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CHAPTER IV

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problems (Kothari,

p.8). This means research methodology is used to give a clear cut idea on what and how to

do the study which depends on the target population, and ease of access it. As indicated

earlier this study is making efforts to solve problems of customer lapsing. This is also can

be done by investigating antecedents of customer loyalty in order to build loyalty. Thus,

this chapter gives emphasis on describing on the following major parts.

1. Research design
2. Research methods-Secondary and primary
3. Questionnaire Design
4. Sample design
5. Validation of scales
6. Data organization and statistical treatment

4.1. Research design

A research design encompasses the method and procedures employed to conduct

scientific research (Wikipedia, the free encyclopedia 5 September 2013). According to

Nargundkar (2010) research design is classified into three as: (1) Exploratory research, (2)

Descriptive research and (3) Causal research.

Exploratory research is often conducted when a problem has not been clearly defined as

yet. It is the initial research. The results of exploratory research are not usually useful for

decision-making by themselves, but they can provide significant insight into a given

situation. Descriptive research is used to describe characteristics of a population or

phenomenon being studied. It addresses the "what" question (What are the characteristics
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of the population or situation being studied?) Descriptive research generally precedes

explanatory research and cannot be used to as the basis of a causal relationship, where one

variable affects another. In marketing research descriptive research can be further

classified as longitudinal and cross-sectional studies.

Cross-sectional studies (also known as cross-sectional analyses, transversal studies,

prevalence study) form a class of research methods that involve observation of all of a

population, or a representative subset, at one specific point in time (Wikipedia, the free

encyclopedia, 22 June 2013). In a longitudinal study, researchers conduct several

observations of the same subjects over a period of time, sometimes lasting many years

(3)Causal Research explores the effect of one thing on another and more specifically, the

effect of one variable on another.

In this study the influence of independent variables (service quality, customer satisfaction,

customer trust and switching cost) on the dependent variable, customer loyalty is assessed.

The study aims at to determine solutions to problems of customer lapsing, so that the study

focuses on policyholders perceptions and attitude survey to identify the determining

factors for customer loyalty in insurance sector of Ethiopia. Based on the sample studies

the study generalized the findings to the population. The general procedure of the research

design is depicted in the figure below.

Objective of Research Data

Problem Literature the study& Design Analysis
Collection
Review Hypothesis
Identification
Hypothesis confirmation or rejection

Figure 4. 1: The Current Research Design Process

Conclusion
&Reporting
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As delineated in the above figure 4.1, at the beginning of my journey problem

identification accompanied by collecting various information that would help to

differentiate between what should be and what is in the actual situation of the

insurance sector was exhaustively done. It is observed that retentions of policyholders in

insurance sector of Ethiopia is becoming a challenge. An interview with Ethio-life

insurance marketing director (July 2012) showed that in 2010/11, (3.7%) and in 2011/12,

(6%) customers were lapsed. The consequence of such customer churn out from the

company has negative effect on the performance of the company .Thus; this problem

attracted me to launch investigation the driving forces for making customers to be loyal

to the company. What prevents insurers from reaching their goals was listed. Objectives

and problems identified. Objectives and problems are two sides of the same coin. We can

start either with objectives or problems and come to the same conclusions. Anyway, we

reviewed literatures and set objectives and hypothesis. From the review of literature, we

draw what studies have been conducted in the past, how these studies were conducted, and

the conclusions in the problems area. The information discovered during this stage helps us

fully understanding of the magnitude of the problem.

Then, objectives of the research to be achieved developed. These objectives are closely

related to the research problem. The general objective of the study states what to be

expected to achieve by the study in general terms. Specific objectives specify what will be

done in the study, where and for what purpose.

Thus, efforts were made to delineate how data is to be collected, what instruments will be

employed, how the instruments will be used and the intended means for analyzing the

data. In this study as other studies, collecting quality data is a critical step in providing
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the information needed to answer the research questions. The data analyzed to determine

antecedents of customer loyalty and conclusions are made .The result of the study is

expected to provide valuable information for insurers.

In nutshell, the purpose of the study can be considered as descriptive and comparative of

cross sectional design. Attempts are made to explain an understanding of the level of

loyalty in public and private insurance companies. This is done by comparing level of

loyalty in public and private insurance companies. Hence, the research design employed

for this study is descriptiveanalytical in nature. The descriptive study identifies patterns

or trends in a situation of influencing loyalty in insurance sector. This means the

descriptive part involves identifying the characteristics and exploring possible correlations

among variables. The analytical study focuses on establishing relationships between the

independent variables and dependent variable.

According to Mahlotra S. (2008) non -experimental research is used in studies whose

purpose is description. Therefore, for the purpose of this study, a single cross sectional

descriptive study was used to obtain a picture of policyholders opinions of their status of

loyalty to their respective insurance companies. The survey was carried out in a natural

field conditions and data collected pertaining to respondents attitudes and perceptions

.The survey items are statements on which respondents will be asked to indicate the extent

of their agreement or disagreement, using five points, Likert-scale items. The data for this

survey are derived from primary and secondary sources. The sources of data are depicted

below.
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4.2. Research methods-Secondary and primary

There are different methods for data collection .Sometimes the information required can

be collected entirely from published sources those which have already been collected by

someone else and which have already been passed through the statistical process are

secondary sources. On the other hand, information can be collected afresh and for the first

time and thus happen to be original in character and such are termed as primary data.

Nargundkar(2010)classified data collection methods into five as:

1. Survey
2. Observation
3. Experimentation
4. Qualitative techniques
5. Other specialized techniques
Survey is a method of data collection (e.g., a questionnaire) and individual questions or

items that become data that can be analyzed statistically. A survey may focus on different

types of topics such as preferences (e.g., for a presidential candidate), opinions (e.g.,

should abortion be legal?), behavior (smoking and alcohol use), or factual information

(e.g., income), depending on its purpose (Wikipedia, the free encyclopedia, August 2013).

