The eighth statement is “The company’s insurance policy provides additional benefits”. The mean value for
this statement is 3.84, which means that 76.8% of the respondents agree with this statement. The mode value
is 5 which indicates that the respondents strongly agree with this statement.

The ninth statement is “The insurance coverage meets my expectations”. The mean value for this statement is
3.8, which means that 76% of the respondents agree with this statement. The mode value is 5 which indicates
that the respondents strongly agree with this statement.

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The tenth statement is “I am aware about the value of insurance products that I had purchased”. The mean
value for this statement is 3.49, which means that 69.8% of the respondents agree with this statement. The
mode value is 3 which indicates that the respondents are neutral with this statement.

The eleventh statement is “I feel satisfied with the insurance services provided”. The mean value for this
statement is 3.39, which means that 67.8% of the respondents agree with this statement. The mode value is 4
which indicates that the respondents are neutral with this statement.

The twelfth statement is “I feel satisfied with the relationship between me and my insurance company”. The
mean value for this statement is 3.66, which means that 73.2% of the respondents agree with this statement.
The mode value is 4 which indicates that the respondents agree with this statement.

4.4 Structural Equation Modelling

Structural Equation Modelling is utilized for parameter evaluation and hypothesis testing of the causal model.
This study tests the measurement model and the structural model.

4.4.1 Assessment of the Measurement Model

In this study there are four reflective latent constructs, namely, Corporate Image, Service Quality, Customer
Satisfaction, Customer Loyalty So, we assess their reliability and validity.

Table 4.3: Construct Reliability and Validity of Reflective Constructs

Cronbach's alpha rho_A Composite reliability Average variance

(rho_c) extracted (AVE)
CI 0.803 0.834 0.884 0.718
CS 0.722 0.749 0.876 0.78
PF 0.681 0.786 0.856 0.749

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 PV 0.726 0.992 0.816 0.6
SQ 0.785 0.807 0.902 0.822
PLSc Algorithm, Smart PLS 4, Source: Survey 2022

From table 4.3, it is seen that for all the constructs, the Average Variance Extracted (AVE) is greater than 0.5,
Composite Reliability is greater than 0.7, Cronbach’s Alpha is greater than 0.6, and rho_A is greater than 0.7.
So, we can conclude that the convergent validity of the reflective constructs is confirmed.

Moreover, for the reflective constructs, the discriminant validity of the measurement model is assessed using
Fornell and Larcker method. Fornell and Larcker criteria requires the square root of the average variance
extracted (AVE) to be higher than the correlations of any other latent variables. The empirical results
presented in Table 4.6 shows that the discriminant validity is confirmed between all constructs.

Table 4.4: Discriminant Validity – Fornell Larker Criterion

CI CS PF PV SQ

CI 0.847

CS 0.449 0.883

PF 0.189 0.161 0.866

PV 0.6 0.6 0.301 0.775

SQ 0.144 0.476 0.178 0.431 0.907

PLSc Algorithm, Smart PLS 4, Source: Survey 2022

The Heterotrait-monotrait (HTMT) criterion is also used to test the validity of the model. It measures the
average correlations of the indicators across constructs. The acceptable levels of discriminant validity is
below 0.9. The results presented in Table 4.5 show that the discriminant validity is confirmed between all
constructs through HTMT criterion.

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 Table 4.5: Discriminant Validity – Heterotrait-monotrait ratio (HTMT)

CI CS PF PV SQ

CI

CS 0.564

PF 0.333 0.223

PV 0.756 0.668 0.422

SQ 0.2 0.622 0.233 0.457

PLSc Algorithm, Smart PLS 4, Source: Survey 2022

Therefore, using the above statistics, it can be concluded that all the measurement models in the study have
sufficient reliability and validity.

4.4.2 Structural Model

After validating the measurement model, the structural model is assessed. It involves the assessment of the
coefficient of determination R-square, adjusted R-square and the predictive relevance 𝑄 squared. The results
of the model fit are presented in Table 4.6.

Table 4.6: Model Fit

Endogenous Latent Construct 𝑹2 Adjusted 𝑹2 𝑸𝟐
Customer Satisfaction 0.422 0.419 0.374
PLSc Algorithm and Blindfolding, Smart PLS 4, Source: Survey 2022

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To assess the in-sample model fit, the adjusted R2 value of endogenous latent variable in the path model is
examined which has been presented in Table 4. . The adjusted R2 of the Customer Satisfaction is 0.419 which
indicates that all predictors explained 41.9% of the variance in Customer Satisfaction. This indicator of R 2 is
considered moderate.

