Girma Telila

ADDIS ABABA UNIVERSITY
ADDIS ABABA INSTITUTE OF TECHNOLOGY (AAIT)
SCHOOL OF MECHANICAL AND INDUSTRIAL ENGINEERING (SMIE)
DEVELOPMENT OF SERVICE QUALITY ASSESSMENT AND
IMPROVEMENT APPROACH OF A MOTOR INSURANCE COMPANY
IN ETHIOPIA
BY
GIRMA TELILA
JUNE 2019
ADDIS ABABA, ETHIOPIA

Development of Service Quality Assessment and Improvement Approach of a
Motor Insurance Company in Ethiopia
Girma Telila
A Thesis Submitted to the School of Graduate Studies of Addis Ababa University
in Partial Fulfillment of the Requirement for the Degree of Masters of Science in
Industrial Engineering Stream
Advisor Dr. Ameha Mulugeta
Co-advisor Mr. Shimelis Tilahun
Addis Ababa University
Addis Ababa Institute of Technology (AAIT)
School of Mechanical and Industrial Engineering (SMIE)
June, 2019
SERVICE QUALITY ASSESSMENT AND IMPROVEMENT APPROACH
ADDIS ABABA UNIVERSITY
SCHOOL OF GRADUATE STUDIES
POSTGRADUATE PROGRAM IN INDUSTRIAL ENGINEERING
DEVELOPMENT OF SERVICE QUALITY ASSESSMENT AND IMPROVEMENT
APPROACH OF A MOTOR INSURANCE COMPANY IN ETHIOPIA
By: Girma Telila
Approved by Board of Examiners:
____________________ _______________ _______________
Chairman of Department Signature Date
Graduate Committee
Dr. Ameha Mulugeta _______________ _______________
Thesis Advisor Signature Date
Mr. Shimelis Tilahun _______________ _______________
Thesis Co-Advisor Signature Date
Dr. Haileleul _______________ _______________
Examiner Signature Date
Dr. Birhanu B. _______________ _______________
Examiner Signature Date
II
DECLARATION
I hereby declare that the work which is being presented in this thesis entitle “Development of service
quality assessment and improvement approach of a motor insurance company in Ethiopia” is
original work of my own, has not been presented for a degree of any other university and all the resources
of materials used for the thesis have been accordingly acknowledged.
_________________________ ____________________
Girma Telila Date
(Candidate)
This is to certify that the above declaration made by the candidate is correct to the best of my
knowledge.
__________________________ ____________________
Dr. Ameha Mulugeta Date
(Thesis Advisor)
__________________________ ____________________
Mr. Shimelis Tilahun Date
(Thesis Co-Advisor)
III
ACKNOWLEDGMENTS
Prior to everything, I would like to thank God for the courage he has given me to complete this
work. Then my family whose love and support never got offsite. I would also like to pass my
gratitude to Ato Jibat Alemneh and Ato Alazar Tamiru for permitting me to access data and
facilitate all situation in the case company.
I would like to express my deepest and heartfelt thanks to my Advisor Dr. Ameha Mulugeta and
Co-Advisor Mr. Shimelis Tilahun, for all what they delivered to me in weekly assessment and my
progress and also I want to appreciate their valuable comment which contributes much in the
quality of my work.
My deepest appreciation also goes to created team members of my case company Cherra Dagafu,
Gemechu Dida, Milkiyas Abera, Barnebas Teklu, Amalework Birhanu, Feyisa Onata, Elias Isa,
Tesfaye Abebe, Alemtsehay Kuma, Tsedale Chernet, Meriem Mohammed, Horenus Abebe, Ayela
Dessaleng, Beteliyem Teshale, and Kasu Eshetu for their relentless efforts providing and sharing
their profound experience throughout my study. Constructive comments by questionnaire
respondents are gratefully acknowledged.
I appreciate Guditi Danboba, Bilise Getachew, Obse Delesa and Mehbuba Husen for their help on
data collection. Finally, my special thanks goes to all my friends for their important advice and
recommendations.
Girma Telila
2019
IV
ABSTRACT
With the increasing progress in insurance service in today’s global world, people experience prudent
delivery of insurance service. This phenomenon has enhanced customer’s expectations. Besides this, pre-
risk and post risk assessments has a great influence overall insurance service delivery at the time of loss
settlements. This study was conducted on development of service quality assessment and improvement
approach of a motor insurance company in Ethiopia and carried out at three branches and head office Claims
directorate of the case company in Ethiopia. The researcher made this paper anonymous to protect
confidentiality of the case company.
Processes study was conducted on files that were available in the archive to find the root cause of customer
complaints and found eight root causes. Five teams were created from experts who knows motor insurance
service delivery process. The study performed to measure and to develop service quality assessment of
motor insurance by using integration of SERVQUAL and KANO Models into QFD method. The standard
questionnaire in English, Afan Oromo and Amharic of SERVQUAL and KANO model have been used.
Customers’ perception and expectation was identified by SERVQUAL and Weak attributes categorized by
kano model. The findings of KANO and SERVQUAL models show that five service quality attributes were
chosen to be improved and inserted in HOQ to develop the plan of improvement.
Through QFD method, five technical requirements were proposed to answer the customer needs. JIT
information flow and updating company’s working guideline has the highest weight score and if they
improved there will be almost 38.04% of improvement in service quality assessment processes. The
correlation among technical requirements indicates that well clarification of policy to customers have a
positive relationship with working guideline and just in time information flow. Creating experience sharing
habit and adopting breakthrough learned lesson that have positive correlation could bring an improvement
of motor insurance service delivery in 26.44%.
The researcher forwarded the step that the case company should follow. Adopting process improvement
implementation philosophy of Juran’s quality Trilogy is suggested that comprises quality planning, quality
control and quality improvements stages. The case company could start with establishing quality goal at a
minimum combined cost, develop methods to match the planned service as per customer needs and follow
continuous improvement accordingly.
Keywords: Service Quality, SERVQUAL, Kano model, Customer satisfaction, QFD, AHP, Insurance
Company
V
CONTENTS
ACKNOWLEDGMENTS .......................................................................................................... IV
ABSTRACT .................................................................................................................................. V
LIST OF TABLES ................................................................................................................... VIII
LIST OF FIGURES .................................................................................................................... IX
LIST OF ACRONYMS ............................................................................................................... X
CHAPTER ONE ........................................................................................................................... 1
1. INTRODUCTION................................................................................................................. 1
1.1. BACKGROUND .............................................................................................................. 1
1.2. STATEMENT OF THE PROBLEM ............................................................................... 4
1.3. RESEARCH QUESTIONS .............................................................................................. 5
1.4. GENERAL OBJECTIVE ................................................................................................. 5
1.5. SPECIFIC OBJECTIVE .................................................................................................. 5
1.6. SIGNIFICANCE OF THE STUDY ................................................................................. 6
1.7. SCOPE AND LIMITATIONS OF THE STUDY ............................................................ 6
1.8. LIMITATIONS OF THE STUDY ................................................................................... 6
1.9. ORGANIZATION OF THE THESIS .............................................................................. 6
CHAPTER TWO .......................................................................................................................... 8
2. LITRATURE REVIEW ....................................................................................................... 8
2.1. THE CONCEPT OF SERVICE ....................................................................................... 8
2.2. SERVICE QUALITY ...................................................................................................... 9
2.2.1. Customer Satisfaction ............................................................................................. 11
2.2.2. Customer Loyalty and Advocacy............................................................................ 11
2.3. SERVICE QUALITY AND PROCESS IMPROVEMENT .......................................... 13
2.4. TOOLS OF CUSTOMER ORIENTATION APPROACHES ....................................... 15
2.4.1. SERVQUAL Model ................................................................................................ 15
2.4.2. Kano Model ............................................................................................................ 21
2.4.3. Quality Function Deployment (QFD) ..................................................................... 26
2.4.4. Analytical Hierarchy Process - AHP ...................................................................... 28
2.5. THE SYNERGY OF CUSTOMER ORIENTED TOOLS FOR IMPROVING
SERVICE QUALITY ............................................................................................................... 30
2.6. SERVICE QUALITY AND INSURANCE INDUSTRY .............................................. 35
VI
2.6.1. Principle of Insurance ............................................................................................. 35

2.6.2. Ethiopian Insurance Industry .................................................................................. 36
2.6.3. Motor Insurance ...................................................................................................... 37
2.6.4. Motor Underwriting or pre risk assessment process ............................................... 39
2.6.5. Motor Claim or post risk assessment process ......................................................... 39
CHAPTER THREE .................................................................................................................... 40
3. RESEARCH METHODOLOGY ...................................................................................... 40
3.1. RESEARCH DESIGN ................................................................................................... 40
3.2. RESEARCH POPULATION AND SAMPLE .............................................................. 41
3.2.1. Population and Sample size of Process Study ........................................................ 41
3.2.2. Population and Sample Size of SERVQUAL Model ............................................. 42
3.2.3. Population and Sample Size of Kano Model .......................................................... 42
CHAPTER FOUR ....................................................................................................................... 44
4. DATA COLLECTION AND ANALYSIS ........................................................................ 44
4.1. PROCESS STUDY ........................................................................................................ 45
4.1.1. Stages of Claim Process .......................................................................................... 46
4.1.2. Process Study Result ............................................................................................... 49
4.2. SERVQUAL MODEL ................................................................................................... 54
4.3. KANO’S MODEL.......................................................................................................... 57
4.3.1. Customer Satisfaction Coefficient and self-stated importance ............................... 61
4.4. INTEGRATING SERVQUAL AND KANO’S MODEL INTO QFD .......................... 62
CHAPTER FIVE ........................................................................................................................ 74
5. CONCULUSION AND RECOMMENDATION ............................................................. 74
5.1. CONCLUSION .............................................................................................................. 74
5.2. RECOMENDATION ..................................................................................................... 76
5.3. FUTURE RESEARCH AREAS .................................................................................... 76
REFERENCES ............................................................................................................................ 77
ANNEX A: PROCESS STUDY DATA COLLECTION ......................................................... 84
ANNEX B: SERVQUAL QUESTIONNAIRE ......................................................................... 88
VII
LIST OF TABLES
Table 2.2-1: Kano Evaluation Table ............................................................................................ 24
Table 2.2-2: Tangible and intangible benefits of Quality Function Deployment. ........................ 28
Table 2.2-3: Random inconsistency indices for n = 10 (Source: Saaty, 1980) ............................ 29
Table 3-1: Gronroos model standard variation in factor of service quality measurement .......... 42
Table 4-1 Experts proposed solution for the root cause of customer complaints ........................ 52
Table 4-2: Questionnaire of customer expectation and Perception. ............................................ 55
Table 4-3: Average gap between customer expectation and their perception.............................. 55
Table 4-4: Weighted score of service quality dimension for case company. ................................ 56
Table 4-5: Responses of customers on Kano’s model functional and dysfunctional questions ... 59
Table 4-6: Prioritized service attributes depending on Kano category ....................................... 60
Table 4-7:Customer Satisfaction Coefficient and self-stated importance .................................... 61
Table 4-8: Average customer expectation .................................................................................... 64
Table 4-9: Representation of pairwise comparison. ..................................................................... 65
Table 4-10: Pairwise comparison matrix for Convenient parking & wreck yard ........................ 68
Table 4-11: Normalized pairwise matrix Convenient parking & wreck yard .............................. 69
Table 4-13: Relationship matrix between customer requirements and technical requirements .. 70
VIII
LIST OF FIGURES
Figure 2.2.1: Managing customer relationship in the business ................................................... 12
Figure 2.2.2: Three types of tools for successful process improvement ...................................... 13
Figure 2.2.3: Six sigma for service processes. ............................................................................. 13
Figure 2.2.4: Juran Trilogy diagram ............................................................................................ 14
Figure 2.2.5: Service Quality dimensions..................................................................................... 16
Figure 2.2.6: Model of service quality gaps ................................................................................. 19
Figure 2.2.7: Kano Model Diagram ............................................................................................. 22
Figure 2.2.8: Kano methodology .................................................................................................. 23
Figure 2.2.9: Kano Evaluation table ............................................................................................ 25
Figure 2.2.10: House of Quality .................................................................................................. 27
Figure 2.2.11: Framework for the integration of SERVQUAL and KANO model into QFD....... 32
Figure 2.2.12: Structure of the house quality with integrated approach ..................................... 33
Figure 3.1Research methodological frame work.......................................................................... 40
Figure 4.5: Research conceptual model ....................................................................................... 44
Figure 4.1: Process flow chart of motor insurance pre and post risk assessment ...................... 46
Figure 4.2: Problematic stages of motor insurance ..................................................................... 51
Figure 4.4: House of Quality for service quality design by using AHP. ...................................... 63
Figure 4.6: Integrated approach of House of quality ................................................................... 71
IX
LIST OF ACRONYMS
SERVQUAL……………. Service Quality

CS………………………. Customer Satisfaction
CRs……………………...customer Requirements
GDP……………………...Gross Domestic Product
NBE……………………...National Bank of Ethiopia
RATER…………………...Responsibility, Assurance, Tangibility, Empathy and Reliability
VOC………………….…. Voice of Customers
HOQ……………………. House of Quality
CR ……….………………Customer requirements
TR………………………. Technical Requirements
MCDM…………………. Multiple criteria decision making
AHP………………….... Analytical Hierarchy process
X
CHAPTER ONE
1. INTRODUCTION
1.1. BACKGROUND
The term service represents and constitutes various issues. It is challenging to define, it
covers ‘a wide range of intangible and heterogeneous products and activities that are difficult to
summarize within a simple definition’ (WTO, 2010). However, many scholars’ states that the
definitions of “service industries” usually exclude manufacture, agriculture, mining, and
construction (Juran, 1992; Kenneth, 2005; Zelalem, 2017). According to Kenneth (2005) the
service industry contains Public transportation, Public utilities, Restaurants, hotels, Marketing
Finance (commercial banks, insurance, sales finance, investment), News media, Personal services,
Professional services, Government (defense, health, education, welfare, municipal services).
The insurance industry is one of the service sectors that has no tangible product; it is sold
policy/promise to indemnify insured. There is the uncertainty of the occurrence of an event to
realize the insurance coverage for the paid premium. The insurance sector plays a vigorous role in
the financial services industry, contributing to economic growth, efficient resource allocation,
reduction of transaction costs, creation of liquidity, facilitation of economics of scale in
investment, and spread of financial losses (Birhanu, 2018). Dickson (2001) also states that
insurance, like most institutions, presents to society with various benefits like, Peace of mind,
indemnification, a basis for credit, stimulating savings and providing investment capital are the
most important general benefits of insurance.
Hailu (2007) states that the history of insurance service is as far back as the modern form
of banking service in Ethiopia which was introduced in 1905. The significant event that the
Ethiopian insurance service observation was the issuance of Proclamation No. 281/1970, it was
issued to offer for the control & regulation of insurance activities in the country. Accordingly, it
forms an insurance council and an insurance controller’s bureau. The controller of insurance
licensed 15 domestic insurance companies, 36 agents, 7 brokers, 3 insurance statistician (actuaries)
& 11 assessors in agreement with the provisions of the proclamation immediately in the year after
the issuance of the law.
1
According to Hailu (2007) states that after four years that is after the acting of the
proclamation, the military government that came to power in 1974 put an end to all private
enterprises, then all insurance companies operating were nationalized and from January 1, 1975,
onwards the government took over the ownership and control of these companies & merged them
into a single unit called Ethiopian Insurance Corporation. Immediately after the enactment of the
proclamation in 1994, private insurance companies began to increase. According to NBE, (2017),
the number of insurance companies remained at 17, of which 16 were private.
The truths observed in the structure of Ethiopian economy within a half century are the
weakening of agriculture, the growth of service and the stagnation of manufacturing sector.
Ethiopia had the highest share of output in the agriculture sector, which is incomparable with the
other countries agricultural output share. According to Zelalem, (2017) in 2011 the Ethiopian
agriculture sector share to total output is still one of the highest 42% when compared with other
countries output share. The manufacturing sector output share just increased from 2 % to 5 %.
However, what has changed significantly is the share of the service sector. It increased from 9 %
to 44 %, becoming the largest sector in output share and comparable with the level of service
output in other developing countries until 2015 (National Bank of Ethiopia, 2015).
In contrast, (National Bank of Ethiopia, 2017) reports the real GDP growth was 10.9 % in
2016/17 up from 8.0 % in 2015/16, as agricultural value added grew by 14.7 percent. The industry
has taken over the services as the major contributor to growth in 2016/17. The major contributor
to the growth was the industry sector contributing 4.4 percentage points, followed by services 4.0
and agriculture 2.5 percentage points.
According to DM Sheaba & Sekata Kenea (2017), most people choose various insurance
policies to protect themselves and their properties. One of the basic sources of competitive
advantage between companies to attract customers is the price of goods and services, in the
insurance industry case, premium. In today’s dynamic world, economies are changing to service
oriented, which customer pressed in shape to play a critical role. A company provides services to
customers, while overall customer attitude towards the company is defined in the relationship
between service quality and customer satisfaction.
Quality is a multi-dimensional phenomenon. Parasuraman, Zenithaml, & Berry, (1985)