Survey data collection can be carried out by telephone, mail, or in person and by internet.

Observational research (or field research) is a social research technique that involves the

direct observation of phenomena in their natural setting. This differentiates it from

experimental research in which a quasi-artificial environment is created to control for

spurious factors, and where at least one of the variables is manipulated as part of the

experiment (Wikipedia, the free encyclopedia, 2 September 2012). Observation is a

technique where the consumer behavior is recorded, usually without his knowledge. In
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experiments we try to measure the effect of one or more variables by changing the level of

some variables, and measuring the effects.

Sometimes the research objectives call for more indirect methods of questioning, either

because quantitative survey is inappropriate. In such cases qualitative methods, which

probe the minds of respondents may be used. The emphasis can be interview, or

unstructured questions. Other methods may include: consumer panel, etc.

For the purpose of this research, secondary and survey data collection methods are used.

Survey method is selected because a survey is a means of gathering information about a

particular population by sampling some of its members, usually through a system of

standardized questions. It can be conducted by mail, telephone, personal interview, or

Internet and administered either to individuals or groups.

The primary data required for this study collected through structured questionnaires from

sample respondents via enumerates for distribution and collection of questionnaires.. The

main source of data is policyholders of insurance companies in Addis Ababa, Ethiopia.

The secondary data sources include: books, journals, reports, previous studies, and

electronic sources relevant to the study. Secondary data contributed toward the formation

of back ground information, analysis & conclusion. The table 4.1 below listed sources for

primary and secondary data.

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Table 4.1: Sources of Primary and Secondary Data

Information elicitation Descriptions

instruments
Primary: Structure questionnaires which distributed to respondents and
Questionnaires collected by enumerates
Secondary: Books (Statistics, Marketing and insurance books)
Literature study Journals (publications of individual, governmental & non-
(internet and hard copy) governmental),Previous research works, Reports (Annual reports,
& a archival records quarterly reports), Insurance companies financial, performance,
policyholders records,

As indicated in the above table 4.1, questionnaires are the main primary data collection

instrument for this research. In questionnaires we tried to elicit accurate answers from

respondents and making it possible to analyze the response to be used in marketing

decisions .Using the primary instrument of data collection in marketing research, is vital to

the usefulness of the study ( Nargundkar 2010,p.65). Therefore, the data collection

instrument designed for this study is structured questionnaire which is illustrated in the

next section.

4.3. Questionnaire Design

Questionnaire design refers to the design of the questions used to obtain the data needed

for the survey. According to Kothari (2011) questionnaire is considered as the heart of

survey operation for data collection. Thus, questionnaires are designed to elicit information

from respondents for this study. The questionnaires to be used for this research are

structured under six categories in order to measure attitudes of policyholders:

Demographic, service quality, Customer satisfaction, customer trust, switching cost and
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customer loyalty .The questions are designed in a manner so as to glean the maximum

information from the respondents and taking minimum of their time.

According to Fairfax County (12August 2012) questionnaires with questions that measure

variables could include questions on:

AttitudesRespondents views, perceptions, or feelings. How they feel

Beliefswhat respondents think is true; their perception of reality (assessment
oriented, taps what they know).
Behaviorswhat respondents do (present, past, and future).
AttributesPersonal or demographic characteristics (age, income, occupation).
Viewing in mind these considerations questionnaires of this study are adapted from

previous studies. Using previous research questionnaires can make the user more

advantageous because the questions have been extensively tested at the time of first use.

Although, these previous research questions were tested before application, it is also

conducted evaluation exhaustively based on: Accuracy or credibility, Researcher,

Coverage or relevance, Currency and Objectivity or bias. Besides these questionnaires

validity and consistency were tested on pilot test. Before questionnaires distributed for pre-

test the questionnaires were reviewed by colleagues and insurance professionals including

the following points:

1. Ease of administration of the survey,

2. Questions are easily understood,

3. All important questions have been asked, and

4. Instructions are understood

The questionnaires were distributed to 1110 respondents according to the short-list by

enumerates and collected by enumerates but only 1000 questionnaires were found fit and

taken for analysis. Data also collected through insurance company marketing directors
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interview. The interview was conducted with EIC, Nile, Global, and Ethio-life insurance

companies marketing directors. Apart from questionnaire method for data collection effort

are made to gather primary information through informal conversations with the

policyholders.

The questionnaires are adapted from previous researches used for collecting information

about people's beliefs, attitudes, and behavior and designed for self-administered by the

respondents in that to elicit genuine information; the respondents were assured of complete

anonymity and confidentiality of responses .The respondents also told their participation is

purely voluntary.

4.4. Sample design

A sample design is a definite plan for obtaining a sample from a given population. It

refers to the technique or the procedure the researcher would adopt in selecting items for

the sample. Sample design may as well lay down the number of items to be included in the

sample that is the size of the sample. (Kothari 2011, p.55). When conducting research, it

is almost always impossible to study the entire population that we are interested in. If we

take the entire customers of insurance for our survey, it would be extremely timely and

costly. As a result, I have to use samples as a way to gather data.

It is implicitly known that a sample is a subset of the population being studied as, limited

number of customers out of the total of insurance customers. It represents the larger

population and is used to draw inferences about that population (customers). It is also a

research technique widely used in the social sciences as a way to gather information about

a population without having to measure the entire population. Thus, the sample design and

procedures for this study were done in five procedures as delineated below.
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4.4.1. Study population

Population is the collection of elements or objects that possess the information sought by

the researcher and about which inferences are to be made ( Mahlotra (2008: 366). This

study investigated antecedents of customer loyalty in insurance companies of Ethiopia;

hence the population for this study is insurance company policyholders who are

currently getting service from these insurance companies. The table below specifies

insurance companies and number of policyholders.

