E customer retention strategies and profitability amongst insurance companies in Kenya: a case of Liberty Life Assurance Co. Ltd

Abstract

This study sought to investigate the influence of customer retention on profitability of insurance companies in Kenya using Liberty Life Assurance Company Ltd as a case study. The Specific objectives of the study included to examine the effect of product quality on profitability; assess the effect of quality customer service on profitability, and to establish the influence of firm’s service/product pricing on profitability. In this context product quality means services that meet customer needs; Quality customer service refers to customers’ perception and value-judgement of a product or service based on how the life insurance policy is delivered to meet expectations and a Firm’s service/product pricing is the cost charged for life insurance services to the customer. The theories of Assimilation, Contrast, and Assimilation-Contrast guided this current study. Descriptive and correlational design were used on a target population of 2, 653 customers who have held life policies since 2010 with Liberty Life Assurance Co. The sample of the study consisted of 347 respondents. A questionnaire was used to collect primary data from customers while a structured interview schedule was used to collect qualitative data from 10 managers. Validity of instruments was ensured by consulting experts from Business Administration Department, Africa Nazarene University. Reliability of instruments was achieved through testretest method on randomly selected 39 customers, whereby Cronbach’s Alpha of 0.849 was calculated from the obtained data. Qualitative data was analyzed through thematic analysis while correlation and regression analysis were used to analyze the relationship between customer retention strategies and profitability in Liberty Life Ltd, Kenya. The study findings showed that 40.4% changes in profitability at Liberty Life Assurance is attributed to the customer retention strategies investigated by the study (R2 =0.4042). Findings also showed that product quality (β=0.428); quality of services (β=1.188) and product pricing (β=0.601) all are significant predictors {F (1, 338) =88.495, P<0.05} of profitability at Liberty Life. It is concluded that product quality, quality of services, and product pricing are critical customer retention strategies for enhancing firm profitability. The study therefore recommends insurance should adopt corporate social responsibility practices as well as flexibility mode of premium payment to improve and stabilize their customer base. Further research should be done on the influence of expanded benefits in insurance product packages on customer retention and profitability.