primarily recognized 10 dimensions used by consumers in evaluating service quality and finally
2
merged them into five dimensions that are named as RATER (Reliability, Assurance, Tangibility,
Empathy and responsibility).
Belay (2014) states that in Ethiopia it is not trending to see organizations that are committed
to building loyal customers and provide excellent service due to various reasons; it may be because
of shortage of knowledge on the area, the business may be dependent on traditional system, lack
of commitment, less attention for quality and many other reasons. Since competition in the service
sector is increasing, organizations have to work on improving service quality and change their
current customers to loyal and get a competitive advantage over the others.
Therefore, this research studied service quality improvement. Moreover, a study concerned
service quality improvement process or technical steps that in the case of the Ethiopian insurance
industry is limited. Existing literature reveals that most of the studies observed service quality in
a way which is not showing strong links between service quality and processes improvement. So,
this research studied development of service quality assessment and improvement approach of
motor insurance in the case company and examined the relationship between service quality in
process and customer satisfaction.
Process study was conducted motor claims and eight roots of customer complain were
found. The research was performed to measure and to make quality improvement by using
integration of SERVQUAL and KANO Models into QFD method with the help of MCDM tool
analytical hierarchy process. Five technical requirements are proposed to answer the customer
needs as follows: adopting JIT information flow, update working guidelines, clarify policy to
customers, breakthrough learned lesson and creating experience sharing habit. This integrated
customer oriented approach model provides information to management of case company
regarding the factors supporting what customers expect and at the same time to evaluate the quality
of services. Thus, organization is able to recognize consumer requirements very well so that
appropriate policies can be formulated based on valid information to attain optimal results.
3
1.2. STATEMENT OF THE PROBLEM
Customer satisfaction in insurance means the use of the policy product purchased for a cost
premium, to the ultimate satisfaction of the buyer, when a claim is paid. The product bought by
the policyholder will give them peace of mind during the product cycle when it is in use by the
customer. Most research studies Observed in Ethiopian Insurance Industry focuses on customer
satisfaction, capital structure, customer loyalty and profitability which is not showing strong links
between service quality and processes improvement. Some of the existing literature that studies
insurance service quality in Ethiopia include;
DM Sheaba & Sekata Kenea (2017) reveals that the premium was the most competing
variable among insurers, the motor policy wordings were too difficult for clients to understand, as
it was a direct copy from foreign insurers, there was no initiation and interest on the part of insurers
to collect feedback from their customers and in private insurers there is a reduction of
bureaucracies to respond to the interest of customers.
Birhanu (2018) states that the growth of insurance industry depends on prudent risk
selection decisions, efficient claims management, and innovations, in Ethiopia insurers were
concentrating more on investment income at the expense of underwriting profit. Belay (2014)
examined that service quality and relationship quality have a significant effect on the development
of customer loyalty while the impact of customer satisfaction is less significant. Chali, (2016)
forwards the usage of induced knowledge ‘s and on using automatic knowledge acquisition
techniques for the development of the knowledge base system.
Tatek (2018) notes that awareness of contract, ways of compensation, location of branches,
service quality, and technology-based service have a positive significant effect on motor insurance
customer’s satisfaction. According to Birhanu (2018) & DM Sheaba & Sekata Kenea (2017) motor
insurance is one of the main insurance services provided by insurers in Ethiopia and in Africa
(Kenya, Uganda, and Tanzania). In development of non-life gross written premium from 2010 to
2018 motor insurance is the dominant non-life insurance policy in Ethiopia that records 4,346.5
million-birr (National Bank of Ethiopia, 2018).
To the best of the researcher’s knowledge, local studies focused more on customer
satisfaction, capital structure, customer loyalty and growth and the other. None of the studies
4
address the subject from quality improvement approach including technical process like pre and
post risk assessments. The researcher realized that there were high customer complaints in motor
insurance claims service in the case company. Identifying customer requirements and focusing at
the root cause of customer dissatisfaction are very important to improve service quality of
delivered service. Therefore, this study focused on development of service quality assessment and
improvement approach of motor insurance in Ethiopian insurance company.
1.3. RESEARCH QUESTIONS
The paper focused on the development of service quality assessment and improvement
approach of motor insurance in Ethiopian insurance company, and the study strives to answer the
following questions.
 What are the major technical processes at the time of risk handling and loss settlement?
 Where are the problematic areas or stages in insurance processes of Pre and post risk
assessment and what are the causes of these problems?
 What is the influential Service quality dimension in motor Insurance?
1.4. GENERAL OBJECTIVE
The general objective of the study is to analyze the process of service delivery in pre and
post risk assessment stages on motor insurance and enhance Service excellence and customer
satisfaction in the case company.
1.5. SPECIFIC OBJECTIVE
The specific objective of the research;
 To study insurance service processes of operation in claims and underwriting activities.
 To identify problematic areas in pre and post risk assessment stages.
 To illustrate systematic illumination of the inefficiency in the processes and identify

customer requirements in the case company.
5
1.6. SIGNIFICANCE OF THE STUDY
This study is mainly concerned with development of service quality assessment and
improvement approach of motor insurance. Emphasis is given to studying the process of motor
claims and measuring the quality of delivered service by the case company. Root causes of
customer complaints and technical requirements to improve the problems were identified. Even
though the study is carried out for academic purposes, the findings obtained from the study would
be helpful to gain information about current delivered service and customer requirements which
in turn could help the case company in improving the motor claims process and reducing customer
dissatisfaction. In addition, identifying the problems and suggesting appropriate improvement
ways to improve the pre and post risk assessment process. Finally, it helps to carry out further
research to refine the conceptual and methodology of the present study.
1.7. SCOPE AND LIMITATIONS OF THE STUDY
The scope of the study is on the motor insurance and assessment process improvements in
the case company. This study uses data collected, from files available in the archive that were
opened in 2017 to April 30, 2019 and from the customers of the case company.
1.8. LIMITATIONS OF THE STUDY
Due to limitation of time, this research is limited to one case company and the researcher
faced confidentiality problem that was raised from case company managers and forced to hide the
name of case company in this study. This study is limited to customers’ needs and circumstances
that was in one company while the other cases and companies may be have another needs or
technical requirements.
1.9. ORGANIZATION OF THE THESIS
This thesis contains a total of five chapters and four appendices. The report is structured so that
the information presented to the reader is arranged in a logical sequence. It is presented in such a
manner that the necessary background information is covered before going further into the next
level of detail.
6
The contents of the chapters are as follows:
Chapter 1 – Introduction: This chapter is to give an opening to the reader about the research
work, what initiated it, the problem statement, objectives, significance, scopes and limitations and
how the entire thesis is organized.
Chapter 2– Literature Survey: - This chapter will review in detail the literature available in the
area of service, service quality, insurance and service quality improvement. It will cover the ideas
evolving around customer satisfaction, motor insurance, and customer oriented approaches based
on the experience and, research and teaching of prominent writers. The main customer focused
approach tools like SERVQUAL, Kano’s model, QFD and MCDM AHP are discussed. The aim
of this chapter is to give the reader fundamental background on the concept of Service quality
improvement.
Chapter 3 – Research Methodology: - will describe different aspects of the methods used and
situations that the researchers must consider during each phase of the study. Different ways of
carrying out a study and different ways of collecting information will be discussed. The purpose
of this chapter is to make the reader understand the methodological choices made on the study.
Chapter 4 –Data Collection and Analysis: - This chapter will cover the finding of process study,
SERVQUAL model, Kano’s model, AHP and analysis and interpretation.
Chapter 5 – Conclusions, Recommendations, and Future Works: - This chapter will present
the conclusions drawn from the study, and give recommendations as to how the approach can be
used by the case company to reduce customer complaints. It will also include suggestions for
further researches in the area.
Ethical Consideration- Participants of the research were informed in advance about the research
prior to give their consent. Participant’s information with their names was not made available. In
addition to this, the case company confidentiality was kept well in order to protect their privacy
i.e. the name of case company was not appeared in this paper so that it would not be recognized
by others.
7
CHAPTER TWO
2. LITRATURE REVIEW
2.1. THE CONCEPT OF SERVICE
The concept of service has been well-defined in different ways. Gronroos (2000) defined
service concept from three dimensions (activities, interactions, and solutions to customer
problems), service concept is a series of activities of an intangible nature that normally, but not
necessarily, take place in the interaction between the client and service provider or physical
resources or goods or systems of the service provider, which are provided as solutions to customer
problems.
According to Lovelock & Gummesson (2004) services are deeds, processes, performances
and not physical or objects with embedded qualities in the product features. This agreed with the
services concept of A. Parasuraman et al., (1985). During the period 1963-1983, Zeithaml et al.
(1985) conducted a literature review and found that the most service characteristics that make it
different from goods were intangibility, inseparability, heterogeneity, and perishability.
Intangibility denotes that services are activities and not physical objects, as goods. Often
services cannot be seen, felt, tasted, or touched before they are purchased, a distinction between
physical and mental intangibility is not presented in most textbooks on service marketing
(Lovelock & Gummesson, 2004). Inseparability denotes that services are produced and consumed
simultaneously because customers are a part of the production process. It is an oversimplification
and argued that many services are partly or largely produced independently of the customer
(Lovelock & Gummesson, 2004). Heterogeneity denotes that inconsistency, variability or non-
standardization because it makes it difficult to establish a standard. Service is delivered by different
people with different delivery times and customer involvement levels, that may contribute to
customer value while standardization may have a bad impact on value creation (Edvardsson et al.,
(2005) and Gronroos (2000). Perishability denotes that service are perishable and unlike a good,
cannot be stored for later use. Additionally, service cannot be stored, saved, returned and resold
ones delivered to the customer (A. Parasuraman et al., 1985).
Edvardsson et al., (2005) studied Service portraits in service research and conducted a
survey of the service experts’ views, the question sent via email for 16 leading scholars on the
8
service concept definitions and most common service characteristics. Finally, Edvardsson et al.,
(2005) concluded service as a perspective on value creation rather than a category of market
offerings, the focus is on value through the lens of the consumers, and co-creation of value with
customers is a significant and the interactive, experimental, and relational nature form the basis
for characterizing service.
As many scholars discussed Edvardsson et al., (2005); Gronroos (2000); Lovelock &
Gummesson (2004) and Parasuraman et al., (1985) service definition is a perspective, general
service definition does not exist and has to be determined at a specific time, in a specific company,
for a specific service, from a specific perspective. Juran on his book of quality by design states
that service industries usually include Public transportation, Public utilities, Restaurants, hotels,
Marketing, Finance (commercial banks, insurance, sales finance, investment), News media,
Personal services, Professional services, Government (Juran, 1992).
2.2. SERVICE QUALITY
Quality is addressed in many academic and trade journals, most frequently repeated word
among managers and executives in contemporary organizations. According to (Zeithaml,
Parasuraman, Berry, & Berry, 1990) improvement of service and product quality is the most
critical challenge in the businesses. Quality has been defined differently by different quality
philosophers. Kathawala (1989); Reeves & Bednar (1994) state that a well-known approach in
defining quality are Transcendent approach, Value-based approach, manufacturing-based
approach, and user-based approach.
Customers commonly take pride in owning an excellent product or receiving excellent

service. Excellence is the basis for advertising campaigns in industries such as automobiles, liquor,
and airlines. Excellence approach relies on strong marketing and human resource benefits, and the
universally recognizable mark of uncompromising standards (Kathawala, 1989). Some scholars
Garvin (1984); Reeves & Bednar (1994) argue this approach because it provides little practical
guidance to practitioners, measurement difficulties, attributes of excellence may change
dramatically and rapidly.
A broader view of quality was founded on the belief that the consumer was the ultimate
mediator of trade, and that business flourished by serving consumer interests or value based.
9
According to Feigenbaum (1956) quality means best certain customer conditions, that means,
actual use and the selling price of the product, Product quality cannot be thought of apart from
product cost. Shewhart & Deming (1986) clearly states that productivity increases with the
improvement of quality and total cost of the product is important rather than the price tag.
Shewhart (1931) prevailing view of quality as a measure of goodness was too indefinite
for practical purposes. Quality had to be quantifiable if manufacturers were going to be able to use
statistical procedures to measure it. Edwards (1986); Juran & Godfrey, 1999) expanded on
Shewhart's work quality of conformance concerns how well the product conforms to design
specifications and incorporated the notions of both excellence and conformance into his quality
definition. Crosby (1980) states that quality is conformance to requirements, it focuses on
conformance and reliability.
The most pervasive definition of quality presently in use is the extent to which a product
or service meets and/or exceeds a customer's expectations (Gronroos, 2000; Ananthanarayanan et
al. 1988; Zeithaml, Parasuraman, Berry, & Berry, 1990). This definition grew out of the services
marketing literature (Kotler & Keller, 2009; Lovelock & Gummesson, 2004). Juran argued for a
universal concept, applicable to both manufacturing and services, by recognizing additional
difficulties posed by services. For internal conformance, the measures of quality have much in
common with the well-known measures widely used in control of the manufacturing process. In
universal concept, Quality is fitness for use and it focuses on aesthetics and perceived quality
(Juran, 1992).
Service quality is the delivery of excellent service relative to client expectations (A.
Parasuraman et al., 1985). In today’s altering world, developed economies are changing to service
oriented, that customer impressions play a great role in this field, on another hand, if service quality
declines quickly, customer satisfaction declines dramatically and if service quality develops
radically, customer satisfaction rises rapidly too (Fauziah & Sharareh, 2012). They also state
service quality has become an important issue for both maintaining current portfolios and gaining
new business.
10
2.2.1. Customer Satisfaction

To survive and best in today’s competitive market organizations must realize the
importance of customer-oriented business thinking and quality management approaches in
managing the business (Tazreen, 2012). Every business organization’s achievement depends on
the satisfaction of the customers. Whenever a business is about to start, customers always come
primary and then the profit. Today’s business company has known that customer satisfaction is
the vital element for the success of the business and at the same time it plays a vigorous role to
expand the market value (Khadka & Maharjan, 2017)
According to Khadka & Maharjan (2017); Lovelock & Gummesson (2004) satisfaction is
a dynamic, moving target that may evolve over time, influenced by different factors. Mostly when
product or service experience takes place over time, satisfaction may be very variable depending
on which point in the usage or experience is focusing. Many scholars have watched customer
satisfaction(Coleman, 2015; Dan, 2016; Kotler & Keller, 2009). Customer satisfaction is a
person’s feeling of desire or dissatisfaction resulting from comparing a product’s/services
perceived performance in relation to the user’s prospects. It is the extent to which a Services or
product’s perceived performance matches a user’s expectation (Kotler & Keller, 2009). Bigger
customer satisfaction can offer company benefits like customer loyalty, extending the life cycle of
a customer expanding customer purchase and increases customers positive word of mouth
communication (Khadka & Maharjan, 2017).
2.2.2. Customer Loyalty and Advocacy

Customer loyalty is an important factor in a business organization. The effect of
satisfaction on loyalty has been a popular subject in the study of the marketing philosophy. Loyal
customers will inspire others to buy from you and think more than twice before altering their mind
to buy other services (Khadka & Maharjan, 2017). Loyal customers, they don’t just come back,
they don’t simply recommend you, they insist that their friends do business with you (Bell &
Zemke, 1987). According to Kotler & Keller (2009), customer loyalty is a profoundly held
commitment to re-use a preferred product/service steadily in the future, thereby causing repetitive
same brand set purchasing, despite situational factors. Satisfaction will nurture loyalty to the extent
that it is a precondition for keeping a favorable relative outlook and for recommending and re-use
the product/ service.
11
Lawer & Knox (2006) define customer advocacy as an advanced form of market
orientation that responds to the new drivers of consumer choice, involvement and knowledge.
Customer advocacy aims to build deeper customer relationships by earning new levels of trust and
commitment and by developing mutual transparency, dialogue, and partnership with customers.
According to Urban (2005) advocacy is not a way for a company to speak at customers. Rather, it
is a mutual dialogue and a partnership that assumes if the company advocates for its customers,
those customers will reciprocate with trust, purchases, and enduring loyalty. It is a partnership
between a firm and its customers to the mutual benefit of both. Chatterjee (2000) also states that
customer advocacy viewed as the top of a pyramid, service quality and customer satisfaction are
at the base of the pyramid.
Customer
Advocacy
Customer
Loyalty
Service Service
Quality Customer Quality
satisfaction
Figure 2.2.1: Managing customer relationship in the business (Source: Chatterjee, 2000)
(Modified)
Today’s unforgiving market where creating and maintaining customer loyalty is more
complex than it used to be in the past years. This is because of technological breakthrough and
widespread of the internet uses. Loyalty building requires the company to focus the value of its
product and services and to show that it is interested to fulfill the desire or build the relationship
with customers (Khadka & Maharjan, 2017).
12
2.3. SERVICE QUALITY AND PROCESS IMPROVEMENT
To grow well in strong economic times and survive the unavoidable downturns, a business
organization must continuously improve their skill to deliver high-quality goods and services at
the required speed and at the lowest cost. Market needs, technology, and new business demands
challenge organizations to apply new continuous-improvement tools to create the agility and
flexibility in order to respond quickly to their customers and stakeholders (Martin & Osterling,
2007).
Edvardsson (1998) conducted research on quality improvement in service operations and

states that Quality improvement is used as a collective expression for quality assurance, quality
management, and quality control. Edvardsson proposed 13 propositions on service quality which
can be regarded as a guide to new service development with built-in quality and presented what
characterizes successful service companies and what can be learned from them:
1. Top management Commitment 9. create realistic customer expectations

2. Strategic development
10. Stress on complaint management
3. Based on the customer oriented
4. Quality improvement is everybody’s 11. Stress on employee commitment and
responsibility. customer for perceived total quality
5. Based on innovative idea 12. Stress on measuring quality for