Table 4.2: List of Companies and Number of Policyholders

No. Name of company Licensed Number of policyholders
for None-life life Total
1 Ethiopian Insurance composite 49,425 13,332 62757
2 NIC Nonlife 11,100 11,100
3 Awash Composite 27,820 375 28,195
4 United Composite 23,274 565 23839
5 Africa Composite 32,000 270 32,270
6 Nile Composite 30,000 450 30450
7 Nyala Composite 31,900 130 32,060
8 Global Nonlife 20,000 20,000
9 Nib Composite 31,200 213 31413
10 Lion Nonlife 1,413 - 1, 413
11 Ethio-life Life - 750 750
12 Oromia Composite 31,588 31,588
13 Abay Nonlife 375 375
14 Berhan Nonlife 575 575
15 Tsehay Nonlife
Total 15 290,670 16085 306,855
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As the above table 4.2 shows, there are 15 insurance companies including the newly

established one. In these companies there are 306,855 policyholders who are currently

getting service. Thus, sample of companies and customers are taken from the population

listed above.

4.4.2 Sampling unit

Insurance business operates all over the country and it is overwhelming to conduct

attitude survey of all policyholders in the country .Thus, the study of attitude survey

focused on policyholders who get insurance service in Addis Ababa , capital city of

Ethiopia.

4.4.3. Sampling

Sampling is the process of obtaining information about an entire population by

examining only a part of it (Kothari (2011, p.152). All this is done on the assumption

that the sample data will enable the researchers to estimate the population parameters.

The items selected constitute what is technically called a sample, their selection process

or technique is called sample design and the survey conducted on the basis of sample is

describe as sample survey. Sample should be truly representative of population

characteristics without any bias so that it may result in valid and reliable conclusions.

Therefore, in assessing policyholders attitude towards the providers studying the whole

population could not be done due to so many reasons as illustrated above. Thus, for this

study sampling was appropriate methods and so that four companies needed to be taken

as sample to conduct policyholders attitude survey. Ethiopian Insurance Corporation is

the only public owned company and also it is a market leader (42%) market share (as
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reported 2010/11 by Ethiopia insurance corporation annual directors board report).

Furthermore, in order to compare the level of customer loyalty between public & private

companies, it was necessary to take Ethiopian Insurance Corporation as one sample.

Samples from private insurance companies were taken based on their major business

area. The table below shows the number of insurance companies by their licensed

business area.

Table 4.3: List of Private Insurance Companies by Their Major Business Area

Type of company Quantity

Non-life 6
Life 1
Composite 7
Total 14
Based on insurance companies licensed business area as depicted in the above table 4.3,

three companies from each category (Nonlife, Life & Composite) using probability

approach of simple random sampling were taken as sample of the study. Therefore, Nile,

Global & Ethio-life companies were selected by using simple random sampling approach.

4.4.4. Sampling technique

Mahlotra . (2008, p. 370) classified sampling techniques as probability and non probability

Sampling technique

Probability Non-probability
1.Simple random sampling 1.Convience sampling
2. Systematic sampling 2.Judgmental sampling
3. Stratified sampling 3. Quota sampling
4. Cluster sampling 4. Snowball sampling

Figure4.2: Classification of sampling techniques (adapted from Mahlotra , 2008)

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As presented in the above figure probability sampling units are selected by chance while

non probability sampling relies on the personal judgment of the researcher rather than

chance to select sample elements (Mahlotra 2008). The aim of this study is to make

inference about the whole insurance policyholders attitude in Addis Ababa from the

survey of samples i.e.to estimate policyholders status on customer loyalty in insurance

companies of Ethiopia. Therefore, probability sampling was appropriate for this study

rather than non probability sampling. Consequently, for this study in which its respondents

are heterogeneous stratified random sampling is more appropriate as this is underpinned

by Kothari (2011) if a population from which a sample is to be drawn does not constitute

a homogeneous group stratified sampling technique is generally applied in order to obtain

representative sample(p.62).

4.4.4. Sample size

According to Mahlotra (2008, pp. 368-369) Sample size refers to the number of elements

to be included in the study. Thus, the policyholders attitude & perception survey

sample size is based on Nargundkar (2010) formula for sample size calculation which is

depicted below:

n=(Zs/(0.05))2

Where:
n= the sample size required

Z = represents the z score from the standard normal distribution for the confidence level

desired by the researcher. In this case a 95% confidence level is taken which is equivalent to z

score of 1.96
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s= represents the population standard deviation for the variable which we are trying to

measure. As the population standard deviation is unknown, we took the standard deviation of

the pilot test (.85) and estimate the population standard deviation.

e= is tolerable error in estimating the variable in question which is decided by the

researcher. In this study the variables are measured using 5-point Likert scale, the highest 5

and lowest 1.So that we have to decide how much error (on scale of 1 to 5) we can tolerate.

The lower the tolerance the higher will be the sample size. For this survey e= .05was taken as a

tolerance error.

Nargundkar formula assumption is that the data is assumed to be normal distribution and

the data of customer attitudinal survey is also assumed normal distribution. This indicates

Nargundkar formula is appropriate for determining sample size. Therefore, the sample size

required for this attitudinal survey is:

n= (1.96*.85/(0.05))2
n= 1,110
The sample size required for the survey is 1,110, though we selected a sample of 1,110

respondents for this study to conduct the attitude and perception survey of insurance

companies. The table 4.4 below precisely delineated the proportionate allocation of the

total sample of 1,110 policyholders in the selected four companies.