In addition to adjusted 𝑹2 values, as a criterion of predictive accuracy and to test the predictive power of the
model, the predictive relevance 𝑸𝟐 is used to measure out-of-sample predictive power. The 𝑸𝟐 value is
considered above 0, which indicate that the models’ predictive relevance for the endogenous constructs was
supported.

Further, the statistical significance and relevance of the path coefficients are shown in Table 4.8 which are
calculated by performing the PLS-SEM algorithm to assess the hypothesized relationships between the
constructs. The significance of the path coefficient is examined by performing bootstrapping 500 resamples.
The hypotheses developed in the study which are tested are:

Hypothesis 1 (H1): Corporate Image has an impact on Customer Satisfaction. (CI→CS)

Hypothesis 2 (H2): Service Quality has an impact on Customer Satisfaction. (SQ→CS)

Hypothesis 3(H3): Price Factor has an impact on Customer Satisfaction. (PF→CS)

Hypothesis 4 (H4): Perceived Value has an impact on Customer Satisfaction. (PV→CS)

Table 4.7: Path Coeffecient and P-values

Hypothesis Relationship Std. Beta Std. Error t-Value P Value

H1 CI→CS 0.192 0.103 1.863 0.031

H2 SQ→CS 0.0.297 0.077 3.841 0.000

H3 PF→CS -0.039 0.097 0.403 0.343

H4 PV→CS 0.0.369 0.108 3.408 0.000

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Note: CI= Corporate Image, PV= Perceived Value, SQ= Service Quality, PF= Price Factor
CS= Customer Satisfaction
Bootstrapping, Smart PLS 4, Source: Survey 2022

Figure 4.1: Structural Model with path coefficients and p-values

The empirical results show that Corporate Image (𝛽 = 0.192, 𝑝 < 0.031), Service Quality (𝛽 = 0.297, 𝑝 <
0.000), Perceived Value (𝛽 = 0.369, 𝑝 < 0.000) significantly impacts Customer Satisfaction. However, Price
Factor (𝛽 = −0.039, 𝑝 > 0.05) do not significantly impact Customer Satisfaction.

25
Therefore, it can be concluded that H1, H2 and H4 are supported by the results while H3 is not supported.

Hence, From the above statistics it can be concluded that there is a significant relationship between Corporate
Image, Service Quality, Perceived Value and Customer Satisfaction, so our research hypothesis is accepted.

Further, the research hypothesis is rejected for the following:

i. Price Factor has an impact on Customer Satisfaction.

CHAPTER V: SUMMARY, CONCLUSION AND RECOMMENDATION

26
5.1 Summary

From the statistical analysis of the data collected through primary survey using a self-administered
questionnaire, the gender of respondents is 70% male and 30% female. The age group of the respondents is
35% between 20-29 years, 34% between 30-39 years, 23% between 40-49 years, 8% 50 and above. The
education level of the respondents is 2% SLC or below, 13% +2 completed, 47% Bachelor’s Degree and 38%
Master’s Degree or above. The occupation of the respondents is 13% student, 49% employee, 19% business,
13% Self-employed and 6% retired. The monthly income of the respondents is 13% below Nrs.20000, 27%
between Nrs.20000 and 39000, 30% between Nrs.40000 and 59000, 30% above Nrs.60000.

The statistical results of the Likert Scale are all positive and valid. In the context of Corporate Image,76.8%
agree that the insurance company frequently appears in media channels (newspaper, social media…), 78.2%
agree that the insurance company is open and always interacts well with customers, and 81% agree that the
insurance company always shows business ethics. In context of Service Quality, 72.2% agree that the
insurance company provides the services as promised, 69.6% agree that the insurance company provides
customer service quickly. In case of Price Factor, 69.8% are neutral that insurance charges are very
reasonable, 77.8% agree that insurance company has many attractive promotions for customers. With regard
to Perceived Value, 76.8% agree that the company’s insurance policy provides additional benefits, 76%
strongly agree that the insurance coverage meets my expectations and 69.8% agree that I am aware about the
value of insurance products that I had purchased. In context of Customer Satisfaction, 67.8% agree that I feel
satisfied with the services provided,
73.2% agree that I feel satisfied with my insurance company.

Furthermore, through the use of Structural Equation Modelling, Customer Satisfaction is directly affected by
Corporate Image, Service Quality and Perceived Value. Overall, the findings of the study show that all the
hypothesis, except H3 is supported.

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5.2 Conclusion

Our study shows that Corporate Image, Service Quality, Perceived Value have significant effect on Customer
Satisfaction and Price Factor have no significant effect on Customer Satisfaction which accepts our
alternative hypothesis.