6. Focus on continuous improvement customers, employees, and owners
and reengineering
13. Rewarding quality improvement
7. Quality improvement drives
based on facts
profitability
8. Benchmarking
Shiba & Walden (2002) described process improvement as a problem-solving process and
proposed three types of tools needed to accomplish problem-solving. First analytical tools provide
the path for communication between the problem and the problem solvers. Second skill-gaining
tools provide a learning process, supported by the organizational infrastructure to gain greater
benefit from the learning. Third project execution tools provide a way to get tangible results, based
on learning and communication.
13
Tools for Gaining Skill
Quality process
Tools for
Improvement Successful Results
Analysis
(III Problem Solving)
Tools for Improvement

Project Execution
Figure 2.2.2: Three types of tools for successful process improvement (Shiba & Walden, 2002)
Antony (2006) demonstrates the power of six sigma, a disciplined approach to improving
service quality in the service industry and presented the potential areas where six sigma could be
exploited in service functions by using its series of well-defined steps called DMAIC.
Define
Statistical thinking +
Integration of
application of quality
human and process
issues of process tools and techniques
improvement Measure
Linking Six
Data driven Analyse Sigma to business
decisions and
strategy
measurements
Improve
Management Impact on bottom-
Leadership line and Customer
commitment
satisfaction
Control
Figure 2.2.3: Six sigma for service processes (Source: Antony, J. (2006).
13
Joseph M. Juran ranks quite near Deming in the contribution he has made to the field of
quality. Among Juran contribution to the quality philosophy, quality trilogy is the most important
and universally accepted in the quality improvement process. According to Juran (1992), the
quality improvement process is the means of raising quality performance to unprecedented levels.
Juran quality Trilogy Diagram is a graph with time on the horizontal axis and cost of poor quality
on the vertical axis. On the vertical axis, perfection is at Zero, what goes up is not good. Figure
below indicates that 20 percent of the work must be redone because of quality shortages. These
wastes then become chronic, because it was planned/deliberated that way.
Figure 2.2.4: Juran Trilogy diagram (Source: quality and a century of improvement by Kenneth)
Quality planning is strategic quality management that management chooses a plan of action
and allocates resources to achieve goal. Control is putting out the fires, such as that sporadic spike
and in the quality improvement, it was realized that the chronic wastes also an opportunity for
improvement from the lesson learned (Kenneth, 2005). Quality improvements is called quality
break through sequence and it requires an action on the part of upper and middle management that
deals with creating new design, changing methods or procedures of manufacturing and investing
new equipment.
In the world a continuous-improvement philosophy and business management approach

for making small, incremental progress on a daily basis. Kaizen is a specific improvement tool in
office, service, and technical environments regularly reduce throughput time by 60 %, improve
quality by 80 %, and increase capacity by 20 % (Martin & Osterling, 2007).
14
2.4. TOOLS OF CUSTOMER ORIENTATION APPROACHES
Many researchers recognize that the voice of customer works as the guide for the service
provider by providing their suggestions as well as complains (Coleman, 2015; Mote, Kulkarni, &
Narkhede, 2016; Rahmana et al., 2014; Shahin, 2006). These suggestions enable the provider to
take accurate steps to design the operational procedure. There are many tools for customer-oriented
approaches. SERVQUAL Model, Kano Model and Quality Function Deployment (QFD), are
among popular tools.
2.4.1. SERVQUAL Model

Service industry by nature has less control over factors that affect quality. Very few
methods are considered to be effective measurement tools for services so far while a number of
methods have been introduced and practiced for measuring the quality of physical goods. Tazreen
(2012) noted that evaluating the quality of service is one of the challenges for service providers
because of the intangible and notably the inseparable and heterogeneous characteristic of service.
SERVQUAL model is one of the well-known models and used broadly for measuring the
quality of services, introduced in 1985 by a group of American Marketing Gurus Parasuraman,
Berry, and Zeithaml. The model used as a diagnostic technique for uncovering broad areas of an
organization’s service quality strengths and weaknesses (Rahmana et al., 2014). Many researchers
illustrate SERVQUAL model is good at drawing the views of customers regarding service
encounters, able to aware management to consider the perception of both management and
customers, able to identify specific areas of excellence and weaknesses and it provides
benchmarking analysis for organization in the same industry (Apornak, 2017; Dan, 2016; Gupta
& R. Sriavastava, 2012).
Further studies by A. Parasuraman et al. (1988) identified ten elements of service quality.
These were tangibles, reliability, responsiveness, competence, courtesy, credibility, security,
access, communications, and understanding. Later these ten elements compressed into five factors
or service quality dimension that create the acronym RATER.
I. Reliability: it is the ability to carry out the promised service dependably and
accurately or doing what you say you will do. Tatek (2018) states that a company’s
ability to deliver promises is the most vigorous factor in providing service quality.
15
II. Assurance: Assurance is well-defined as employees’ knowledge, courtesy, the

ability of the firm and its employees to inspire trust and confidence. The importance
of this dimension increases in proportion to the risk (Gupta & R. Sriavastava, 2012).
III. Tangibles: The appearance of physical facilities, equipment, personnel and

communication materials. According to Gupta & R. Sriavastava (2012) Service
industries such as hotels and restaurants rely heavily on tangibles. Guests often
judge the quality of the physical environment and tangible facilities.
IV. Empathy: Empathy is defined as the caring individualized attention the firm offers
its customers. Gronroos (2000) states that Clients perceive the level of a company’s
empathy by the degree of personalized service offered.
V. Responsiveness: it is the willingness to help customers and to deliver prompt

service. Customers judge a company’s responsiveness by considering the amount
of time it takes and the attentiveness that is offered in response to their demands,
questions, complaints, and problems (DM Sheaba & Sekata Kenea, 2017)
Reliability
Assurance
 Competence
 Courtesy
 Credibility
 Security
Service Quality
Dimension
Tangibles
Empathy
 Access
 Communication
 Understanding
Responsiveness
Figure 2.2.5: Service Quality dimensions by A. Parasuraman et al., 1988 (Modified)
16
Benefits of SERVQUAL can be summarized as follows:
1. It is good to draw out something hidden the views of customers regarding service
encounters (Dan, 2016)
2. It is able to an aware organization to consider the perception of management and

customers (Kay C. Tan & Pawitra, 2001a)
3. Addressing the service gaps can serve as a basis for formulating strategies and tactics
in order to ensure the fulfillment of expectations (Stephen W. Brown & Swartz, 1989;
Buttle, 1996)
4. It can trace the trend of customer relative importance and able to identify specific areas
of excellence and weaknesses (Apornak, 2017)
2.4.1.1. Service Quality Gap Models

The Gap model of service quality was originally developed by Parasuraman, Berry, and
Zeithaml (1985). It has served as a basis for study in services industries. The model identifies four
specific gaps leading to a fifth general gap between customers’ expectations and perceived service.
These gaps are;
Gap 1: Knowledge gap; A gap arises when the company’s knowledge of customer expectations
is missing, binding them from approaching consumers in the correct way. The extent of the gap is
dependent on the level of upward communication, the number of layers of management, the size
of the organization and the extent of marketing research to identify customer expectations (Dan,
2016)
Gap 2: Standards gap; The organization has already designed its own idea about what the
customer expects from their service. If this idea is incorrect from the start and does not correspond
to what customers actually expect, there is a significant risk that the organization will interpret it
wrongly into a quality policy and corresponding rules (Terzakis, Zisis, Garefalakis, & Arvanitis,
2012)
Gap 3: Delivery gap; It also called performance gap, its extent is a function of many variables
involved in the provision of service. Service quality may have affected by factors like skill level,
type of training received, degree of role agreeability or conflict, and job fit. Service recovery efforts
17
along with the extent of responsibility and empowerment also affect the size of this gap (Baki,
Sahin Basfirinci, Murat AR, & Cilingir, 2009)
Gap 4: Communications gap; The extent of communications between the company and the
advertising agencies will affect the size, it can create the wrong expectations among customers. It
also happens that the organization communicates and promises things that are not in line with what
they can actually deliver (Apornak, 2017).
Gap 5: Satisfaction/perception gap; It is the total accumulation of variation in Gaps 1 to 4 and

represents the difference between expectations and perceived service. Eventually, this will lead to
the biggest gap in the experience of quality (Awlachew, 2015).
According to (S.W. Brown & Bond, 1995) the gap model is one of the best received and most
heuristically valuable contributions to the services literature and the model recognizes seven key
gaps relating to managerial perceptions of service quality, and tasks associated with service
delivery to customers which is an extension of Parasuraman et al. (1985).
The External gap happens when the consumers and the company are the main concerns. The
internal gap is related to the company’s departments and functions. Like the external customer, an
internal customer to considers categories of service attributes in judging the quality of the internal
service. service organizations need to know how well the organization or employees performed on
each RATER dimension and identify the weakness in order to make improvements (S.W. Brown
& Bond, 1995; Shahin & Samea, 2010). These authors identified an additional two gaps to
Parasuraman et al. (1985) gap model;
Gap 6: The discrepancy between customer expectations and employee’s perceptions: as a

result of the differences in the understanding of customer expectations by service providers (S.W.
Brown & Bond, 1995)
Gap7: The discrepancy between employee’s perceptions and management perceptions: as a

result of the differences in the understanding of customer expectations between managers and
service providers (Shahin, 2006).
18
Figure 2.2.6: Model of service quality gaps (Source: Brown and Bond (1995); Curry, 1999; Luk
and Layton, 2002)
4.2.1.2. Method of SERVQUAL Survey for Measuring Service Quality

According to Terzakis, Zisis, Garefalakis, & Arvanitis (2012) SERVQUAL is an
instrument that constituted from three parts and operated as follows: a set of 22 items in the form
of a questionnaire is applied to consumers in order to identify their perceptions and expectations.
The customers are asked to rate their perceptions and expectations in a 7-point-scale from 1
strongly disagree to 7 strongly agree. The next part of SERVQUAL asks customers either to weigh
the 22 items or to rate each of the five dimensions according to their importance in scale out of
100, the measure of service quality was based on responses to a 7-point semantic differential
question (Buttle, 1996).
As a result, an average score is identified for each of the 5 dimensions as well as an overall
satisfaction quality score is determined using the mean score of the RATER. Gathered facts on
19
service quality gaps can assist managers or administrators diagnose where performance
improvement can best be targeted. According to Terzakis et al. (2012), if the gap is positive, the
service quality is regarded to be better than expected, if the gap is zero, service quality is good,
and if the gap is negative, improvements are demanded.
𝑆𝑄𝑖 = ∑𝑘𝑗=𝑖(𝑃𝑖𝑗 − 𝐸𝑖𝑗 )
where: SQi = perceived service quality, k = number of service attributes, P = perception of

individual ‘i’ with respect to performance of a service firm attribute ‘j’, E = service quality
expectation for attribute ‘j’ that is the relevant norm for individual ‘i’.
Parasuraman et al.’s SERVQUAL were critiqued by various Scholars. Cronin and Taylor
were amongst the researchers who attack the SERVQUAL scale, they suggest that SERVQUAL
is inadequate in performance measure, and developed performance-based scale called SERVPERF
which measure service quality only by customer perception or not include customer’s expectation.
It can reduce by 50% the number of items that must be measured 44 items to 22 items (Cronin Jr
& Taylor, 1992). (Akdere, Top, & Tekingündüz, 2018) also, criticize the SERVQUAL scale that
it entails enormous data collection task and recommended SERVPERF scale as an alternative, less
tedious approaches, to avoid large the data collection task.
Conversely, other researchers maintain encouraging SERVQUAL for its superior

diagnostic power to find areas for managerial intervention. The use of the weighted SERVQUAL
scale is the most appropriate alternative from the point of view of the diagnostic ability of various
scales (Buttle, 1996; Dan, 2016 & Jain & Gupta, 2004). Baki et al. (2009) insisted on SERVQUAL
power of diagnostic and noted that the dimensionality of SERVQUAL depends on the context
which is applied and cannot be generalized in any service industry, it is an applicable scale in all
industry.
From the literature SERVPERF is less tedious approach where SERVQUAL is entails
enormous data collection task and tedious approach. On the other hand, SERVQUAL has superior
diagnostic power to find areas for managerial intervention where SERVPERF is less in diagnostic
power to find the gap. Depending on Scholars augments SERVQUAL is the best tool to measure
service quality in all industry because of its diagnostic power. But, SERVQUAL only measure the
service quality or identify the gaps, not able to address how the gaps can be closed.
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2.4.2. Kano Model

Kano model is a theory of product development and customer satisfaction invented in the
1980s by Noriaki Kano that was a student of Kaoru Ishikawa (Coleman, 2015). In the 1980s the
model is used as a means to Prioritize critical to quality characteristics and identify implicit as well
as explicit customer needs. Theory of attractive quality or Kano model is an important reference
in the field of quality management, as discussed by many recent research studies from this field
that have exploited its findings in both product and service domains (Baki et al., 2009; Borgianni,
2018; Taifa & Desai, 2016).
Kano et al. (1984) developed a model while studying the contributing factors to customer
satisfaction and customer loyalty and categorize the attributes of a product or service based on how
well they are able to satisfy customer needs. The model describes five unique categories of
customer requirements, three of which want to end up in customer offering, and the other two
should be taken out. Coleman (2015) states that the y-axis is level of satisfaction (frustrated,
Dissatisfaction, neutral, satisfied and delighted) of the requirement, the x-axis is the level of
functionality or execution (none, some, basic, good and best) of the requirement as indicated in
the figure below. All categories of attributes can be mapped on the axis.
1. The basic requirements (M): Customers become dissatisfied when the performance of
the product attribute is low. According to Noriaki Kano (1984) when the must-be attributes
are not fulfilled the customer feels dissatisfied Kano originally called these “Must-be”
because they are the needs that must be included and are the price of entry into a business.
2. The performance requirements (O): Customer satisfaction is a linear function of the

performance of the product attribute. Professor N. Kano originally called these “One-
Dimensional” because the better you execute these the more satisfaction from the customer
you get.
3. The excitement requirements (A): Customer satisfaction increases super-linearly with

increasing attribute performance. Lack of satisfactory fulfillment of this need does not lead
to customer dissatisfaction (Terzakis et al., 2012). Kano originally called these “Attractive
or Delighters” attributes.
21
4. Indifferent (I): Customers don’t care if they are absent or present their satisfaction remains
neutral under either circumstance (Zacarias, 2016).
5. Reverse (R): Customers have clash requirements among these quality attributes. These are
the requirements that cause dissatisfaction when present and satisfaction when absent that
are rare but do happen occasionally (Borgianni, 2018).
According to Coleman (2015) & Zacarias (2016) Questionable (Q) attribute is not actual Kano
categories, it is a mere artifact of the questionnaire but useful in the Kano evaluation table. It refers
to debated customers’ needs.
Figure 2.2.7: Kano Model Diagram (source: The Customer-Driven Organization, Employing the
Kano Model by Coleman (2015). Modified
According to Borgianni (2018) an appreciation for a customer requirement is initially

displayed in the fashion of an attractive quality attribute, this tends to switch towards performance
and subsequently to basic and basic needs transform into indifferent requirements can be somehow
expected with respect to certain functions that are not valued anymore by customers. Gaileviciute
(2011) states that in a certain sense, customer needs tend to decrease their capability to generate
satisfaction and their fulfillment is gradually more and more devoted to avoiding harm.
22
The critical process step can still be considered non-value-adding from the customer’s
perspective (Coleman, 2015). Coleman concludes that it must be pointed out, though, that
exceeding customer expectations does not simply mean giving more. There must be value for the
customer in the additional service or product provided at the time that it is presented. Otherwise,
an organization is generating the waste of over processing. Based on publications of Kano's model,
different scholars summarized its benefits as follows;
1. Kano's model promotes an understanding of product or service requirements. The

attributes that have the maximum influence on customer satisfaction can be recognized
(Gaileviciute, 2011)
2. It provides valuable guidance in the following trade-off situation. If two product attributes
cannot be promoted simultaneously due to technical or financial reasons, the attribute that
has a greater influence on customer satisfaction can be determined (Taifa & Desai, 2016)
3. Kano's model can lead to developing a wide range of product/ service differentiation by
examining the attractive attributes (Walten, 1999). The attractive attributes are the key to
beating the competition in the marketplace.
According to (Mote et al., 2016) in Kano Model, a qualitative survey for the focused group
interviews should be carried and insights from this survey are gathered and based on deep
understanding, a Kano questionnaire was formulated. This questionnaire is constructed through
pairs of customer requirement questions functional and dysfunctional (Singgih & Ardhiyani,
2010). Answers of kano questioners may have five possibilities; I like it that way, it must be that
way, I am neutral, I can live with it that way and I dislike it that way (Gaileviciute, 2011).
Figure 2.2.8: Kano methodology (Source: Kano Model application in new service development and
Customer satisfaction by Mote et al., 2016)
According to Zacarias (2016), one of the great things about the Kano model is that it
accounts for both having and not having some functionality. This shows the extent to which
something is actually wanted, needed or indifferent for our customers. Evaluation table that
combines the functional and dysfunctional answers in its rows and columns to get to one of the
23
Kano categories described above. The final classification criterion is the “frequencies of single
respondent categorization” (Terzakis et al., 2012).
Table 2.2-1: Kano Evaluation Table (Source: Translating the service quality gaps into strategy
formulation by Terzakis et al., 2012)
Note that Letter A, O, M, I and Q denotes attractive, one-dimensional, must-be, indifferent,

reverse, and question respectively
If the customer responses to a question, how would you feel if we provide free Wi-Fi? as I
like it, and to question, how would you feel if we do not provide Wi-Fi? as I am neutral, then
responses to both questions provide “A”. If combining the answers yields category I, Customer
does not care whether the attribute is present or not. Category Q is for the questionable result.
Normally, the answers do not fall into this category. Questionable scores show that the question
was written incorrectly or that the person interviewed didn’t understand the question or mark out
a wrong answer by mistake. The answer in the evaluation table yields category R, this product
feature is not only unwanted by the customer but he even expects the reverse (Mote et al., 2016).
In case analyzing the results of close results between categories, use the following rule
leftmost wins: Must-be > Performance > Attractive > Indifferent (Gupta & R. Sriavastava, 2012
& Zacarias, 2016)
24
Figure 2.2.9: Kano Evaluation table (Source: Kano's Model for Understanding Customer-
defined Quality by Walten, 1999).
An important addition to the Kano model methodology suggested by different researchers

is to include extra important question after the functional and dysfunctional pair and the question
asks customers how significant a given feature is to them (Berger,1993). The self-stated
importance question is asked in the following arrangement: How important is it or would it be if
<requirement>? The author states that the responses should be in the form of a scale from 1 to 9,
going from Not at all important to Extremely important.
Zacarias (2016) stated that Better and Worse or Satisfaction and Dissatisfaction
Coefficients scores that reflected, in numerical terms, how customers’ satisfaction or
dissatisfaction would change by the presence/absence of a feature. By considering the total number
of answers in each category for a given feature, they’re calculated using these formulas:
𝐴+𝑂 𝑀+𝑂
Better = 𝐴+𝑂+𝑀+𝐼 Worse = − 𝐴+𝑂+𝑀+𝐼
A positive customer satisfaction (CS) ranges in value from zero to one; Closer to value
one, higher the influence on customer satisfaction. The negative customer satisfaction operates in
a similar pattern. A value of zero shows that this feature does not cause dissatisfaction if it is not
met. In this way, all the evaluated attributes can be represented in a diagram.
25
Despite the above benefits, Kano's model is restricted by several limitations. Lilja &
Wiklund (2006) states that Kano model classifies, but does not quantify either the numerical or the
qualitative performance of the attributes, does not provide an explanation of what drives customers'
perceptions, why the particular attributes are important to the customers, and what the customers'
behavioral intentions are. It is helpful to know service attribute influence on customer satisfaction
and dissatisfaction and planning the design for service.
2.4.3. Quality Function Deployment (QFD)

