The Effect of Service Quality on Customer Satisfaction: A Study on Four Selected Insurance Companies in Hossana Town, Hadiya Zone, SNNPR, Ethiopia

Abstract

The liberalization of the economic system in Ethiopia enabled the emergence of private insurance companies and had created competitive environment in the insurance industries. Most of service sectors failures were due to negative gap score between perception and expectation of customer towards service quality dimensions. This is mainly true in insurance companies that regularly interface with customers.The motives of this study was examining the effects of service quality on customer satisfaction in four selected insurance companies of Hossana town, SNNPR. This research was carried out through cross-sectional survey design and mainly based on data collected through questionnaires. Simple random sampling method was used to select four insurance companies from currently operating eight insurance companies in the study area and then convenience sampling method was used to select respondents from available customers of each insurance company. Sample size 353 was determined by using the formula given by Yamane. The descriptive and inferential statistical tools such as; mean, percentage, correlation and multiple regressions were used to analyze collected data. The result of individual companies and total Gap analyzes indicates that the mean score of customers’ expectations exceeded perceptions in all five dimensions. This implies that the selected insurance companies of Hossana town were not providing the level of service quality as demanded by customers. The findings suggest that selected insurance companies need to improve all the dimensions of service quality. Although, based on a finding of regression analyzes responsiveness had relatively strong significant and direct effect on customer satisfaction with beta value of .376 and followed by reliability with beta value of .327, tangibility with beta value of .187, empathy with beta value of .149, and assurance with beta value of .113 respectively. Based on the research results, it is recommended for the selected insurance companies to improve the delivery of service quality dimensions through Providing training to their employees, allocating resource based on relative importance of dimensions, carrying out depth research, continuously evaluating service performance, reviewing suggestion box and act accordingly.