5.3 Recommendation

For the sustainable growth of the insurance business, insurance service providers in kageshwori manahara,
ward no. 06 must satisfy consumers needs by emphasizing the enhancement of customer relations, image,
quality and added value.

Insurers should focus on enhancing service quality and corporate image in order to satisfy customers, timely
helping company to develop a strong customer base.

References

Bhuvaneswari, S. and Sinchu, P. (2016). A Study On Customer Satisfaction Level Of LIC With
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 Reference To Customers Of Malappuram District. International Journal of Advance Research and
Innovative Ideas in Education, 1(3).

Bowen, J. T. & Chen, S. L. M. (2015). Transitioning loyalty programs: A commentary on “The relationship

between customer loyalty and customer satisfaction”. International Journal of Contemporary

Hospitality Management, 27 (3), 415-430.

Ene, S. Ozkaya, B. (2014). A Study on Corporate Image Customer Satisfaction and Brand Loyalty

in the Context of Retail Stores. Asian Social Science, 10(14), 52-66.

Gronroos, C. (1984). A Service Quality Model and its Marketing Implications, European Journal

of Marketing, 18(4), 36-44.

Kotler, P.& Keller, K. (2006). Marketing Management, 12th Edition, Pearson Education Inc., New

Jersey.

Leninkumar, V. (2019). Antecedents of Customer Satisfaction. Archives of Business Research,

7(6), 62-76. DOI: 10.14738/abr.76.6622

Lovelock H.C. & Wirtz J. (2011). Service marketing: people, technology, strategy, 7th edition,

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Moreira A.C. & Silva P.M. (2015). The trust-commitment challenge in service quality-loyalty

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Rizan, M., Ari, W. and Dewi, L., 2014. Relationship marketing and customer loyalty: Do customer

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Sarmad, M. Younas, K. Raza, A. Razzaq, A. Younas, U. (2020). Impact Of Customer Satisfaction And

Attitude Towards Insurance Company. Malaysian E Commerce Journal, 4(1), 09-14.

Statistics Solutions. (2022, July 7). Structural Equation Modeling.

https://www.statisticssolutions.com/freeresources/directory-of-statistical-analyses/structural-
equation-modeling/
Trasorras, R., Weinstein, A. & Abratt, R. (2009). Value, satisfaction, loyalty, and retention in professional

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 ANNEX

Dear Respondent,
I am a student of School of Mathematical Sciences, Tribhuvan University studying Bachelors in
Mathematical Sciences. I am conducting this survey to collect data for my research project “Factors affecting
customer satisfaction and loyalty in the insurance industry. This research is conducted to meet an academic
requirement of Actuarial Science. The whole questionnaire is divided into 2 parts.

Part A: BASIC INFORMATION

PART B: RATING SCALE QUESTIONS.

This information provided by you will be kept confidential and will be used for academic purpose only.

Sanjeeb Khatiwada,
School of Mathematical Sciences,
Tribhuvan University
Kathmandu, Nepal

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A. Basic Information

Please tick the following.

1. Gender
1. Male 2. Female

2. Age Group
1. 20-29 2. 30-39 3. 40-59 4. Above
50

3. Education
1. SLC or 2. +2 completed 3. Bachelor’s 4. Master’s degree or
below degree above

4. Occupation

1. Student 2.Employee 3.Business 4.Self 5.Retired

employed

5. Income per month (Rs)

1. Under 2. 20000- 3. 40000- 4. Above 60000
20000 39000 59000

B. Rating Scale Questions

Please rate the following:

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(1: Strongly Disagree, 2: Slightly Disagree, 3: Neutral, 4: Slightly Agree, 5: Strongly Agree)

Corporate Image
CI1-The insurance company frequently appears in media 1 2 3 4 5
channels (newspaper, Social Media...).

CI2-The insurance company is open and always interacts well 1 2 3 4 5

with customers.

CI3-The insurance company always shows business ethics. 1 2 3 4 5

Service Quality

SQ1-The insurance company provides the services as promised. 1 2 3 4 5

SQ2-The insurance company provides customer service 1 2 3 4 5

quickly.

Price Factor

PF1- Insurance charges are very reasonable. 1 2 3 4 5

PF2-Insurance company has many attractive promotions for 1 2 3 4 5

customers.

Perceived Value

PV1-The company’s insurance policy provides additional 1 2 3 4 5

benefits.

PV2-The insurance coverage meets my expectations. 1 2 3 4 5

PV3-I am aware about the value of insurance products that I 1 2 3 4 5

had purchased.

Customer Satisfaction

CS1- I feel satisfied with the insurance services provided. 1 2 3 4 5

CS2- I feel satisfied with the relationship between me and my 1 2 3 4 5

insurance company.

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