Quality Function Deployment (QFD) was created by Yoji Akao in Japan in 1966. By 1972
the power of QFD had been well demonstrated at the Mitsubishi Heavy Industries Kobe Shipyard
(Temponi, Yen, & Tiao, 1999). Later QFD adopted by Toyota, Ford Motor Company and Xerox
brought this concept to the United States in 1986 (Singgih & Ardhiyani, 2010). QFD developing
a design quality aimed at satisfying the customer and changing their demand into design targets
and main quality assurance points to be used throughout the production phase, and a vital
advantage that Akao points out, QFD has demonstrated the reduction of development time by 1/2
to 1/3 (Akao, 1997)
QFD is a tool that gathers the need of the customer and inducting the expected features in
the final product. In order to QFD extend importance to expectations of the customers, which in
turn may fulfill overall CS for a product or service (Apornak, 2017). Prioritize spoken and the
unspoken customer wants, translate these needs into technical characteristics, build and deliver a
quality product or service are the main goal of QFD implementing. In the implementation of QFD,
there are four major phases, in the process, each phase uses a matrix to translate customer
requirements from initial planning stages through production control (Akao, 1972). These phases
or stages are described as follows;
1. Product/Service Planning: it is also known as The House of Quality (HOQ). This stage
collects customer requirements, competitive opportunities, warranty data, product
measurements, and the technical ability of the organization to meet each customer
requirement (Singgih & Ardhiyani, 2010 &Terzakis et al., 2012).
26
Requirements
Technical
(How's)
Customer Competitive
Requirement Customer Relationship matrix
(What's) Priority level assessments
Target
Figure 2.2.10: House of Quality (Terzakis et al., 2012)
2. Product/Service Design: this phase needs innovative group ideas, Product/service

concepts are shaped and specifications are documented (Temponi et al., 1999).
3. Process Planning: During process planning, manufacturing/service processes are
flowcharts and process parameters or target values are documented (Akao, 1997).
4. Process Control: this phase used as quality assurance, in phase 3 performance indicators
are created to monitor the production/service process, schedules, and skills training for the
employee. In the process, control decisions are made as to which process poses the most
risk and controls are put in place to prevent failures (Terzakis et al., 2012).
The scientific publications describe QFD as a practice that leads to process improvements
which enable an organization to exceed the expectations of the customer and point out its benefits
(Temponi et al., 1999; Kay C. Tan & Pawitra, 2001; Rahmana et al., 2014 & Apornak, 2017).
Benefits of Quality Function Deployment can be summarized as tangible and intangible in the
table below;
27
Table 2.2-2: Tangible and intangible benefits of Quality Function Deployment.

Tangible benefit Intangible benefits
Significant reduction in start-up and
Facilitates multidisciplinary teamwork
engineering costs by 30%
Early identification of high-risk areas Provides a basis for improvement planning
Up-front determination of product process Creates a transferable storehouse of engineering
requirements knowledge
Strengthens good relationships between
More efficient allocation of resources
customers and the company
QFD is ensuring that customer requirements are accurately translated into relevant
technical descriptors throughout each stage and meeting or exceeding customer demands to
maintaining or improving product/service performance. It means designing products/services that
delight customers and fulfill their unarticulated desire. The relationship between customer
requirements and technical requirements that are proposed by experts have a great influence on
service design. The relationship matrix is determined by team or focused group. Relationships can
either be weak, moderate, or strong and carry a numeric value of 1, 3 or 9 (Apornak, 2017).
Even though, QFD is ensuring to fulfill clients unarticulated desire, subjective decision that
given by teams in the consideration of the company's ability to meet prioritized customer needs
may not strong or consistency of relationship matrix is not checked. When decision is made,
experts should consider multiple criteria concerning the attributes, unless the decision may not
consistent or strong enough.
2.4.4. Analytical Hierarchy Process - AHP

Analytical Hierarchy Process is one of the multiple criteria decision-making method
(MCDM) that was originally introduced by Prof. Thomas L. Saaty (1980). Wind & Saaty (1980)
finds that AHP provides measures of judgment consistency, derives priorities among criteria and
alternatives, simplifies preference ratings among decision criteria using pairwise comparisons.
AHP helps to capture both subjective and objective aspects of a decision, and it has been applied
in a wide variety of areas including planning, selecting the best alternative, resource allocation and
resolving conflict (N. Jain & Singh, 2014). Analytical Hierarchy Process is applicable for group
discussion environment when it is difficult to formulate criteria evaluation, i.e. it allows qualitative
evaluation as well as quantitative evaluation. Steps involved in AHP are:
28
Step 1: The complex problem is decomposed into smaller sub-problems with goal
hierarchy at the top, followed by criteria sub criteria at lower levels and at the bottom decision
variables (develop model).
Step 2: Decision matrix is constructed and the priority score is determined. Saaty gave a
nine-point scale, for an equal assessment numerical value 1 is assigned and for moderately more
important 3 is assigned, for strongly more 5 is assigned and 7 for very strongly, for extremely more
important 9 is assigned. 2,4,6,8 are assigned for intermediate values of importance (Wind & Saaty,
1980).
Step 3: To set the relative priorities with respect to next higher level, pair wise
comparison is done. The comparison matrix so formed takes the form. There are n criteria then
n(n-1)/2 comparisons are to be done. To obtain the relative weight of the criteria Eigen value of
the n normalized matrix should be calculated. A is pair wise comparison matrix; X is Eigen
vector or priority vector (N. Jain & Singh, 2014).
Step 4: for checking the consistency of decision maker’s judgment in consistency index
or consistency ration is calculated using the equation CI=(λ-n)/(n-1). Consistence vector (C) is
calculated from pair wise matrix (A) and priority vector (X), then λ is the average of Consistency
vector. Calculate the consistency ratio CR = CI/RI where RI is a random index from table below.
If CR > 0.10 the judgements are untrustworthy and the comparisons should be repeated, and If CR
≤ 0.10 considered acceptable in practice and the rankings are consistent (Wind & Saaty, 1980).
Table 2.2-3: Random inconsistency indices for n = 10 (Source: Saaty, 1980)
n 1 2 3 4 5 6 7 8 9 10
RI 0.00 0.00 0.58 0.9 1.12 1.24 1.32 1.41 1.46 1.49
29
2.5. THE SYNERGY OF CUSTOMER ORIENTED TOOLS FOR IMPROVING

SERVICE QUALITY
Now a day’s market competition is increasing, organizations should apply continuous

improvement to maintain and enhance their competitive edge. Therefore, strategic move towards
innovation like integrated approach involving SERVQUAL, Kano’s model, and QFD is needed
(Baki et al., 2009). This integrated approach helps companies to assess customer satisfaction, to
direct improvements in strengthening their weak attributes, and to speed up the growth of
innovative services through the identification of attractive attributes and setting them into
upcoming services (Kay C. Tan & Pawitra, 2001)
According to Parasuraman et al. (1988), SERVQUAL used to understand the expectations
and perceptions of consumers. In SERVQUAL model is the relationship between CS and SQ is
linear, the implication is that the higher gap score of a service attribute, the more essential to
prioritize for improvement actions (Pheng & Rui, 2016). However, with rising market pressure,
continuous improvement may not be adequate in maintaining a competitive edge. SERVQUAL
was not designed to address the element of innovation and not able to address how the gaps can
be closed. Hence, it would be better if SERVQUAL can be integrated with other service quality
tools that focused on reducing the service gaps (Kay C. Tan & Pawitra, 2001a).
Noriaki Kano developed a model to categorize the attributes of a service or product on how
well they are able to fulfill customer needs as must-be, one-dimensional and attractive
requirements (Kano et al., 1984). In a competitive marketplace, business groups need to adopt
strategies and to create product attributes targeted specifically at exciting customers and over-
satisfying them. According to Tan & Pawitra (2001) paying more attention to improving the
quality of a specific service, the attribute may not always lead to greater customer satisfaction if
that attribute is taken for granted. So, Kano's model cannot evaluate attribute performance.
According to (Kay C. Tan & Pawitra, 2001a) Kano's model is proposed to be integrated
into SERVQUAL in to remove the linearity assumption and to provide innovative inputs. It helps
SERVQUAL to prioritize the improvement of an organization's weaknesses based on the category
of the requirement that leads to the highest CS and enable SERVQUAL to focus on the attractive
attributes that are most preferred in the product/service innovation process. Kano model eliminates
the linear assumption about the relationship between customer satisfaction and service quality and
implements a nonlinear and asymmetric assumption, that different types of service attributes have
30
different degrees of impact on customer satisfaction. Thus, should be allocated different weights
when arranging attributes for improvement (Kay C. Tan & Pawitra, 2001a).
Pheng & Rui (2016) states that faced by all the service attributes that need improvement
and their importance levels, the next stage is to close the service gap and improve service quality.
But, SERVQUAL and the Kano model alone cannot address this problem. Integrating
SERVQUAL and the Kano model into QFD can offer insight into solving this issue. Singgih &
Ardhiyani (2010) states that applying SERVQUAL only into QFD does not tell us how to close
gaps happened between customer perceived and expect. The customer needs (VOC) priorities
reflect what customers require most but the real information needed in QFD is to know which
customers we want to satisfy most and how to meet their requirements (Kay C. Tan & Pawitra,
2001b)
Various researchers like Kay Chuan Tan & Shen (2000); Kay C. Tan & Pawitra, (2001) &
Singgih & Ardhiyani (2010) adopted the integrated approach for service quality improvement. It
is the more powerful and inclusive approach for continuous service quality improvement,
information on customer satisfaction and service performance is translated into particular working
instructions and procedures. Rahmana et al. (2014) also used the concept of this integrated
approach to improve the quality of simulation-based training on project management and
recommend an integrated approach that could be applicable in manufacturing & service industries.
31
Figure 2.2.11: Framework for the integration of SERVQUAL and KANO model into QFD
(Source: Rahmana et al., 2014)
Tan & Pawitra (2001) were the first to propose the integrated use of SERVQUAL, the
Kano model and QFD. They demonstrated this application by a case study focusing on Singapore’s
tourism sector. They start with employment of a SERVQUAL and a Kano questionnaire, then
service gaps and service attributes’ categories were identified, allowing attention to focus on the
attributes with a negative gap score and at the same time classified under “A”, “O” and “M” and
finally use the output from the first phase and incorporate it into the HOQ. Note that adjusted
importance score is | (P − E) | × Level of importance × Kano multiplier.
32
Figure 2.2.12: Structure of the house quality with integrated approach (Source: Pawitra & Tan,
2003)
According to Pheng & Rui (2016) many research proposed the approach of integrating the
three tools because it can yield valuable results that cannot be obtained using either of them alone.
It has been proven to be a useful tool for service quality management. The literature shows that
there are no standard steps or methods for applying this integrated approach. The procedures and
methods used by researchers depend on the nature and purpose of their studies. Most of the
scholars ((Baki et al., 2009; Rahmana et al., 2014; Singgih & Ardhiyani, 2010; Kay C. Tan &
Pawitra, 2001) agreed on three benefits for this integrated approach:
 It provides a basis for improvement planning.
 There is a prioritization of action plans as per VOC.
 There is better documentation, teamwork, and communication.
Many researchers adapted the technique MCDM AHP methodology in the integration of
different customer-oriented approach models like SERVQUAL, QFD, and Kano’s model. Wind
& Saaty (1980) suggests applying AHP for marketing decision of determining the desired direction
for the new product development, and evaluation of marketing mix strategy. Chua Chow & Luk
(2005) adapting the AHP methodology for measurement of service quality in restraint industry
using RATER and recommends analytic hierarchy process for service quality (AHP-SQ) to
33
compute a gap analysis in a way that provides a competitive perspective in managing service
quality.
Kazemi et al. (2013) used AHP with Kano’s model to prioritize the factors affecting CS of
the quality of services provided by the bank in order to gain more competitive advantage and found
that the rules and employees skills, indicated as the most important factors in CS. Synchronizing
QFD and AHP method is used to rank the customers or suppliers on the basis of criteria and how
far they are impacted by each alternative N. Jain & Singh (2014). Pakizehkar et al. (2016) also
illustrates Kano’s model, AHP and QFD to prioritizing the bank's subtractions, they identify the
competitive priorities and classify requirement through Kano’s model, then prioritize them by
using analytical hierarchy and finally identify technical requirement through QFD and design
quality home.
From the literature the researcher recognize that using SERVQUAL alone is not effective
for improvement because it is not designed to address the element of innovation and not able to
address how the gaps can be closed. Kano's model also does not provide an explanation of what
drives customers' perceptions and why the particular attributes are important to the customers when
it is used alone. If SERVQUAL and Kano’s model are integrated the linear assumption will be
eliminated because kano follows nonlinear and asymmetric assumption. Using SERVQUAL and
the Kano model cannot address the problem. Service quality is measured and prioritized, but
problem is not addressed still. QFD is a planning/designing process, by integrating this two model
into QFD problem can be addressed from root. Then, integrating of the three method is powerful
and inclusive approach for continuous service quality improvement.
In this study, researcher realized that during building house of quality for integrated
approach consistency of subjective decision of relationship matrix is not checked, it may not reflect
strong relationship of customer needs and technical requirements. Therefore, this integrated
approach relationship matrix should be supported by multiple criteria decision making-analytical
hierarchy process (AHP) to strengthen subjective decision of teams.
34
2.6. SERVICE QUALITY AND INSURANCE INDUSTRY

2.6.1. Principle of Insurance
There are six key principles of insurance which used as the central principles that make up
any insurance contract. These principles are essential to understand to ensure that your insurance
policies are covered on the correct basis (Hailu, 2007). These are insurable interest, utmost good
faith, proximate cause, indemnity, subrogation, and contribution.
All risks are not insurable, the insured vehicle must be capable of financial measurement,
not be against public policy, the premium needs to be reasonable, and an insurable interest for the
person insuring. There must be something tangible that can be ensured such as property rights
imposed by law. Utmost good faith insurance principle requires anyone looking for insurance to
disclose all appropriate facts that influence the judgment of a careful underwriter in fixing the
premium. The insurer has the right to void a contract when material non-disclosure can be proved
(DM Sheaba & Sekata Kenea, 2017).
The proximate cause is the main source that has a contribution to the chain of events. All
contracts are subject to conditions and terms that can ignore certain causes of damage or loss. It is
important to determine the cause of the loss in order to decide if that cause is covered or excluded.
The exact compensation to restore the policyholder to the financial position is called Indemnity
rule (Birhanu, 2018). The principle of subrogation permits the insurer to pursue any rights or
remedies which the policyholder may possess, always in the name of the policyholder. If insured
has a claim paid by their insurer, they may also have a right to pursue funds from another party.
The contribution is the right of an insurer to call upon the other insurers to share the costs
of such a claim payment. An insured party may have policies with two or more insurers covering
the same risk, although not necessarily with equal degrees of liability. Therefore, in the event of a
claim, all of the insurers should pay an equitable proportion of the claim payment. Hailu (2007)
states that contribution is the right of an insurer to call upon the other insurers to share the costs of
such a claim payment.
35
2.6.2. Ethiopian Insurance Industry