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Table 4.4: Proportionate Allocation of Respondents

Name of Population strata and sample allocated using proportionate sampling

the Non-life Life Total
company Population Number of Population Number of number of
size sample allocated size sample samples
allocated
EIC 26,428 173 7,341 49 222
Nile 17,100 533 450 15 548
Global 11,030 344 - - 344
Ethio-life - - 195 6 6
Total 1050 70 1,110
As it can be seen from the above table4.4 stratified sampling has been done in two-way

process in which the population is partitioned into strata (company). In the group every

population element assigned one and only one stratum and no population element was

omitted. Next elements were selected from each group based on proportionate stratified

sampling, in that the size of sample drawn from each group is proportionate to the relative

size of that group in the total population.

Then after the size of proportion is identified the systematic Sampling procedure is

employed . EIC (Ethiopian Insurance Corporation) in non-life business has 26,428

customers so that from this, based on proportionate stratified sampling method 173 sample

respondents were needed .We needed to select a random starting point and then picking

every ith element from the list. The sampling interval is obtained as:

26,428 /173= 152.Then a random number between 1 and 152 was selected as 50 by way

of simple random sampling methods. Therefore, the sample consists of the numbers

50,202, 354, 506 26,276=173.

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Based on the allocated samples as shown in the above table (4.4), the following sampling

procedure developed.

4.4.5. Sampling procedures

Enumerates in considering their proximity to respective companies and those who are

voluntaries to participate in data gathering process are selected along with the assistant of

each company marketing directors. Training is given what, when, and how to collect data

from respondents .List of respondents who are selected based on the sampling process

were given for each enumerates .We also designed a cross check mechanisms whether the

right respondents fill the questionnaires. On the short training program for enumerates the

requirements which were needed were illustrated to reduce errors in the data collection

process.

The anticipated problems to be encountered during data collection were evaluated and

solutions were indicated. Attempts are made to aware enumerates how to reduce the

possible source of errors. A detailed briefing of the survey was given to enumerate and the

meaning of each item in the questionnaire was well explained. In addition to this, in order

to improve the quality of response remarks were written in the cover of questionnaire not

to put their name or signature.

Furthermore, the questionnaire was made reader friendly by using good quality paper with

clear and medium fonts. The covering letter also mentioned that the broad findings of the

study will be used for the improvements of the company. For creating trust, message was

written that individual response would be kept confidentially.

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4.5. Validation of scales

The scale validation involves measure of internal consistency of items for the scales,

group resemble test using intra correlation coefficient, validity test , test whether the data is

normal distribution .The detail is presented below.

4.5.1. Internal consistency test for pilot study.

Although the questionnaires used to measure respondents attitude are adapted from the

previous related studies dry run are conducted to check whether fitting in the new situation,

Ethiopian insurance environment. Hence Pilot test was conducted by the help of three

enumerates in order to facilitate the distribution and collection of questionnaires. The

respondents asked to indicate their agreement or disagreement with the statements

provided, using 5-point Likert-type scales with 1, to indicate strongly disagree and 5, to

indicate strongly agree in regard to their insurance provider. The items were incorporated

into questionnaires and distributed to respondents by enumerates. Some of the items in

questionnaires designed to measure customers attitudes are listed as below.

Table 4.5: Service Quality Measures

Dimension Individual items

Visually appealing materials associated with the service are good

Tangible I am sure that Insurance Company uses latest technology in providing
services
Information is easily available through Product & Service Brochures, leaflets, letters
,et
Staff provides error free services
Reliability The company is Providing services at the promised time
Company provides accurate records such as payment record or any to
customer
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Company keep customers informed about service that have been performed
and price charged

Responsiveness Employees of company provide prompt service to their customers

Employees in company are willing to help their customers
Employees give their customers shorter waiting time or fast service turnaround

Assurance Employees in company have knowledge and competence to solve customers

problem
Employees in company have knowledge and competence to solve customers
problem
In case of complications managers are helpful by making prompt decisions
Privacy of customers information is maintained
Empathy Company employees give individual attention
Agents/advisors have concern and understanding of customers problems
Company has convenient Business Hours
The company understands your needs

The items listed in the above table 4.5 are designed to measure perception of respondents

quality of service offered by insurers. Moreover, the survey items relating perception of

respondents loyalty to their respective companies are shown in table 4.6 below.

Table 4.6: Customer loyalty measures

Dimension Individual items

Word of mouth I would encourage friends, relatives and others to purchase policies from

the company

Do you recommend the company to others

Cross-selling I will use additional policies/ services offered by this company in the

future
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This insurance company is my first choice when I want to have an

insurance

I am willing to stay with this insurance company even if prices are raised

Retention to a more reasonable level

I have never seriously considered changing this company

Based on these and the other unstated here questionnaires, respondents were requested to

indicate their level of agreement or disagreement with the different statements on a five

point scale where 1= strong disagree and 5 = strongly agree .The pre-testing results

indicated that the questionnaires were clearly understandable and unambiguous which

shows the questionnaires had adequate content validity.

The questionnaires reliability was checked using Chronbachs coefficient Alpha for the

entire 46 statements and the independent and dependent variables were found being of

0.86. According to Nargundka (2010) if the Alpha value for the scale is 0.7 or more, it is

usually, considered a good scale (p. 64) . Therefore, it can be concluded that the

underlying items of these factors were good scale for measuring the constructs. The table

below shows the reliability test result.

Table 4.7: Summary of the Pilot Test Questionnaires Reliability Statistics

Internal consistency

Cronbach's Alpha Number of Items

.86 46 Good scale
As the pilot test was conducted to know whether these questionnaires fit to the new

situation in Ethiopian insurance industry, the result of the pilot study showed
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questionnaires reliability were good. Though, some parts of the questionnaires were

modified after the pilot study and found reliable to measure the variables of the study.

