The Influence of Customer Relationship Management to Customer Satisfaction and Retention in Property and Casualty

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THE INFLUENCE OF CUSTOMER RELATIONSHIP MANAGEMENT TO CUSTOMER SATISFACTION AND RETENTION IN PROPERTY AND CASUALTY INSURANCE

BROOKE ELLEN LYTTLE

Bachelor of Arts in Psychology and Criminal Justice Kent State University May, 2003

Submitted in partial fulfillment of requirements for the degree MASTER OF ARTS IN PSYCHOLOGY at the CLEVELAND STATE UNIVERSITY May, 2008

This thesis has been approved for the Department of Psychology and the College of Graduate Studies

Thesis Chairperson, Steven D. Slane, PhD

Department & Date

Brian F. Blake, PhD

Department & Date

Leslie E. Fisher, PhD

Department & Date

THE INFLUENCE OF CUSTOMER RELATIONSHIP MANAGEMENT TO CUSTOMER SATISFACTION AND RETENTION IN PROPERTY AND CASUALTY INSURANCE BROOKE ELLEN LYTTLE ABSTRACT

Customer relationship management (CRM) emerged in the 1990’s, promising to revolutionize the business and customer dynamic. At present, CRM has yet to live up to its promise of individualized customer relationships with carefully targeted customers. In property and casualty insurance, customer and insurer relationships are important. It is more cost effective to retain current customers than to acquire new ones. This thesis explores the history of CRM and how its proper implementation can help identify areas of customer satisfaction and retention in the property and casualty insurance industry. Data were collected from a regional property and casualty insurer and analyzed to determine customer satisfaction standards. A factor analysis and several multiple

regressions were conducted to determine whether satisfaction on identified standards was a predictor of stated likelihood to renew the policy. The overall regression examined independent variables under the control of the insurance company and showed a significant overall prediction, with 48.0 percent of the variance explained. When looking at the significant unique contributors, satisfaction with premium/policy factor had the greatest influence, followed closely by people service factor and claims service factor.

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The second regression was conducted with customers of high-value agencies and explored variables under control of the agent. The model explained 33.8 percent of the variance, and found satisfaction with the agent had the greatest influence, followed by ease of billing, and satisfaction with explanations of premium costs. The third regression looked at the same variables but with customers of low-value agents. The model explained 47.4 percent of the variance, and found ease of the claims process had the most influence, followed by satisfaction with explanations of premium costs, and ease of billing. The goal was to investigate how variables identified through previous research would predict likelihood to renew with the insurer. The results of all the regressions support the importance of CRM “moments of truth.” In addition, the results from the analyses if customers of low- and high-value agents provided support for the impact of the company’s internal program, FOCUS.

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TABLE OF CONTENTS Page ABSTRACT…………………………………………………………………………… iii LIST OF TABLES…………………………………………………………………….. vi LIST OF FIGURES…………………………………………………………………… vii CHAPTER I. INTRODUCTION…………………………………………….…………….... 1 Database marketing………….…………………………………. 2 Building a database……………………………………….…….. 3 Types of databases……………………………………….…....... 4 Theoretical stages of CRM………………………………….….. 5 CRM process…………………………………………….…...… 8 Key Moments of truth………...................................................... 8 Customer Lifetime Value…………………………………........ 10 Hypothesis development………………….…………………… 14 II. METHOD………………………………………………………………....... 16 Company history…………………………………..................... 16 Survey procedure…………………………………………........ 17 Participants……………………………………………............. 18 III. RESULTS…………………………………………………………............ 19 IV. DISCUSSION………………………………………………….................. 29...
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