Many researchers have written the vital purpose of insurance is protection against possible
the economic loss, economic loss is basically defined as the unintentional and permanent loss of
something which has monetary value (Dickson, 2001; DM Sheaba & Sekata Kenea, 2017).
According to (Dickson, 2001) insurance is an agreement where, for a stipulated payment called
the premium, one party (the insurer) agrees to pay to the other (the policyholder or his designated
beneficiary) a defined amount upon the occurrence of a specific loss. An exceptional feature of the
insurance industry is the peculiar rules of the game such as insurable interest, utmost good faith,
indemnity, contribution and subrogation which underwriters are more conscious of what the
customers (Zelalem, 2017).
From accounting point of view, insurance categorized into two, life insurance and General
insurance (non-life insurance). Life insurance guarantees to pay a certain sum of money to the
policyholder on reaching a certain age or on his death whichever is earlier (Hailu, 2007). General
insurance provides coverage of protection from damages or losses excluded from the life insurance
(Tatek, 2018). It includes all other types of insurance except life insurance as fire insurance, marine
insurance, accident insurance, burglary, fidelity, third party, workmen compensation,
consequential loss etc. Profitability is one of the greatest important objectives of the financial
organization because one of the goals of financial management is to maximize the owner` s wealth
and profitability which in turn shows better financial performance (Birhanu, 2018).
According to DM Sheaba & Sekata Kenea (2017) motor insurance is one of the main
insurance services provided by insurers in Ethiopia. Development of non-life insurance gross
written premium from 2010 to 2018 indicates the dominance of motor insurance policy in Ethiopia
that records 4,346.5-million-birr (National Bank of Ethiopia, 2018).
36
Table 2-5: Development of Ethiopian non-life insurance gross written premium from 2010 to 2018
(Source: National Bank of Ethiopia, 2018)
Class of
2010 2011 2012 2013 2014 2015 2016 2017 2018
Insurance
Aviation 103.30 188.60 237.70 231.60 245.50 220.70 270.30 258.80 573.80
Eng. 233.80 190.70 243.70 733.50 432.00 430.40 421.50 507.70 754.20
Fire 108.80 136.00 197.40 229.70 163.80 309.00 372.10 487.40 580.800
Liability 33.20 50.50 99.10 117.00 163.80 189.80 167.60 221.90 293.60
Marine 284.50 390.60 577.30 531.70 536.70 490.40 472.40 532.30 470.90
Motor 770.80 1,082.00 1,861.20 2,101.70 2,421.70 2,830.60 3,489.10 3,982.20 4,346.50
Acc/H 105.10 104.00 117.10 147.10 169.60 192.00 180.90 260.54 294.10
Pecuniary 126.80 205.90 308.50 329.30 352.80 416.30 478.90 429.80 453.60
WC 49.60 57.30 65.00 53.20 58.20 69.40 144.50 160.60 180.10
Others 8.90 16.70 17.30 22.80 26.60 93.30 65.20 92.50 165.70
Non-life
1,824.90 2,422.40 3,724.80 4,497.70 4,687.70 5,242.10 6,093.70 7,133.50 8,113.20
total
Growth in
14.74 39.97 66.99 10.00 -8.56 11.83 16.20 17.10 13.70
%
2.6.3. Motor Insurance

According to (Carman, 1919; DM Sheaba & Sekata Kenea, 2017) motor insurance is
insurance type issued to provide indemnity when the financial loss arises due to overturning,
collision, stolen and fire either on insured motor vehicles or/and others /third party/
unintentionally. The motor policy provided on a yearly basis with exceptions and conditions. It is
renewable insurance before the policy date of expires (Tatek, 2018).
Different reports and magazines show based on the purpose of vehicle, motor insurance
policy also sub-divided into two private vehicle insurance and commercial vehicle insurance.
There are different main covers and extension covers delivered under motor insurance business
(Hailu, 2007; National Bank of Ethiopia, 2015). Motor insurance has two distinct sections; one
relating to its physical damage, which is categorized under property insurance and the other
relating to injury or death and collision of third parties’ property which is part of liability insurance.
Motor insurance coverage includes property coverage, liability coverage, medical coverage. there
are four types of motor policies in Ethiopian market (Zelalem, 2017).
37
There are four types of Motor Policies in the Ethiopian market. There are compulsory third
party, third party only, third party fire and theft, and comprehensive motor insurance.
Compulsory Third Party Motor Insurance policy is the minimum cover provided by motor
insurers which is sufficient to comply with the minimum insurance requirements of Ethiopia (i.e.
Proclamation no. 559/2008). The cover will apply to incidents which occur on a road. The policy
provides bodily injury compensation for death, compensation for disability, and medical expense
up to Birr 40,000.00 per person with a minimum of 5,000 birrs. Compensation for third party
property damage up to birr 100,000 per event for both private and commercial motor vehicles (DM
Sheaba & Sekata Kenea, 2017). Third Party Only cover will extend the third party liability cover
to any situation involving a motor vehicle within the territorial limit. Under TPO policies, the off-
road cover is also provided. TPO cover on private policies has a well-known extension which
enables the policyholder to drive a vehicle not belonging to them and be covered for third party
risks. The policyholder may also drive a motor car or motorcycle, not belonging to him and not
hired to him under a hire purchase agreement.
Third Party Fire and Theft Cover policy extends a third party cover to incorporate elements
of cover that relate to the policyholder's own vehicle Such a policy will provide indemnity for loss
of or damage to the insured's vehicle and (accessories and spare parts) caused by fire or theft or
attempted theft. Nowadays, most private car policies will provide fire and theft cover in relation
to accessories and spare parts irrespective of whether they are fitted to the vehicle. Under the
motorcycle policy, theft of such accessories or spare parts will not be covered unless the vehicle
is stolen at the same time (Tatek, 2018). A comprehensive motor insurance policy provides the
greatest extent of cover. The term comprehensive can be a little misleading in that such a policy
does not provide blanket cover, no matter what the nature, extent, and cause of the loss. The
intention is to provide cover for accidental damage to the insured vehicle and to indemnify the
insured against third party liabilities. Accident caused by fire, external explosion, self-ignition,
lightning theft or attempted theft, malicious act in transit (including the process of loading and
unloading) and impact damage caused by falling objects.
In the countries where third-party motor insurance is compulsory, a certificate and Sticker
of motor insurance is required in a prescribed form. Sticker of motor insurance is prescribed by
the regulations. Certificate and Sticker of motor insurance contain Certificate number, details of
38
the vehicle covered, name of the policyholder, effective date of the commencement of cover, date
of expiry, classes of persons entitled to drive limitation. the commencement of cover, date of
expiry, classes of persons entitled to drive limitation.
2.6.4. Motor Underwriting or pre risk assessment process

Birhanu (2018) states that underwriting is a process that permits insurers to classify risks
and price them accordingly. Among the basis of successful insurance, the operation is the ability
to underwrite well as poor risks selection results in significant losses and insurer failure. In the
underwriting process magnitude of the risk that means a probable maximum loss (PML) should be
identified before handling the risk of insured. That means pre-risk surveyors check all status like
model, condition, Originality, availability of spare, familiarity, market value and extra fittings of
insured property on the report including recommendation. Customers should be notified clearly
about insurance policy bought (condition/exclusion) and exceptions on the pre-risk survey report.
DM Sheaba & Sekata Kenea, (2017) states that Premium problem comes from
inappropriately rating a risk. Rating is the setting up of a premium to a given risk after the
underwriter has decided to accept the risk. Incorrect rating may lead to disaster while appropriate
rating to success. Good Rating does not mean high premium charge but rather to create a protective
system to lower the cost and expenses to charge a rational premium.
2.6.5. Motor Claim or post risk assessment process

Service in insurance is fundamentally measured in claim payment. It should be settled on
time or declined soonest possible by giving an acceptable explanation for the declinature. What
the insured need is just a fast payment with what is payable without dragging on the circumstance
for months and months (DM Sheaba & Sekata Kenea, 2017).
There are four methods of providing indemnity. They are Cash Payment, Repair,
Replacement and Reinstatement. According to DM Sheaba & Sekata Kenea (2017) claim is a
request for compensation by the insured and addressed to the insurer. The roles of the claim
department are to provide a fast, efficient and technically knowledgeable and policyholder in
accordance with the cover purchased. The various stages in the claim process are the event giving
rise to the claim and claims notification, claim review and response to claimant, claims
investigation and claims negotiation and claims settlement and claims recoveries (Hailu, 2007).
39
CHAPTER THREE
3. RESEARCH METHODOLOGY
According to (Kothari, 2004) research methodology is a way to systematically and scientifically
solve some difficulties or tricky raised in the statement of the problem of the research.
3.1. RESEARCH DESIGN
Research Design is developed to collect and value gathered facts in order to enhance understanding
of a specific topic (Kothari, 2004; Walliman, 2011). This research focuses on the service quality
improvement in pre and posts risk assessment process in the case company and process analysis
focuses on motor insurance in depth. The nature of the research was descriptive and the
methodological frame work was constructed as follow.
Literature Review: Book, journal articles, Annual Report Case Company study;
 Ethiopian Insurance Industry  Process study
Data Collection
 Loss Settlement and underwriting  Observation

 Service Quality and insurance  Focused group discussion
 Service Quality improvement
 Customer oriented approach and tools
 Questionnaire and Interview

Data Processing
 Identify root cause of customer

Measure service quality Categorize attributes complain
(SERVQUAL Model) (Kano Model)  Identify technical requirements
(MCDM AHP)
Data Analysis
Data Analyzed by Synergy of SERVQUAL and Kano s Model into QFD

(Integration Approach)
Figure 3.1Research methodological frame work
40
3.2. RESEARCH POPULATION AND SAMPLE
Kothari (2004) definite sample design as a plan for getting a sample from a given
population and categorize into random sampling and non-random sampling. Probability sampling
divided into Simple, Stratified, Systematic and Cluster Random Sampling where non- probability
sampling includes Judgment, Convenient and Quota sampling (Walliman, 2011). In this study two
segments of the population were involved that means, employees (internal customer) and
customers of the case companies. The population and sample size calculation used in this paper
were divided in three parts (Process study, SERVQUAL model and Kano’s model).
3.2.1. Population and Sample size of Process Study

Researcher used stratified and simple random sampling for process study. For sample size
calculation, the researcher used the formula with finite population correction by Daniel (1999) as
follows.
NZ 2 P(1 − P)
n=
d2 (N − 1) + Z 2 P(1 − P)
where n = sample size with finite population, N = Population size, Z = Statistic for a level
of confidence, P = Expected proportion and d = Precision
Commonly confidence level 95% is used for academic study and expected proportion of
population mostly need pilot test, if impossible it should be 0.5 (Kothari, 2004). For total opened
file N = 5070, p = 0.5, Confidence level = 95% then sample error or precision (d) = 0.05 and Z =
1.96 from table with confidence level of 95%. The researcher took total population (N) 5070 files
available in the archive that were opened in 2017 to April 30, 2019.
5070 (1.96)2 0.5(1−0.5)

n= = 357.167 Sample size (n) ~ 𝟑𝟓𝟕
(0.05)2 (5070−1)+(1.96)2 0.5(1−0.5)
The sample size from each stratum is determined in proportion with the stratum population. To
determine the size of sample items which must be selected from the stratum population.
nN i
ni  , Where n: Total Sample size, N: Total Population size, Ni: Stratum population
N
size and ni: Stratum sample size.
41
3.2.2. Population and Sample Size of SERVQUAL Model

Convenience sampling method was used for SERVQUAL model questionnaire
respondents. Researcher used basic formula for calculating the sampling error for sample estimate
of a population parameter is formulated as follows:
Variablity of the measurement (Values among the sampling units)

Sample error =
√Size of the sample
The researcher did a pilot test with the standard variation in the factor of service quality
measurement in Gronroos model (Gronroos, 2000) that summarized in the following table:
Table 3-1: Gronroos model standard variation in factor of service quality measurement
Service quality dimension (RATER) Means Standard Variation
Tangibles 0.708
Reliability 0.301
Responsiveness 0.521
Assurance 0.263
Empathy 0.755
According to (Mehdi Bozorgi, 2007) who used Gronroos model variation, to choose the
precise sample size, the biggest or average standard variation is the best selection and 5% sampling
error is appropriate enough for an academic study. Accordingly, the sample size (n) is calculated
by using the above data.
(0.701+0.301+0.521+0.263+0.755)⁄5
0.05 = , Sample size (n) ≈ 𝟏𝟎𝟒
√𝑛
3.2.3. Population and Sample Size of Kano Model

Convenience sampling method, a non-probability sampling method was used for Kano’s
model respondents. The sample size is determined by commonly used formula in estimating the
mean or the proportion is as follows.
𝑍2∗ 𝜎2 𝑍 2 ∗ 𝑃(1−𝑃)
𝑛= =
𝑒2 𝑒2
42
where n = sample size, Z = Statistic for a level of confidence, e = sample error and P =
expected prevalence or proportion (in proportion of one; if 20%, P = 0.2), In many cases, we can
get this estimate from previous studies. Therefore, respondent sample size for Kano questionnaire
is calculated from confidence level 95 % which is most researchers used for academic study,
sample error = 0.05, Z = 1.96 from statistical level of confidence table and expected proportion
(P) is estimated from previous study P = 0.9. (Naing et al., 2006; Rahmana et al., 2014; Singgih &
Ardhiyani, 2010).
1.962 ∗ 0.9(1−0.9)
𝑛= = 138.29, Sample size (n) ≈ 𝟏𝟑𝟖
0.052
43
CHAPTER FOUR
4. DATA COLLECTION AND ANALYSIS
The task of data collection starts after a research problem has been defined. According to
Kothari (2004) determining about the method of data collection to be used for the study, the
researcher should recognize two types of data primary and secondary. This study was used mixed
way of data collecting techniques, qualitative and quantitative. The primary data is collected based
on questionnaires, direct observation and interview from claims and underwriting department of
the case company. The primary data was collected by structured questionnaire and focused group
discussion and secondary data is collected from case company files, journal articles, books,
company's annual report & websites and thesis papers.
In this study data was analyzed with the help of integrating SERVQUAL and Kano’s model
into QFD. Figure below gives an illustrative view of the phase analysis procedure to develop the
service quality improvement of motor insurance by integrating SERVQUAL and KANO Models
into QFD aided with process study and AHP.
Process
Literature Review Study
SERVQUAL Service Kano

Weak service MCDM AHP
Model gap Model
SERVQUAL &
Good Service Kano Model
Maintain process
(Standard)
Process
Improvement
Management
&
expert Opinion
House of Quality
Figure 4.1: Research conceptual model
44
Research conceptual model indicates that initially, literature review was started in parallel
of process study, SERVQUAL model was used to measure service quality and identify good and
weak services. Since the research objective was focused on process improvement, weak attributes
must be addressed first. Hence, good service attributes kept as standard or maintained process
while weak service attributes directed to kano’s model and prioritized by using Kano category
(must be, operational, Attractive and indifferent). Because there no need to invest on indifferent
service category in the improvement plan.
Data from process study was used to find the problematic stages and root cause of
customer’s complaints in motor claims, after the root cause of customer complaints were
identified, technical requirements were proposed by insurance experts or teams that was entered
in HOQ and the feature that were measured as weak service quality by SERVQUAL model and
service which could create value to the company prioritized by kano model inserted in HOQ.
MCDM-AHP was used to measure the relationship between customer requirements and technical
requirements instead of purely subjective and the level of importance of technical requirements
were calculated from HOQ. Then technical requirements with high level of importance put in
action depending on management decision for improvement.
4.1. PROCESS STUDY
General principles of underwriting or pre-risk survey, the accurate rating of risks can make
the difference between profit and loss for an insurer. The main rating factors for motor insurance
include; a vehicle to be insured, proposer, drivers, geographical area of use and/or garaging and
use to which the vehicle is put cover required. An insurance premium is made up of a number of
elements; the amount that is required to pay Claims, allowance for Variable costs (commission),
allowance for operating costs of the company.
Factors which affect the cost of repairing accidental damage are the extent of damage,
availability of parts (genuine or local), the possibility of accident, modification to cars which affect
repair cost, the age of the vehicle, and value of the vehicle. Considering the above factor and pre-
risk survey report insurance company’s management decide to handle or reject the risk. Identifying
original equipment manuafcturer (OEM) and original equipment equevalent (OEE) parts,
45
possiblity of loss, familairity of vehecle and other factors play great role to improve underwriting
processes that has consideration in claim settlement process.
Reject
Pre-risk Assessment process
Annual Contract of
Underwriting Department Inspection
Management Decision Accept motor
Customer who need Motor policy (Pre-risk survey)
InsurancePolicy
Reject
Claim review
Claims Department Accident Notification
(Claim review)
Accept
Condition of
Severe Wreck-Yard
accident
Loss assessment
(Post-risk assessment)
Out side or At a place

Minor
of accident
Returned to
Archive
Post Risk Assessment Process
No
Legal Department Is it recovery

Garage Bid
(Act of Subrogation right & Yes Claim Settlement &
case
recover the case) Collecting pro forma invoice
Figure 4.2: Process flow chart of motor insurance pre and post risk assessment
4.1.1. Stages of Claim Process

A. The event giving rise to the claim and Claims Notification
This is the reporting of the claim by the insured to the insurer. The purpose of this condition is to
enable the insurer to take steps to investigate claims in order to minimize its exposure under the
policy. It enables loss assessors and lawyers to investigate the circumstances so that detailed
evidence is not lost. It also gives insurers the opportunity of investigating possible recoveries from
third parties.
46
B. Claim Review and Response to Claimant