4.5.2. Test for internal consistency for main data

Reliability is the property by which consistent results are achieved when we repeat the

measurement of something. A questionnaire used on a similar population that produce

similar results can be termed as reliable ( Nargundka (2010, p. 62).

Questionnaires are designed to measure customers perceptions, and in order to elicit

pertinent information of their perceptions of service quality, satisfaction, and trust,

switching cost and loyalty to their respective insurance companies. For this survey five

variables were developed comprised of totally 46 questions ,each of the questions was a

statement followed by a five-point Likert scale ranging from strongly disagree through

neither disagree nor agree to strongly agree. The table below shows the five-point likert

scale with the respective given rate

Table 4.8: Likert five Point Scale with Respective Rates.

Level of Strongly Disagree Neither disagree nor Agree Strongly

measurement disagree agree agree

Rate 1 2 3 4 5
It is obvious that data consistency and accuracy are needed for data analysis. It has been

established that moderate violation of parametric assumptions have little or no effect

substantive conclusions in most instances (Cohen 1969:p. 226 as cited in David Garson

2012). In this study, correlation and regressions are used for data analysis, but in order to

perform a correlation analysis and more importantly regression analysis the variables in the

research had to be tested their reliability and validity whether the questionnaires asked

relate to the constructs that we intend to measure. So that for this study Cronbachs Alpha
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is used as a testing instrument as it is the most used reliability test among researchers. The

reliability of the instrument means that its results are characterized by repeativeness

(Psarou and Zafiropoulos, 2004). Georg and Mallery provided the following rule of thumb

for judging the acceptability of the internal consistency as cited in Prabhakar (2006:6).

Table 4.9. Rule of Thumb for Cronbach Alpha

Rate standard Rate Standard
0.9 Excellent 0.6 Questionable
0.8 Good 0.5 poor
0.7 Acceptable < 0.5 Unacceptable

Source: Georg and Mallery as cited in Prabhakar (2006:6)

Though, checking reliability of the data was conducted in three levels: variables,

dimensions and the entire items which is depicted in the following paragraphs.

1. Reliability checking for variables

The table below shows reliability statistics of: service quality, customer satisfaction,
customer trust and switching cost.
Table 4.10: Reliability Analysis of the Variables
Variables Cronbach's Alpha Number of Items
Service quality perception .775 17
Customer satisfaction .791 11
Customer Trust .70 7

Switching cost .751 5

Customer loyalty .850 6

As presented in Table 4.10 above, the reliability was reported as above the standard of

.70. Service quality has been measured by 17 items based on Parasuraman et al. (1988)

service quality five dimensions adapted from Deepika Upadhyaya and Manish Badlan

(2011) and the reported reliability is .775. Customer satisfaction has been measured by

using 11 items adapted from Hellier, Gearsen & Rickard (2003) , Chi Bo Wong, (2011)
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and NPL National Physical Laboratory Management limited, a wholly owned subsidiary

of service Group, March 2008 and the reported reliability is .791.Customer trust has been

measured by using 7 items adapted from Kennedy, Ferrell, & Leclair, (2001)and

Sirdeshmukh, Singh, & Sabol (2002) and the reported reliability is .70. Switching cost

has been measured by using 5 items adapted from Wong & Mula (2009) and Jones,

Mothersbaugh & Beaty (2000), and the reported reliability is .751. Since the Cronbachs

Alpha scale is above the acceptable values of .70, the scales are considered to be

consistent. This ensures variables have been measured the same construct generating the

internal consistency.

1. Reliability checking for variables of dimensions

This stud comprises five variables which are further divided into dimensions. Under each

dimension there are individual items in total of 46. The reliability statistics is depicted

below.

Table 4.11: Reliability Statistics of Dimensions

Dimensions Number Cronbach,

of Items s Alpha Mean SD N

Tangible 3 .717 3.215 .8694 1000

Reliability 4 3.832 .6023 1000

Responsiveness 3 3.627 .7223 1000

Assurance 3 3.671 .6239 1000

Empathy 4 3.773 .7551 1000

customer satisfaction in service 4 .661 3.150 .6754 1000

Customer satisfaction in interactions 2 3.280 1.0030 1000

Customer satisfaction in treatment 3 3.678 .8058 1000

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Overall customer satisfaction 2 3.510 1.0011 1000

Customer trust on employees 4 .647 3.684 .8008 1000

Customer trust on company 3 3.522 .6671 1000

Recommending to others 2 .871 3.506 .9096 1000

Purchasing additional policies 2 3.996 .6601 1000

Commitment to stay 2 3.660 .8719 1000

switching cost 6 .751 3.745 .6647 1000

Total 46
The table above shows that the internal consistency (reliability) of questionnaires

measured through Cronbachs Alpha is found to be greater than the threshold .60 for each

dimension. This means the variance of the score can be considered as true score variance

or internal reliability score. We can conclude that the questionnaire has internal

consistency for further analysis.

The mean scores of all the variables found to have a range 3.1 to 3.99 and the

corresponding standard deviations were ranging from 0.6 to 1.10. As it is presented in

the above table some score of standard deviation are small (relative to the mean score)

which indicates that the data points tend to have scores that are very close to the mean and

other scores of standard deviation are farther away from the mean, for example customer

satisfaction in related to their interaction is 3.2 mean while the standard deviation is 1.0

which is relatively farthest of all. Farthest standard deviation from the mean indicates

widely spread-out cases from the mean. However, there is no outlier of SD away from the

mean as the above table presented.