This involves the analysis of the claim by the insurer. The appropriateness of the amounts claimed
and the exact terms of the policy legal requirements are reviewed. The initial response from the
insurer to the insured may be only an acknowledgment and a request for further information.
Depending upon this further information, the insurer must then convey their Claim decision which
can payment (acceptance of the claim in broad terms), negotiation (the liability is accepted by the
insurer and the quantum of the claim is the only point in argument and rejection (liability is not
accepted by the insurer).
C. Claims Investigation and Claims Negotiation

The insurer will not be in a position to make a claim decision before the full facts surrounding the
claim are available. In order to establish such facts, it may be necessary to instruct an internal
claims inspector to undertake further investigations or appoint loss assessor/loss adjusters who
undertake an independent investigation into the claim and write a report of their findings for the
insurer.
D. Claims Settlement and Claims Recoveries

Payment of the claims, claim settlement may be delayed for some time in the case of claims
where liability is initially denied, then subsequently negotiated. Following payment of the claim,
if the case is not recover case file is closed and send to archive, but if it is recovery case the insurer
will be able to recover part of the outlay from other sources or third parties considered liable for
the insured event by exercising their subrogation rights. If not recovery case
Generally, the maximum the insurer will pay is the market value of customer’s vehicle at
the time of damage or the Sum Insured, whichever is the lesser. Market value is the amount that
it would cost to replace a vehicle with one of similar make, model, condition, and mileage. There
are other deductions like excess (Standard excess, Young and inexperienced driver excess,
Voluntary excess), Loss of use or betterment contribution (Depreciation, wear and tear, mechanical
or electrical, electronic or computer failures or breakdown). There are losses which have no
coverage with motor insurance policy; damage to tires from braking or by road puncture, cuts or
bursts, Loss of or damage to telephone or communication equipment of any kind unless extended
and loss or damage as a result of deliberate actions by the insured person.
47
In this study data was collected from the case company. Different customer complaints
were collected, from total population 5070 files available in the archive that were opened in 2017
to April 30, 2019. From the total file or population sample size taken was 357 file, and 93 files
were found with customers complain. Data collected from files was conducted at head office
claims directorate and two branches that were selected based on their operation. i.e. they process
both underwriting (pre-risk assessment) and claims or loss settlement (post risk assessment).
Data collected from selected own damage files includes, policy claim number, type of the
accidents, date of accidents, date of assessment, place of assessment, type of complains, numbers
of complains, number of accepted and rejected complain and possible root cause. From 93 file that
were with customers complains the researcher found 362 numbers of complains, and three types
of accidents collision 72%, overturning 25.8 % and fire 2.2%.
Generally, from 362 received complaints, Researcher categorized the total received
customer complaints by their root cause with focused group discussion and found 8 (eight) major
root causes of customer complain/dissatisfaction on motor insurance. These 8 pillars of root cause
of customer complaints are customer over expectation, unexhausted assessment, working
guidelines, information flow gap, Spare part problems, labor/part cost and market value estimation,
professional skill, and completion and salvage management.
48
Chart 1: Root Causes of motor claims Complaints
Root Causes of Customer Complaints
Professional skill 6.48%
Completion and Salvage management: 3.70%
Information flow gap 12.04%

Labor/Part cost/market Value
10.19%
estimation
Customer Over Expectation 24.07%
Working procedure or guidelines: 12.96%
Spare Part Problem 10.19%
Unexhausted Assessment 20.37%
0.00% 5.00%10.00%15.00%20.00%25.00%30.00%
4.1.2. Process Study Result

From total received complaint 158 complaints were accepted by the case company where
and the rest were rejected. Mean that 43.65% customer complaints were accepted by the case
company and having the above root causes. The researcher discussed these root cause of customer
dissatisfaction in brief as follows;
1. Customer Over Expectation or Fraud
From collected data customer over expectation is the highest percent (24.07%) mean that some
customers over expect from the insurer when an accident occurs. This over expectation cause
insurance clients to forward complain like asking coverage for previous damage that is not related
with a current accident, collecting false pro forma invoice, interfering maintenance labor cost,
hiding parts, intentional property damage, and others
2. Incomplete Assessment
Some of the incomplete or unexhausted assessments are forgotten parts during the assessment,
non-clear survey report assessment, carelessness, fail to remark extra fitting of the vehicles, fail to
49
remark expected mechanical of claimed vehicle and it is the second root cause of customer
complain (20.37%).
3. Working procedure or guidelines
Insurance companies set guidelines for good execution of duty. However, if not stated well, it
increases customer complaints. Complaints coming from such guidelines were wrong procedure,
unspecified limit, non-updated guidelines of workers and scores (12.98%).
4. Information flow gap
The information has a great impact on insurance activities. The data shows that 12.04% of
customer complain came from information flow gap. Complaints arise from the insufficient
information between officers and customers, officers and surveyors, surveyors and management,
officers and management were most of causes client complain that was found by this study in the
case company.
5. Spare Part Problem
Spare part is one of the main issues in insurance companies that cause different complaints. The
frequent client complaints were on the unavailability of spare parts (obsolete parts), scarcity of
parts, dealers delay to provide parts, non-match parts to the vehicle's body due to wrong part
number and model which is 10.19% of root cause of client dissatisfaction.
6. Labor, Part cost and market Value estimation
A surveyor is a professional link between the insured and the insurer. Insurance surveyor estimates
repair cost, and market value of the vehicles. According to process study 10.19% of customer
complain came from Poor subjective decision on repair cost estimation and market value
estimation have a great impact on customer’s satisfaction in insurance companies. Not only this,
fluctuation of market value that leads to under insurance and over insurance can be pointed as a
root cause of customer complaints.
7. Professional skill
Professional skill is one of the major issues for any business company. If skill is not enough for
what we do, it opens the door for complaint. Complaints from lack of professional skill like the
50
wrong professional decision, lack of training/non updated employee and others causes the case
company’s clients to forward complain in 6.48%.
8. Completion and Salvage management
Completion and Salvage management were the least cause of push customers to write complain
(3.7 %). Salvage collection serves as a means of cost minimization for insurance companies if
managed well. The complaint raised from completion and salvage management includes unclear
completion guidelines and poor salvage control and salvage collection method according to this
study.
From process study the researcher recognize that pre-risk assessment and post risk
assessment are interconnected activities. From the above stages of claim process the most
problematic area is loss settlement stage. Customer dissatisfaction or complain highly seen in this
stage than another stages of motor insurance process.
Reject
Pre-risk Assessment process
Annual Contract of
Underwriting Department Inspection
Management Decision Accept motor
Customer who need Motor policy (Pre-risk survey)
InsurancePolicy
Reject
Claim review
Claims Department Accident Notification
(Claim review)
Accept
Condition of
Severe Wreck-Yard
accident
Loss assessment
(Post-risk assessment)
Out side or At a place

Minor
of accident
Returned to
Archive
Post Risk Assessment Process
No
Legal Department Is it recovery

Garage Bid
(Act of Subrogation right & Yes Claim Settlement &
case
recover the case) Collecting pro forma invoice
Figure 4.3: Problematic stages of motor insurance
51
Pre-risk survey requires high professional skill; pre-risk surveyor or engineers should be good
expert to estimate probable maximum loss, if pre-risk is not assessed well, it also affects the post
risk assessment when accent occurred. Therefore, pre-risk stage is problematic area of
underwriting process.
After the root causes were identified, researcher focus on how to reduce the gaps that come
from these root causes of customer complaints and how to improve the insurance processes in post
and pre-risk by reducing or if possible eliminating them. To find the solution of the above eight
pillars of root causes of motor insurance complaints, five teams were created. Each team contains
manager/branch manager, senior officer, and senior engineer who have at least seven-year
insurance experience and worked in senior position for above 2 years. Each team member had full
information about the study and they had got short note of collected data from files.
After having clear objective of the study, all teams proposed possible solution for each root
cause of motor insurance customer dissatisfaction with group discussion. The researcher
summarized experts proposed solution in the table as follows;
Table 4-1 Experts proposed solution for the root cause of customer complaints
Root cause of
No. Customer Experts Proposals
Complaints
1. Create or select suitable place of assessment and adopt efficient approval

system
2. Conduct relevant training for employees
3. Encourage experience sharing habit (Brainstorming).
Unexhausted 4. Updating working guidelines (by focusing on time, technology, inflation
1 and customer requirement).
Assessment
5. Having enough information earlier to assess damage (customer
notification, inspector’s information).
6. Follow systematic working schedule and work load management
1.Conduct efficient pre-risk survey

Spare Part 2. Periodical market assessment (inspectors with adequate skill).
2
Problem
3. Working with more (wide range) spare part dealer (not be specific).
4. Giving enough info. to customers earlier (Just in time - JIT).
52
5. Create well communication system with dealers (part name difference,

working step and speed/repair time frame)
1. Updating working guidelines (by focusing on time, technology, inflation

Working procedure and customer requirement). Mech., body (w/s glass and lamp), salvage,
3
or guidelines contribution etc.
2. Implement working guidelines at all branches in the same manner
1. Encourage clear/neat surveyors/inspectors report (on time and

computerized).
Customer Over 2. Conduct relevant training
4 Expectation or 3. Aware clients about the insurance product/policy they bought well.
Fraud 4. Create responsible employees (internal customer satisfaction, follow
customer oriented approach).
5. Fast response to claims/customer request
1. Encourage impartiality (free from interference) of survey report
Labor cost/Part 2. Periodical market assessment and reasonable estimate

5 cost/market Value 3. Conduct relevant training
estimation 4. Establish insurance garage (Own Garage).
5. Efficient garage selection system and management (wide range,
geographically, quality, reliability and responsiveness )
1. Conduct relevant training

Information flow 2. Creating strong complain Handling system (Breakthrough-learning lesson).
6 3. Just on time information flow line (info. only from concerned person).
gap
4. Encourage experience sharing habit (Brain storming)
1. Adopting systematic salvage control (well layout/arrangement,

computerized documentation, fraud detection system/internet).
Completion and 2. Dismantling necessary changed parts at wreck yard (Complete cabin,
7 Salvage lamps) and mark important parts with non-erasable marker (follow subjective
management decision).
3. Adopt final checkup for all OD vehicles claims and avoid repeated
completion request except exceptional.
1. Conduct relevant training top management commitment

2. Encourage experience sharing habit (Brainstorming).
8 Professional skill 3. Follow technology focused approach
4. Encourage applied research and compile documents that can improve
company's service.
From the above summarized expert’s proposals, the researcher discussed with focused
group from the team and prioritize eight experts proposed solution. These were conduct relevant
53
training, update working guidelines, create experience sharing habit, systematic salvage control,
clarify policy to customer, follow JIT information flow, Breakthrough learned lesson, and efficient
pre-risk survey.
From the above process study, the researcher recognized the actual root cause of customer
complaints. Insurance experts who know the service delivery of motor insurance generate
proposals for these root causes. However, current service delivered should be measured to
recognize weak service attributes depending on customer focused approach. Therefore, current
service quality of the case company was measured by SERVQUAL model in order to indemnify
weak service feature that need improvement.
4.2. SERVQUAL MODEL
To measure service delivered by case company or five service quality dimensions, sixteen
statements were selected from the structured SERVQUAL questionnaire format and reformed to
make it short and best suitable for the insurance sector. Two sets of questionnaires were prepared;
one set of questions asks the customers to indicate the extent to which the insurance’s services
should possess the features described by each statement. The other set asks about their views
regarding the extent to which clients believe case company has the features and benefits described
by the statement.
A seven-point Likert scale was used to get the level of expectation and perception
associated with each service quality dimension of the insurance sector. The research sample
consists of 104 respondent customers, 104 questionnaires were given to customers which 52
customers required to fill perception question and 52 customers required to answer expectation
questionnaire. To make clear let’s consider statement 1 from each questionnaire. The following
table represents the calculation of the difference between the scores of expectation and Perception.
54
Table 4-2: Questionnaire of customer expectation and Perception.
Differnce = Perception – expectation, 5-6 = -1, thus the gap between the perception and
expectation is -1 which represents that according to the respondents the service performance
could not meet the expectation. Hence, mean difference for all sixteen statement calculated and
summarized as below in the table.
Table 4-3: Average gap between customer expectation and their perception regarding various
service features of the case company.
55
This analysis shows that the average gap score between customer expectation and
perception. The average gap score for most of the service quality dimensions of the case company
was showing negative figure where the highest gap score is for reliability. Other four dimensions
show the comparatively smaller gap that represents lesser customer dissatisfaction regarding the
services. The researcher like to know how much each of these features is important to the customer.
Total one hundred (100) points were allocated among the five features which are called
SERVQUAL importance weight according to how important it is.
After service gaps were identified on each service quality dimension that delivered by the
company and SERVQUAL importance weight allocated, weighted score was calculated as follow:
weighted score = | Mean difference for each SQ Dimension |* Importance Weight
Table 4-4: Weighted score of service quality dimension for case company.
Rater Gaps Importance

Rater Weighted Scores
(P-E) Weights
Reliability -0.428 18 7.704
Assurance -0.289 25 7.225
Tangibility 0.0289 22 0.635
Empathy -0.159 15 2.385
Responsiveness -0.135 20 2.700
From the above Weighted score of service quality dimension for case company indicates
that the high score were reliability and assurance followed by responsiveness, empathy and
tangibility. Means that the case company should focus on these service quality dimension to
improve service quality of motor insurance. However, improving all negative or service feature at
once is impossible. Identifying indifferent activities those may not enhance customer satisfaction
is important before investing on. So, for this research weak services were categorized using Kano’s
model as follows.
56
4.3. KANO’S MODEL
Kano’s model questionnaire is constructed through pairs of customer need questions. Each
question has two parts: How do you feel if that feature is present in service (A functional form of
question) and how do you feel if that feature is absent in the service (dysfunctional form of
question). For example;
Functional Question: If insurance Surveyors have suitable personal protective equipment's for
non-office work, how do you feel? Answers: “I like it”; “It must be there”; “Neutral”; “I can live
with it”; “I dislike it”.
Dysfunctional Question: How would you feel, if insurance Surveyors have not suitable personal
protective equipment's for non-office work? Answers: “I like it”; “It must be there”; “Neutral”; “I
can live with it”; “I dislike it”.
If the customer answers to a Functional Question as “I like it”; Dysfunctional Question as

“I am neutral”, then by using Kano evaluation table both questions provide “A” i.e. Attractive
Category. Indicating that service is delight customer requirement from the customer’s point of
view. If combining the answers falls in category I, it indicates customer is indifferent to this service
feature. customer does not care whether the attribute is existing or not. Category Q is for
questionable result. Usually, the answers do not fall into this category. Questionable result show
that the person interviewed didn’t understand the question or mark out incorrect answer. In the
study, no service attribute received a Q-rate higher than 2%. If we see the answer in kano
evaluation table yields category R, this service attribute is not only unwanted by the customer but,
also expects the reverse.
57
In this research for getting a practical understanding, a qualitative survey for the focused
insurance expert interviews was carried out on 15 respondents and insights from this survey were
gathered and based on good understanding, a Kano questionnaire was formulated in the structured
questionnaire, there were thirty-six questions in three sections (Demographic information, pair
question of Kano’s model and Importance of service feature).
Determined sample size was 138 customers, the customers volunteered to participate the
survey were selected by convenience sampling method, a non-probability sampling method,
because of their convenient accessibility and proximity to the researcher. 138 questionnaires were
distributed to customers in the case company’s branches. Response rate was 61.6% i.e. 138
distributed questionnaire, 13 questionnaires were not evaluated because of some missing answers,
53 questionnaires were not returned and 72 completely answered questionnaires used for analysis.
Kano Model analysis were used to analyze data collected.
Note that 72 questionnaires were answered in the survey. Among the 72 respondents, 35
% were females, 37.5 % of the respondents were ages 31- 45 years, 62.5% of the respondents were
degree holders, 66.66% of the respondents have comprehensive motor insurance and 48.6% of
respondents have been a customer of the case company for 1-5 years.
Customers response of Kano’s model functional and dysfunctional were summarized in

table 4.5. Feature’s categorized by frequent response and leftmost wins’ rule: Must-be >
Performance > Attractive > Indifferent was used to analyze the results of close results between
categories. All service features were not failed in the questionable and reverse category. Four
service attributes were categorized as operational category, two service attributes were categorized
in must be category and three service features grouped in indifferent category and one service
categorized as attractive.
58
Table 4-5: Responses of customers on Kano’s model functional and dysfunctional questions
Tabulation of Questionnaire Response (Functional/Dysfunctional)
Customer Requirement Questions

A O M I R Q Total Category
Use personal O
Responses 13 14 1 11 1 0 40
1 protective
Equipment Percentage 33% 35% 3% 28% 3% 0% 100%
Convenient M
Responses 9 9 11 11 0 0 40
2 parking & wreck
yard Percentage 23% 23% 28% 28% 0% 0% 100%
Fast response to Responses 7 15 6 8 1 0 37 O
3
claims
Percentage 19% 41% 16% 22% 3% 0% 100%
Feel save in all I
Responses 8 9 8 13 0 0 38
4 Interaction of
insurance Percentage 21% 24% 21% 34% 0% 0% 100%
Less error working Responses 8 11 12 5 0 2 38 M
5
process
Percentage 21% 29% 32% 13% 0% 5% 100%
Informing when Responses 6 12 8 14 0 0 40 I
6
service occur
Percentage 15% 30% 20% 35% 0% 0% 100%
Fast response to Responses 9 14 4 11 0 2 40 O
7
request
Percentage 23% 35% 10% 28% 0% 5% 100%
Good behavior of Responses 12 11 9 5 1 1 39 A
8
staff
Percentage 31% 28% 23% 13% 3% 3% 100%
Responses 11 9 6 12 1 1 40 I
9 Care and attention
Percentage 28% 23% 15% 30% 3% 3% 100%
Employees support O
Responses 8 16 6 4 4 0 38
10 on taking correct
action Percentage 21% 42% 16% 11% 11% 0% 100%
Therefore, indifferent service attributes were identified. The organization should have
focused first on must be features, second operational or one dimensional feature and next on
attractive category. Hence, table 4.5 was rearranged according leftmost win rule of kano category
of service feature.
59
Table 4-6: Prioritized service attributes depending on Kano category
Tabulation of Questionnaire Response (Functional/Dysfunctional)

Customer Requirement Questions A O M I R Q Total Category
Less error Responses 8 11 12 5 0 2 38 M

1
working process Percentage 21% 29% 32% 13% 0% 5% 100%
Convenient Responses 9 9 11 11 0 0 40 M
2 parking & wreck
yard Percentage 23% 23% 28% 28% 0% 0% 100%
Employees Responses 8 16 6 4 4 0 38 O
3 support on
taking correct Percentage 21% 42% 16% 11% 11% 0% 100%
Fast response Responses 7 15 6 8 1 0 37 O

4
to claims Percentage 19% 41% 16% 22% 3% 0% 100%
Use personal Responses 13 14 1 11 1 0 40 O
5 protective
Equipment Percentage 33% 35% 3% 28% 3% 0% 100%
Fast response Responses 9 14 4 11 0 2 40 O

6
to request Percentage 23% 35% 10% 28% 0% 5% 100%
Good behavior Responses 12 11 9 5 1 1 39 A

7
of staff Percentage 31% 28% 23% 13% 3% 3% 100%
Informing when Responses 6 12 8 14 0 0 40 I

8
service occur Percentage 15% 30% 20% 35% 0% 0% 100%
Feel save in all Responses 8 9 8 13 0 0 38 I
9 Interaction of
insurance Percentage 21% 24% 21% 34% 0% 0% 100%
Care and Responses 11 9 6 12 1 1 40 I

10
attention Percentage 28% 23% 15% 30% 3% 3% 100%
In this research five service featured were selected by focused group from created team of
insurance expert. Therefore, selected customer requirement with their category;
1. Convenient parking & wreck yard, Category A
2. Fast respond to claims, Category O
3. Less error working process, Category O
4. Good behavior of staff, Category A
5. Employee support on taking correct action, Category M
60
4.3.1. Customer Satisfaction Coefficient and self-stated importance

Customer Satisfaction Coefficient shows the extent to which satisfaction increases if a
service requirement is met or the extent to which satisfaction decreases if a service requirement is
not met. In addition to the Kano questionnaire, it is helpful to have the customer rank the individual
service criteria of the present service attributes. Relative importance of the individual service
criteria (self-stated-importance) was determined from customer rating that ranges from 1- 9 or
from very unimportant to extremely important. Customer rates the importance of the features were
summarized in table 4.7.
Table 4-7:Customer Satisfaction Coefficient and self-stated importance
Self-Stated
service requirements A+O O+M Importance
No. A+O+M+I A+O+M+I
Use personal protective
Q01 Equipment 0.69 -0.38 7.3
Q02 Convenient parking & wreck yard 0.45 -0.50 7.7
Q03 Fast response to claims 0.61 -0.58 8.2
Feel save in all Interaction of
Q04 insurance 0.45 -0.45 7.5
Q05 Less error working process 0.53 -0.64 7.3
Q06 Informing when service occur 0.45 -0.50 7.7
Q07 Fast response to request 0.61 -0.47 8.0
Q08 Good behavior of staff 0.62 -0.54 7.7
Q09 Care and attention 0.53 -0.39 8.1
Employees support on taking
Q10 correct action 0.71 -0.65 7.8
A positive CS ranges in value from zero to one; Closer to value one, higher the influence
on customer satisfaction. A value of zero shows that this service attributes does not cause
dissatisfaction if it is not met. From the above table informing when service occur and feel save in
all interaction of insurance scores the small customer satisfaction coefficient 0.45 and employees
support on taking correct action, use personal protective equipment and fast response to claims
were the feature with high customer satisfaction coefficient, 0.71, 0.96, and 0.61 respectively. In
this research fast response to claims had high self-rating importance of 8.2 where use personal
protective equipment for non-office work has got least self-rating importance 7.3.
61
4.4. INTEGRATING SERVQUAL AND KANO’S MODEL INTO QFD
For the data analysis, the qualitative and quantitative data analyzed integrating
SERVQUAL and KANO’S model into QFD. SERVQUAL Model was used to identify gaps of
service quality dimension. Since objective of the study was to improve service quality, weak
service of insurance activities was focused and services that were measured as good are maintain
as standards. Kano model was used to prioritize customer requirements and categorize the service
into categories of Kano model (must-be, operational, attractive and Indifferent) for the delivered
service that were need improvement in the voice of customer. Beside SERVQUAL and Kano
model processes study was conducted to identify root cause of customer complain or
dissatisfaction on motor insurance service and gather possible reaction to decrease the existed root
of customer complaints from insurance experts.
Measured service from SERVQUAL, prioritized and categorized service from Kano model
and technical requirement from insurance experts were used as the input data of quality function
deployment that used as service design/planning tool. Multiple criteria decision making approach
analytical hierarchy process was used to weight the relationship between customer requirements
and technical requirements instead of purely subjective correlation matrix of QFD that developed
by professor Saaty and used by many scholars in the literature.
Kay C. Tan & Pawitra (2001) the first scholars who recognize the integration of
SERVQUAL and Kano’s model into QFD for service industry and apply the approach for tourism
industry in 2003 (Kay C. Tan & Pawitra, 2003). Starting from 2003 G.C. Many researchers had
done the research on different service industry by using integration approach ( Baki et al., 2009;
Singgih & Ardhiyani, 2010; Rahmana et al., 2014; Apornak, 2017). These Scholars used different
structure house of quality and most of them follows (Kay C. Tan & Pawitra, 2003) others modify
some of the feature of HOQ. The approach is the more powerful and inclusive approach for
continuous service quality improvement.
To the best of the researcher’s knowledge, most of scholars used normal subjective
judgment for the relationship matrix of HOQ to determine importance of How’s. Researcher
realized that subjective decision of the experts that used to determine the importance of technical
requirements in HOQ is better to Supported by multiple criteria decision-making method (MCDM)
Analytical Hierarchy Process (AHP) as theoretical contribution of the study.
62
Importance of the "Whats"
Adjusted Importance
The "How's"
Percent importance
(process study &
Kano Category
experts opinion)
Target
The "What's"
(Customer)
Relationship
Matrix by AHP
Importance of the "How's"

1
Percent Importance of the

2
"How's"
Figure 4.4: House of Quality (HOQ) for service quality design by using AHP for Relationship
matrix.
AHP allows qualitative evaluation as well as quantitative evaluation and provides measures
of judgment consistency, derives priorities among criteria and alternatives, simplifies preference
ratings among decision criteria using pairwise comparisons (Wind & Saaty, 1980).
In process study five teams were created, each team include three experts with different
working position and they proposed the ways to reduce root cause of customer complain or
dissatisfaction after researcher identified root causes of customer complaints from deep study of
case company files. From the expert’s proposals, eight the most important were selected by
focused group discussion and the researcher used these insurance expert’s proposals as technical
requirements that was used in HOQ. These technical requirements were conduct relevant training,
update working guidelines, create experience sharing habit, adopt systematic salvage control,
63
clarify policy to customer, create just on time information flow, Breakthrough learned lesson and
Conduct efficient pre-risk survey.
Service quality delivered by case company was measured SERVQUAL, by distributing

sixteen statements to customers as questionnaire analyzed in table 4.8. From SERVQUAL model
weighted score and customer expectation were used as importance of the What’s and target in
house of quality respectively.
Table 4-8: Average customer expectation regarding various service features of the case company
Weighted Score
Service Quality Expectation Perception Gaps Importance
No. |Gaps*Importance
Dimension Average Average (P-E) Weight
weight|
T1 4.62 5.02 0.4 6 2.4
T2 4.92 5.06 0.13 7 0.91
Tangibility
T3 4.92 4.79 -0.13 5 0.65
T4 5.29 5 -0.29 7 2.03
R5 5.37 4.98 -0.38 7 2.66
R6 5.19 4.73 -0.46 4 1.84
Reliability
R7 5 4.92 -0.08 6 0.48
R8 5.5 4.71 -0.79 6 4.74
Rs9 5.31 5.15 -0.15 6 0.9
Responsiveness Rs10 5.42 5.37 -0.06 7 0.42
Rs11 5.35 5.15 -0.19 7 1.33
A12 5.71 5.15 -0.56 6 3.36
Assurance
A13 5.25 5.23 -0.02 7 0.14
E14 5.63 5.27 -0.37 6 2.22
Empathy E15 5.62 5.4 -0.21 7 1.47
E16 5.76 5.87 0.1 6 0.6
Customer requirements were prioritized and categorized by Kano’s model and selected
customer’s voice was convenient parking & wreck yard (Category A), fast respond to claims
(Category O), less error working process (Category O), Good behavior of staff (Category A) and
Employee support on taking correct action (Category M). these five service attributes were used
as an input data in HOQ of “What’s”.
In this research the matrix of QFD Supported by Analytical Hierarchy process. Qualitative
evaluation was done by focused group (selected expert from created teams). Five steps of
64
Analytical hierarchy process were followed to find weighted relationship between customer wants
and technical requirements. These steps are identifying customer requirements and technical
requirements, develop pairwise comparison matrix n×n, normalize the matrix, compute criteria
weight/priority vector and consistency check.
A. Identify Customer Requirements and Technical Requirements

Customer voice were identified by using SERVQUAL and Kano’s model, and technical
requirement were identified by focused experts from created teams aided by of process study.
Customer Requirements (CR) Technical Requirements (TR)
a. Convenient parking & wreck yard 1. Conduct relevant training
b. Fast respond to claims 2. Update working guidelines
c. Less error working process 3. Create experience sharing habit
d. Good behavior of staff 4. systematic salvage control
e. Employee support on taking correct 5. Clarify policy to customer
action 6. JIT information flow
7. Breakthrough learned lesson
8. Efficient pre-risk survey
B. Develop the AHP Matrix Representation in Pairwise Comparison.

Pairwise comparison representation was formed by 8×8 matrix, where n is number of technical
requirements (CTQs).
Table 4-9: Representation of pairwise comparison.
Criteria TR1 TR2 TR3 TR4 TR5 TR6 TR7 TR8
TR1 1.00
TR2 1.00 Quantitative

Evaluation
TR3 1.00
TR4 1.00
TR5 1.00
TR6 Qualitative 1.00

Evaluation
TR7 1.00
TR8 1.00
65
Pairwise Comparison Matrix “C” of each technical requirement was filled by AHP
Ranking. Note that 1 means that technical requirement A and B are equally preferred to selected
criteria (Customer Requirement), 3 A is moderately preferred than B, 5 means that A is strongly
preferred than B, 7 means that very strongly preferred than B and 9 means that Extremely preferred
than B. Each column added up to get sum for all technical requirements.
This indicates that which technical requirements were more or less preferable for creating
convenient parking and wreck yard in the case company. The preference ranking between the same
technical requirements were one. As clearly indicated in table 4.10 first qualitative preference
raking was given by focused groups, next quantitative preference raking was computed, i.e. the
inverse of qualitative ranking.
Table 4-10: Pairwise comparison matrix for Convenient parking & wreck yard
Parking and
TR1 TR2 TR3 TR4 TR5 TR6 TR7 TR8
Wreck Yard
TR1 1.00 0.33 0.33 0.33 0.20 3.00 0.20 3.00
TR2 3.00 1.00 7.00 0.20 3.00 5.00 0.33 7.00
TR3 3.00 0.14 1.00 0.14 0.20 3.00 0.20 5.00
TR4 3.00 5.00 7.00 1.00 5.00 3.00 0.14 0.33
TR5 5.00 0.33 5.00 0.20 1.00 3.00 0.33 5.00
TR6 0.33 0.20 0.33 0.33 0.33 1.00 9.00 3.00
TR7 5.00 3.00 5.00 7.00 3.00 0.11 1.00 3.00
TR8 0.33 0.14 0.20 3.00 0.20 0.33 0.33 1.00
Sum 20.667 10.152 25.867 12.210 12.933 18.444 11.543 27.333
C. Normalize Pairwise Comparison Matrix and Compute Criteria Weight “W”
Normalizing the matrix means to divide each element in every column by the sum of each column.
Criteria Weight calculated as average each row in the normalized matrix and it is called priority
vector. Therefore, criteria weight of technical requirements (“How’s”) were computed from
qualitative and quantitative preference ranking for the given criteria or creating convenient parking
and wreck yard in the case company.
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Table 4-11: Normalized pairwise matrix Convenient parking & wreck yard
Parking and
TR1 TR2 TR3 TR4 TR5 TR6 TR7 TR8 W
Wreck Yard
TR1 0.05 0.03 0.01 0.03 0.02 0.16 0.02 0.11 0.05
TR2 0.15 0.10 0.27 0.02 0.23 0.27 0.03 0.26 0.16
TR3 0.15 0.01 0.04 0.01 0.02 0.16 0.02 0.18 0.07
TR4 0.15 0.49 0.27 0.08 0.39 0.16 0.01 0.01 0.20
TR5 0.24 0.03 0.19 0.02 0.08 0.16 0.03 0.18 0.12
TR6 0.02 0.02 0.01 0.03 0.03 0.05 0.78 0.11 0.13
TR7 0.24 0.30 0.19 0.57 0.23 0.01 0.09 0.11 0.22
TR8 0.02 0.01 0.01 0.25 0.02 0.02 0.03 0.04 0.05
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
D. Checking for Consistency.

Note that the consistency rule says;
If CR > 0.10 the judgements are untrustworthy and the comparisons should be repeated, and
If CR ≤ 0.10 considered acceptable in practice and the rankings are consistent (Wind & Saaty,
1980). Therefore, procedure for checking consistency is determining a weight sums vector “W s”,
find consistency vector “Cv” by dot product and determine average of the elements of consistency
vector “Cv” which is called λmax
1
Ws = |C| {𝑊} and Cv = {Ws}.{ },
𝑊
Where C = is Pairwise Comparison Matrix
W = Criteria Weight or priority vector
Ws = weight sums vector
Cv = consistency vector
Consistency index “CI” was determined from average of the elements of consistency vector (λmax)
and total number of “How’s” (n).
𝝀𝑚𝑎𝑥−𝑛
CI = , where n is number of CTQ or technical requirements
𝑛−1
𝟖.𝟖𝟔−8
CI = = 0.12, if CI is zero it indicates pairwise comparison would be perfectly consistent
8−1
69
𝐶𝐼
𝐶𝑅 = , where RI is random index and its value is 1.41 from the table 2.2.3
𝑅𝐼
CR <0.1 the ranking or criteria weight are consistent and acceptable and if CR ≥ 0.1 the ranking
or criteria weight are not consistent and the comparison should be recalculated.
0.12
𝐶𝑅 = = 0.085, which is less than 0.1
1.41
Therefore, pairwise matrix for convenient parking and wreck yard is consistent and
acceptable. Accordingly, Comparison matrix (C), Normalized matrix, Eigen Vector (W) or
priority vector, Consistence check were computed for the left four customer requirements. That
means fast response to claims, less error working process, good behavior of staff and support on
taking correct action and summaridez in table 4.13.
Table 4-12: Relationship matrix between customer requirements and technical requirements
Parking and TR8
TR1 TR2 TR3 TR4 TR5 TR6 TR7 W
Wreck Yard
TR1 0.05 0.03 0.01 0.03 0.02 0.16 0.02 0.11 0.05
TR2 0.15 0.10 0.27 0.02 0.23 0.27 0.03 0.26 0.16
TR3 0.15 0.01 0.04 0.01 0.02 0.16 0.02 0.18 0.07
TR4 0.15 0.49 0.27 0.08 0.39 0.16 0.01 0.01 0.20
TR5 0.24 0.03 0.19 0.02 0.08 0.16 0.03 0.18 0.12
TR6 0.02 0.02 0.01 0.03 0.03 0.05 0.78 0.11 0.13
TR7 0.24 0.30 0.19 0.57 0.23 0.01 0.09 0.11 0.22
TR8 0.02 0.01 0.01 0.25 0.02 0.02 0.03 0.04 0.05
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Technical Requirements
Customer
Requirements
TR1 TR2 TR3 TR4 TR5 TR6 TR7 TR8
CR1 0.05 0.16 0.07 0.2 0.12 0.13 0.22 0.05
CR2 0.07 0.12 0.13 0.08 0.21 0.14 0.1 0.15
CR3 0.04 0.22 0.14 0.02 0.24 0.14 0.12 0.08
CR4 0.03 0.1 0.17 0.04 0.34 0.15 0.12 0.14
CR5 0.05 0.1 0.16 0.04 0.31 0.15 0.13 0.16
70
This computed relationship between customer requirements and technical requirements

were used as in put data into QFD. These criteria weight were used in the relationship matrix of
HOQ instead of using only subjective decision to compute level of importance of technical
requirements (“How’s”).
Kano Category & correlation

symbols
4.0 Attractive (A)
2.0 Operational (O)
1.0 Must-be (M)