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2. Reliability checking for the entire items

Table 4.12: Reliability Statistics of Items

Cronbach's Alpha Number of Items

.939 46
The table above gives evidence that the internal consistency (reliability) of

questionnaires measured through Cronbachs Alpha is found to be .939 which is greater

than the threshold .70. This means 93.9% of variance of the score can be considered as

true score variance or internal reliability score. Therefore, as the values exceeded the

threshold value of 0.7 we can conclude that questionnaires were in a high level of

consistency. If a particular item was deleted from the scale, the Cronbach Alpha would be

lowered so that there was no any necessity to remove items. Besides this it is helpful to

assess the intra class correlation. The table below illustrates the result of intra class

correlation coefficient.

4.5.3. Intraclass Correlation Coefficient (ICC).

The Intraclass Correlation Coefficient (ICC) is a measure of the reliability of

measurements .It describes how strongly units in the same group resemble each other.

While intraclass is viewed as a type of correlation, unlike most other correlation measures

it operates on data structured as groups, rather than data structured as paired

observations (Wikipedia, the free encyclopedia 18 June 2013). The Intraclass Correlation

Coefficient (ICC) is a measure of the reliability of measurements or ratings. Single

measure ICC means a fair to good reproducibility if the test is performed at one of several

occasions respectively. Average measures ICC means excellent reproducibility if you

repeated the test for several times and calculate the mean value. Thus, the study variables

are checked their reliability via ICC in the table below.

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Table 4.13: Variables of Intra class Correlation Coefficient

95% Confidence Interval F Test with True Value 0

Intraclass Lower Upper
Correlation Bound Bound Value df1 df2 Sig
Single
.769 .750 .787 17.640 999 3996 .000
Measures
Average
.943 .938 .949 17.640 999 3996 .000
Measures
Variable: 5 , n= 1000

As the table above exhibits our estimated reliability between the five variables is 0.769,

with 95% confidence interval and bound (0.750, 0.787), which is quite 'wide'. This

indicates that we have evidence to support the reliability of this measurement between the

variables.

ICC can be interpreted as follows: 0-0.2 indicates poor agreement:

0.3-0.4 indicates fair agreement; 0.5-0.6 indicates moderate agreement;
0.7-0.8 indicates strong agreement; >0.8 indicates almost perfect agreement.
Source : Retrieved at:
https://www.google.co.in/search?client=opera&q=intraclass+correlation
Therefore, the result of ICC test of the variables in the above table 4.13 shows above

moderate standard which means variables are strongly resemble each other in the group.

Item intraclass correlation coefficient is illustrated below.

Table 4.14 : Items Intraclass Correlation Coefficient

95% Confidence
Intraclass Interval F Test with True Value 0
Correlati Lower Upper
on Bound Bound Value df1 df2 Sig
Single Measures .250 .233 .269 16.368 999 44955 .000
Average Measures .939 .933 .944 16.368 999 44955 .000
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As the table above reports the reliability analysis - scale (alpha) Intraclass Correlation
Coefficient is:

One-way random effect model: People Effect Random

Single Measure Intraclass Correlation = .250

95.00% C.I.: Lower = .233 Upper = .269

F = 16.368 DF = (999, 44955), Sig. = .000 (Test Value = 0)

Average Measure Intraclass Correlation = .939

95.00% C.I.: Lower = .933 Upper = .944

F = 16.368 DF = (999, 44955) Sig. = .000 (Test Value = 0)

The single measures of ICC are reported as .250 which is above the threshold of ICC
mentioned above that means fair agreement and indicates items strongly resemble
each other in the group.
4.5.4. Validity Test

Validity is the property by which a questionnaire measures what it is supposed to

measure. The validity of questions on a questionnaire can be checked by comparing it with

previously used items (questions) measuring the same thing ( Nargundka, 2010,p. 62).

In order to test the content validity of the questionnaires, we have gone thoroughly

literature review and we have got confirmation from purposely selected experts before and

on the pilot test. Content validity reflects a complete range of the attributes under study

and is usually undertaken by seven or more experts (DeVon et al. 2007). Furthermore, in

tandem with content validity, the face validity of the questionnaires were evaluated .Face

validity used to evaluate the appearance of the questionnaire in terms of feasibility,

readability, consistency of style and formatting, and the clarity of the language used (

DeVon et al. 2007). Besides these, we need a test of construct validity whether the

constructs reflect a complete range of attributes. Construct validity refers to the degree to
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which the items on an instrument relate to the relevant theoretical construct (DeVon et al.

2007).

4.5.5. Normality Test

The assumption of a normal model for a population of responses will be required in order

to perform certain inference procedures. Normal distribution takes the form of bell-shaped

curve .Normality can be visually assessed by looking at a histogram of frequencies or by

looking at a normal probability plot output (David Garson, 2012).The calculation of p-

values for hypothesis testing typically is based on the assumption that the population

distribution is normal. Therefore, test of normality check has undergone using different

tools as described below.

Table 4.15: Normality Test Using Skewness and Kurtosis

service quality customer customer switchin Customer

perception satisfaction trust g cost loyalty

n 1000 1000 1000 1000 1000

Skewness -.572 -.401 -.661 -.962 -.756
Std. Error of Skewness .077 .077 .077 .077 .077
Kurtosis -.339 -.822 -.570 -.115 -.780
Std. Error of Kurtosis .155 .155 .155 .155 .155

The table above 4.15shows skewness and kurtosis distribution for variables. It is obvious

that in order to make inferences the data need to be normal or nearly normal distribution.

Skweness and kurtosis are helpful for testing of normality. Skewness is a measure of the

asymmetry and kurtosis is a measure of 'peakedness' of a distribution. Skewness is a

measure of symmetry, or more precisely, the lack of symmetry. A distribution, or data set,
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is symmetric if it looks the same to the left and right of the center point. The skewness is 0

for the normal distribution and it should be close to zero for any symmetrical distribution

The amount of skewness tells us how highly skewed data is, the bigger the number, the

higher the probability (Bulmer, 1979) .In other words, according to Bulmer (1979)kurtosis

is a measure of whether the data are peaked or flat relative to a normal distribution. That is,

data sets with high kurtosis tend to have a distinct peak near the mean, decline rather

rapidly, and have heavy tails. Data sets with low kurtosis tend to have a flat top near the

mean rather than a sharp peak. Here below is rule of thumb for making decision if the data

is normal or not, using skewness and kurtosis.

Table 4.16: Rule of Thumb of Skewness (Bulmer M.G (1979)

If skewness is < -1 and >1 skewed distribution

If between -1 and -0.5 or 0.5 and 1 Moderately skewed
If between 0.5 and 0.5 Symmetric
If absolute value of kurtosis is less than SE(standard normal
error) of Kurtosis times 3.

Table 4.16 above presents the rule of thumb for normality. When we interpret the rule to

the real data set, and when we compare the data in table 4.15 above under skweness ,

some of the data are between -0.5 and 0.5 which tells us the distribution is normally

while some others are beyond that i.e. moderately skewed. In related to kurtosis most of

the data set met the criteria while two of the data set are not fit. Despite of this, normality

can be checked using mean, median and mode. When there is normality, mean, median and

mode are equal but when there is moderate symmetry all these three indicators will be

closely distributed.
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Figure: 4.3: Normal distribution Adapted from Wikipedia, the free encyclopedia, 17 August 2013

The figure 4.4 above shows normal distribution of data for reference and when data is

normal mean, median and mode are equal. The table 4.16 below shows means median and

mod are somewhat close to each other.

Table 4.17: Normality Test Using Mean ,Median & Mode

service quality customer Customer Switching Customer

perception satisfaction trust cost loyalty

Sample size 1000 1000 1000 1000 1000

Mean 3.649 3.383 3.615 3.745 3.721
Median 3.765 3.455 3.714 4.000 4.000
Mode 4.0 3.8 4.1 4.0 4.0

As it can be seen from the above table 4.16 mean, median and mode are somewhat

distributed closely that shows roughly symmetrical distribution

Furthermore, we can proceed for checking normality of the research data using Q-Q plot..

The above pictorial representations of the points in the Q-Q plots lie closer to the line y =

x. This means observations are approximately normal distributions and the Q-Q plot

shows evidence of an underlying distribution which is approximately normal with a

positive slope except for some large outliers that should be further investigated. From this,

we can conclude that we can proceed doing the analysis.

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Moreover, in order to test construct validity of the questionnaires, exploratory factor

analysis is used. Exploratory Factor Analysis (EFA) is used to explore the underlying

dimensions that could have caused correlations among the observed variables. Here, our

interest is to explore the underlying dimensions that could have caused correlations among

the variables. The table below shows the result of KMO & Bartletts test of sphericity

Table 4.18: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .923
Bartlett's Test of Sphericity Approx. Chi-Square 47.60
df 1035
Sig. .000
Items= 46 , N=1000

As the above table exhibits, KMO and Bartletts test of sphericity produces the Kaiser-

Meyer-Olkin measure of sampling adequacy being .923. In general KMO measure of

sample adequacy varies between 0 and 1, and values closer to 1 are considered better. High

values (close to 1.0) generally indicate that a factor analysis may be useful with your data.

If the value is less than 0.50, the results of the factor analysis probably won't be very

useful. The KMO value as in the table above illustrates sampling adequacy of .923is a

good indicator. The value should be greater than 0 .5 if the sample is adequate (Field

2005). Hence, as it can be seen from the above table KMO is greater than 0. 5 which

shows the sample size is appropriate. This means the sample data are suitable for the

undergoing analysis.

According to Business analytics (2012) the Bartletts Test of Sphericity relates to the

significance of the study and thereby shows the validity and suitability of the responses

collected to the problem being addressed through the study. For Factor Analysis to be

recommended suitable, the Bartletts Test of Sphericity must be less than 0.05.
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The Bartletts test of sphericity is found to be with approximate Chi-Square value of 47.60

degree of freedom 1035 at 95% level of significance. The significance level of Bartlet test

value is <.05. Hence, the null hypothesis is rejected and alternative hypothesis is accepted.

This means the data is suitable for factor analysis; the data needs to be reduced.

4.6. Data organization and statistical treatment

Statistical data analysis is the process of converting data into useful information.

According to Nargundkar (2010) choice of data analysis depends on scale of data, research

design and assumptions about the test statistics.

The major objective of this study is to examine the determinants of customer loyalty .A

survey was drawn from independent samples based on interval Likert 5-point scale from

customers. The five independent variables (demographic factors, service quality, customer

satisfaction, customer trust, and switching cost) whether they influence or have association

on customer loyalty are tested.

In this study of data analysis, the descriptive analysis is employed to describe and

summarize data which comprises; distribution, central tendencies and dispersions.

Inferential statistical are used to make inferences, or estimates about the population.

Regression analysis and ANOVA are employed to explain customer loyalty based on

influencing factors and to specify the contribution of the independent variables on

dependent variable. To compare the level of customer loyalty in both public and private

insurance companies, an independent test is performed. The data was analyzed with the

help of SPSS software (Statistical Packages for Social Scientists Version 16.0) and AMOS

5.0 (Analysis of Moment Structures) software. Here below is a short summary of statistical

treatments.
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Statistical treatment used in data analysis

In the process of converting data into useful information different types of analysis were

employed using SPSS and Amos soft wares. The detail is illustrated below.

Table 4.19: Types of analysis & Statistical tools used in the analysis

Types of Statistical tools Software used Purpose of analysis

analysis applied employed
Univariate Descriptive statistics SPSS For obtaining information as
analysis required.
Bivariate Chi-square, Pearson SPSS To know the association between
analysis correlation & partial variables
correlation
Multivariate Multiple regression SPSS &Amos To know the influence of
analysis ANOVA determinants on customer loyalty
To know if customer loyalty
differs between public & private
insurance sector.
The table above shows the types of analysis, statistical tools employed and the purpose of

analysis. More specifically, the detail statistical treatments are delineated below.

1. Data : Nominal, ordinal & Interval

2. Sample : Two samples, private & public insurance policyholders

3. Purpose of analysis:
Testing for associations/ relationships/influence
Testing for mediation effect
Testing for comparisons of loyalty between private & public insurance
companies
4. Variables:
Independent variable: demographic characteristics , service quality,
customer satisfaction, customer trust& switching cost
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Dependent Variable: customer loyalty

5 Statistical tools employed.
5.I. Statistics associated with Summarization of data

Central Tendency: Mean ,median , mode

Measure of variability: Standard deviation , Variance
Percentile
Charts & graphs were used to provide information of the distribution and
the dispersion among the variables, and the relatives standing of values
5.2. Testing for relationship between two variables, the bivariate Pearson correlation and

chi-squared independence statistics employed. In addition, in order to understand the

strength of relationship the symmetric measure Cramers V were calculated.

5.3. For associative relationships between IDVs and DV, linear regression analysis is

used to explain the variation in the level of loyalty (DV) based on the variation over the

independent variables; service quality, customer satisfaction, customer trust and switching

cost. Therefore, the multiple regression equation becomes:

y= a + b1x1 + b2x2 + b3x3 b4x4

Where:
y= the value of dependent variable (customer loyalty) , what is being predicted
a (Alpha) = is the Constant or intercept
b1 = is the Slope , regression coefficient (Beta coefficient) for X1
X1 = First independent variable that is explaining the variance in Y
b2 = is the Slope , regression coefficient (Beta coefficient) for X2
X2 = Second independent variable that is explaining the variance in Y
b3 = is the Slope, regression coefficient (Beta coefficient) for X3
X3 = Third independent variable that is explaining the variance in Y
b4 = is the Slope , regression coefficient (Beta coefficient) for X4

X4 = Forth independent variable that is explaining the variance in y.

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And also R, R-squared, the F- statistics and the t-statistics were used to estimate the

strengths of relationships. Multiple collinearity were checked by means of Tolerance value,

Variance Inflation Factor (VIF) to substantiate the absence of any inter correlation among

the predictor values.

5.4. Mediation test

Baron and Kenny (1986) addressed the steps required for mediation test:

1).The total effect of the independent variable on the dependent variable must be

significant (X Y)

2) The path from the independent variable to the mediator must be significant (X M

(3) The path from the mediator to the dependent variable must be significant

(M (and X) Y). The pictorial representation below makes it more understandable

Figure 4.4: Mediation, direct & total effect of variables adapted from Baron and Kenny (1986).
Amos 5.0 software is employed to test the mediation effect in a single analysis instead of

testing separate regression analysis.

5.5. For test of differences (comparing means of populations), Ho: 1=2, comparing

customer loyalty in public and private insurance companies, Factorial ANOVA test for is

used. In addition to this, the measure of association in the form of Eta-squared, R &R-

squared were calculated.

4.7. Data processing

In this data processing stage, assigning of codes for the raw survey data including

respondents demographic factors and for all questions on a questionnaire were given. This
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data processing task made clear of the respondents demographic factors as well as made

the data to be ready for further processing as frequencies, descriptive statistics, tables and

so on which enable to draw conclusions. Besides this, measurement scales are assigned for

variables used in this study for further tasks. Thus, based on these widely used

classification of measurement scales data is analyzed through SPSS and Amos soft wares

4.8. Response rate

The main Source of data for this research is policyholders attitude survey through

questionnaires. Based on research guides and research plan respondents were selected. In

order to distribute questionnaires to respondents and to collect questionnaires from

respondents it was necessary to recruit enumerates and armed them what, when, and how

to do. So that all such tasks were done on time and 1,110 questionnaires were distributed

through enumerates, but only1000 questionnaires were found valid for this research. Thus,

1000 questionnaires are used for analysis and the response rate can be mentioned as 90%.

4.9. Ethical considerations

According to Wikipedia, the free encyclopedia Research ethic s involves the application of

fundamental ethical principles to a variety of topics involving research. These include the

design and implementation of research involving human experimentation various aspects of

academic scandal, including scientific misconduct (such as fraud, fabrication of data and

plagiarism), whistle blowing; regulation of research, etc. Thus, in this study a certain moral

responsibility are maintained towards the participants.

There is a duty to protect the rights of people in the study as well as their privacy and

sensitivity. The confidentiality of those involved in the observation is kept and their
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anonymity, privacy is secured. So that participants privacy, feelings and dignity are fully

respected. Most of the ethical considerations are implicitly known. It is considered that

there are so many tasks which the researcher should do and never do instead should be

respected. In this study efforts are made to be objective and logical throughout the whole

process. It is researchers responsibility to reflect accurately the respondents replies in the

research. As this research is based on the theoretical and empirical evidence of previous

work great care was taken for avoiding text plagiarizing and so that sources are cited

or quoted when ideas are taken directly or indirectly. All copy cat approach is avoided in

the whole process of this study. Bearing this in mind data analysis and interpretation are

presented in the next chapter.