Importance of the "Whats"
Clarify policy to customer
Percent importance
Percent of importance
Efficient pre-risk survey
Positive Correlation
Breakthrough learned
Adjusted Importance
JIT information flow

Systematic salvage
Experience sharing
Working guidelines
Relevant training
Max = 35.53
Negative Correlation
Kano Category
Min = 3.89
Target
control
lesson
Convenient parking & 2.03 A 8.12 0.05 0.16 0.07 0.2 0.12 0.13 0.22 0.05 5.29 21.46
wreck yard
Fast respond to claims 2.66 O 5.32 0.07 0.12 0.13 0.08 0.21 0.14 0.1 0.15 5.37 14.06
Less error working 4.74 O 9.48 0.04 0.22 0.14 0.02 0.24 0.14 0.12 0.08 5.50 25.06
process
Good behavior of staff 3.36 A 13.44 0.03 0.1 0.17 0.04 0.34 0.15 0.12 0.14 5.71 35.53
Support on taking correct 1.47 M 1.47 0.05 0.1 0.16 0.04 0.31 0.15 0.13 0.16 5.62 3.89
action
1.63
5.52
5.11
2.84
9.40
5.37
5.26
4.09
Importance of the "How's"
1
Percent Importance of the

14.07
13.03
23.97
13.69
13.41
10.43
4.16
7.24
2
"How's"
Max = 23.97
Percent Importance of the "How's"
Min = 4.16
.
Figure 4.5: Integrated approach of House of quality

Adjusted importance was computed by multiplying KANO category (A = 4, O = 2 and M
= 1) and importance of “What’s” were weighted score from SERVQUAL model. Target was
determined based on customer’s expectation of insurance service attributes, and percent
importance for each customer’s needs were determined by calculating relative percentage of
adjusted importance. Importance of the “How” was defined based on sum of multiplying adjusted
importance with score in relationship matrix that was computed by Analytical Hierarchy Process.
Percent importance of the “How” for each technical requirement was determined by calculating
relative percentage of importance of the “How”.
71
This approach helps to recognize the minimum set of technical requirements of case
company to come across the various customer needs, in turn leading to a cost-effective means of
improving quality as perceived by the customers by reducing poor cost of quality.
HOQ indicated that the customer requirements, technical requirements, relative weight of
relationships, improvement direction and correlation among technical requirements. From the
figure 4.6 of HOQ we can recognize many things. For example, there is strong relationship
between conducting efficient pre-risk survey of motor insurance and updating working guidelines
of the case company. There is a lower relationship between efficient pre-risk survey and adopting
systematic salvage control used in organization.
When the percent of importance of “How’s” is analyzed, it is seen that just in time
information flow and updating company’s working guideline has the highest weight score or
percent of importance respectively; meaning that when just in time information flow and updating
company’s working guideline is improved there will be almost 38.04% of improvement in the pre-
risk and post risk assessment processes of motor insurance in the case company. The third highest
percent of importance of technical requirement is calculated to be the clarity of motor insurance
policy which states that an improvement in clarify policy to customer’s will improve the institution
by 13.69%. The correlation among technical requirements indicates that well clarification of policy
to customers have a positive relationship with working guideline and just in time information flow.
The importance level of technical requirements was identified; correlation between
“How’s” was clearly stated and the target of case company was known. The all steps that
conducted were on service quality planning stage. So, what would be the next step to apply this
plan into action for service quality improvement?
The best way to forward this research is adopting process improvement implementation
philosophy. Deming cycle, Juran quality trilogy, Juran’s 10 steps to quality improvements are
some of the well-known quality improvement philosophy. Juran believes that management has to
adopt a unified approach to quality and he focused on needs of customer or “Fitness for use”. The
researcher prefers Juran’s philosophy as next step that the case company should follow. Juran
contribute to quality philosophy four ways of quality improvement. They are Juran’s ten basic
steps to quality improvement, Juran’s Quality trilogy, Juran’s three basic steps to progress and
Pareto principles.
72
Among the above quality philosophy, Juran’s quality Trilogy is a universal way of thinking
about quality improvement and it is suitable to this case. Quality Trilogy comprises three main
steps. These steps are quality planning, quality control and quality improvements. This study falls
in the planning stage of quality trilogy. That means customer requirements are identified, service
that respond to customer need was developed or designed by integrated approach.
The next step that the case company should do is first, establishing quality goal at a
minimum combined cost and prove the service process capability or develop methods to match the
planned service as per customer needs. Second choosing quality control subjects with
measurements, then measure the actual performance, interpret differences and taking remedial
action if there is any discrepancy. The third steps that case company should follow is breakthrough
learned lesson, provide remedies and control mechanism. Therefore, the company should build
commitment and repeat these steps and follow continuous improvement to enhance service
excellence and customer satisfaction.
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CHAPTER FIVE
5. CONCLUSION AND RECOMMENDATION

5.1. CONCLUSION
With the increasing progress in insurance service in Ethiopia and as general in today’s
global world, people experience fast and prudent delivery of insurance service. This phenomenon
has enhanced customer’s expectations about the insurance services. Besides this, pre- risk and post
risk assessments has a great influence on customer’s satisfaction and over whole insurance service
delivery at the time of loss settlements. So, this paper focused on development of service quality
assessment and improvement approach of motor insurance by integrating different scientific
methodologies including SERVQUAL, Kano and QFD with the help of multiple criteria decision
making tool AHP to strengthen subjective opinion and check consistence of expert’s subjective
decision. The research was conducted on service quality improvement in pre and post risk
assessment process of motor insurance, which carried out at three branches and head office (Claims
directorate) of the case company in Ethiopia. Process study was conducted concerning pre and
post risk assessment of motor insurance in selected branches. 357 files were taken as population
sample and 93 files were found with customer complain. The researcher breakthrough these
complained files and found 8 major root causes of customer’s complaints. The standard
questionnaire of SERVQUAL and KANO model used as the main research tool. Multi-criteria
decision making method Analytical Hierarchy process (AHP) was used to strengthen the
subjective decision of HOQ correlation matrix.
Research process has shown that synergy of three methods with the help of AHP can create
powerful solutions for transforming customer needs into customer focused service improvement
in motor insurance service delivery. Sixteen questions distributed to customers to measure the
current insurance service quality based on difference between customer’s perception and
expectation. Thirteen service features or four service quality dimensions were identified as
negative difference which indicates weak service quality. Improvement was focused on the
satisfaction scores which less than one and suitable category for each attribute of insurance service
quality was determined by KANO Model. From selected 10 motor insurance service four service
were identified as one dimensional category, three were categorized as indifferent service, two
service were must be feature and one was categorized as attractive.
74
Data collected by process study, SERVQUAL and Kano model were inserted into QFD.
Adjusted Importance value was calculated and technical requirements were identified by experts
in order to cover customers’ needs. The relationships between customer expectations and technical
requirements specified with the help of analytical hierarchy process steps. Through QFD method,
five of the total 8 technical requirements are properly proposed to answer the customer needs as
follows: adopting JIT information flow, update working guidelines, clarify policy to customers,
breakthrough learned lesson and creating experience sharing habit.
Information that could found from HOQ is relationship between each technical
requirement, means that improvement of one technical requirement can also affect another
technical requirement in a negatively or positively way. Just in time information flow and updating
company’s working guideline has the highest weight score or percent of importance; meaning that
when just in time information flow and updating company’s working guideline is improved there
will be almost 38.04% of improvement in the pre-risk and post risk assessment processes of motor
insurance in the case company. The third highest percent of importance of technical requirement
is calculated to be the clarity of motor insurance policy which states that an improvement in clarify
policy to customer’s will improve the institution by 13.69%. The correlation among technical
requirements indicates that well clarification of policy to customers have a positive relationship
with working guideline and just in time information flow. Creating experience sharing habit and
adopting breakthrough learned lesson that have positive correlation, company will carry out the
improvement in 26.44%.
In this study customer requirements are identified, weak service attributed were
categorized and technical requirements were also selected by experts who knows the service
delivery processes to improve the weak service delivery. On another side, actual root causes of
customer complaints were identified and this was used to identify problematic stages in the motor
insurance service delivery.
75
5.2. RECOMMENDATION
Based on the analysis made, result obtained and conclusions drawn, the following
recommendations are forwarded to the case company.
 Company should always assess customer expectation and perception, to know the quality
of delivered service.
 Always collect the customer’s complaints and breakthrough the learned lesson by using
synergy of customer focused approach for continuous process improvement.
 Company should encourage experience sharing habit and carry out amendment on weak
service deliveries with the help of MCDM.
 Encourage applied research and compile documents that can improve company's service in
all aspect.
5.3. FUTURE RESEARCH AREAS
After conducting the research and analyzing the different aspects of process improvement
in service delivery of motor insurance, the following research areas are recommended to be
undertaken in the future.
 Future studies could use more than one case company data’s in order to realizing
the relationship between customers’ wants and technical requirements to improve
insurance service delivery.
 This study focuses on motor insurance. Future research may take into account other
insurance policy like engineering insurance, life insurance, marine insurance, etc.
with conceptual model integrated approach
76
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83
ANNEX A: PROCESS STUDY DATA COLLECTION

SECTION 1: Process Study to Find Root Cause of Customer Complain on Own Damage Motor
Insurance During Post Risk Assessment Data Collection.
Data Collected from Case Company's Files, Customer Complaints on Motor Insurance at (Head office Claims
Directorate and two Branches)
Possible Root of Cause for

Type of Date No.
Tota Accepted Complain
Motor and Type of Acce
Branc Type of l No.
No. Policy Place of Complaint pted
h Accident of
Claim Assess s Com
com
no. ment plain
plain
1 888/18 BOL Collision KDWY Spare 7 0 Spare part availability
2 /030/19 KOL Collision KDWY Body 1 1 customer over expectation
Labor & Low, Price of the parts and
082/18 KOL Collision KDWY 2 2 labor cost estimation
3 Spare
Spare Spare price estimation
025/19 NFS Collision H.O 1 1
4 price problem
5 026/19 NFS Collision H.O Body 3 2 unexhausted asse.
working rule or unwritten
026/19 NFS Collision H.O Body 2 2
6 policy
Processional skill/Knowledge
035/19 GRJ Collision H.O Body 1 0
7 Gap
8 020/18 MKL Collision D/Dawa Body 1 1 Information gap
9 085/17 KOL Collision H.O Body 1 1 scarcity of parts
body and working rule or unwritten
106/18 GFM Collision Out side 5 4
10 Mech. policy
11 016/19 KOL Collision KDWY Body 2 2 unexhausted asse
12 087/19 BOL Collision BMB Mech. 1 1 customer over expectation
14 167/19 BOL Collision BMB Mech. 3 3 customer over expectation
454/17 BOL Collision NA Body 2 2
15 policy
16 169/18 BOL Collision Out side Mech. 2 1 customer over expectation
Labor & Price estimation, LABOR
051/19 BOL Collision Out side 1 1
17 Spare
18 552/2019 BOL Collision BMB 2 0 After completion
054/2019 ADD Collision ADD Body 1 1
19 policy
20 043/2019 ADD Collision ADD Body 2 1 customer over expectation
21 001/2019 ADD Collision ADD Body 1 0 customer over expectation
22 089/2018 ADD Collision ADD Body 1 1 Price estimation
23 120/2018 ADD Collision ADD Body 1 0 Price estimation
039/2018 ADD Collision ADD Body 1 1
24 policy
013/2018 MRT Collision H.O Body 2 2
25 policy
84
26 092/2018 MRT Collision KDWY Spare 1 1 Spare availability problem

body and unexhausted asse.
041/2018 GRT Collision KDWY 5 3
27 Mech.
28 001/2018 MRT Collision KDWY Body 3 3 unexhausted asse.
29 017/2017 PIZ Collision KDWY Body 1 0 customer over expectation
30 070/2018 ADD Collision ADD Spare 5 0 Price estimation
31 140/2018 ADD Collision KDWY Body 1 0 customer over expectation
32 041/2019 ADD Collision KDWY Body 3 1 Customer over expectation
33 019/2019 22M Collision KDWY Body 10 5 Information Gap
020/2018 GLL Collision KDWY Mech. 3 3
34 policy
35 039/2019 GFM Collision KDWY Body 1 0 customer over expectation
36 046/2017 GFM Collision KDWY Body 10 1 information Gap
004/2019 WLS Collision KDWY Body 2 1
37 policy
38 047/2018 DRD Collision KDWY Body 1 0 customer over expectation
39 004/2019 KLY Collision KDWY Mech. 5 0 customer over expectation
40 037/2019 22M Collision H.O Body 1 1 Spare availability problem
41 021/2019 ADD Collision KDWY Body 1 1 customer over expectation
42 069/2018 GRJ Collision H.O Body 1 1 Spare availability problem
price estimation / market
081/2018 NFS Collision H.O Body 1 1
43 value
003/2019 DSE Collision Out side Body 1 0
44 Gap
019/2018 AMB Collision KDWY Mech. 0 0
45 policy
Spare Spare part invoice problem
011/2019 ADM Collision KDWY 1 1
46 price
unexhausted asse and info.
003/2019 NKM Collision KDWY Body 5 1
47 Gap
023/2019 PIZ Collision H.O Body 1 1
48 policy
49 023/2018 NFS Collision KDWY Body 2 2 unexhausted asse.
50 041/2018 MRT Collision KDWY Body 9 4 unexhausted asse.
Spare Spare availability problem
036/2018 MRT Collision H.O 0 0
51 price
52 007/2018 GLL Collision KDWY Body 4 1 unexhausted asse.
601/18 MT Collision KDWY Body 6 4
53a policy
53b 601/18 MT Collision KDWY Body 4 3 unexhausted asses.
54a 037/19 PIZ Collision KDWY Body 1 1 customer over expectation
54b 037/19 PIZ Collision KDWY Body 1 1 unexhausted asse
55a 043/19 BOL Collision Out side Mech. 9 2 customer over expectation
Spare Price estimation
043/19 BOL Collision Out side 1 1
55b price
56a 134/2018 ADD Collision ADD Body 1 1 unexhausted asse.
56b 134/2018 ADD Collision ADD Body 1 1 unexhausted asse.
85
57a 004/2019 SGR Collision KDWY Spare 0 0 Spare availability problem

57b 004/2019 SGR Collision KDWY Body 1 0 customer over expectation
58a 081/2019 FFN Collision H.O Body 2 1 customer over expectation
58b 081/2019 FFN Collision H.O Body 2 1 salvage and completion
59a 015/19 ADD Collision Out side Body 1 1 Information Gap
59b 015/19 ADD Collision Out side Body 1 Information Gap
60 039/2019 ADD Fire KDWY Body 1 0 customer over expectation
61 069/2018 GFM Fire Out side Price 1 1 Spare availability problem
001/19 BLH Overturning KDWY Body 1 0
62 Gap
63 080/18 KOL Overturning KDWY Body 2 0 unexhausted
customer over
115/18 ADD Overturning KDWY Body 1 0
64 expectation/fraud
65 001/19 NKT Overturning KDWY Body 15 5 Information gap
66 028/17 BHD Overturning KDWY Body 5 4 Unexhausted asse.
67 010/18 AMB Overturning KDWY Body 7 2 Information Gap
68 003/19 AMB Overturning KDWY Body 8 5 unexhausted assessment
69 001/19 WSO Overturning KDWY Body 16 1 Information Gap
body and unexhausted asse
038/18 ADD Overturning Out side 2 2
70 Mech.
body and unexhausted asse
089/2018 LDT Overturning KDWY 7 3
71 Mech.
72 115/2017 ADD Overturning KDWY Body 1 0 customer over expectation
73 63/2018 NFS Overturning KDWY Body 1 1 scarcity of parts
74 025/2019 KZC Overturning KDWY Mech. 3 0 customer over expectation
75 011/2019 NFS Overturning KDWY Body 1 1 unexhausted asse
body and Information Gap
039/2019 ADD Overturning KDWY 17 7
76 Mech.
77 009/2019 SAB Overturning KDWY Body 2 0 Information Gap
Price price estimation / market
132/2019 22M Overturning KDWY 1 0
78 estimation value
79a 003/18 WSO Overturning KDWY Body 2 2 unexhausted asse
79b 003/18 WSO Overturning KDWY Body 2 1 unexhausted asses
80a 037/18 NFS Overturning Out side Body 2 1 unexhausted asse
customer over
037/18 NFS Overturning Garage Mech. 1 0
80b expectation/fraud
Mech. unexhausted
037/18 NFS Overturning Garage 10 9
80c And body
81a 019/18 GNB Overturning KDWY Body 4 4 unexhausted asses.
completio unexhausted asses.
019/18 GNB Overturning Garage 2 1
82b n
body and Information Gap
022/18 GMB Overturning Garage 15 2
83a Mech.
83b 022/18 GMB Overturning Garage Mech. 1 1 unexhausted asse
body and information Gap
017/2018 MRT Overturning KDWY 15 5
84a Mech.
84b 017/2018 MRT Overturning KDWY Body 1 1 customer over expectation
86
017/2018 MRT Overturning KDWY Spare 0 0
84c Gap
85a 055/18 KOL Overturning Garage Body 1 1 Labor cost problem
055/18 KOL Overturning Garage Mech. 3 3
85b policy
86a 001/2017 DLA Overturning KDWY Body 1 1 unexhausted asse
86b 001/2017 DLA Overturning Garage Body 1 0 customer over expectation
001/2019 BLH Overturning KDWY Body 1 1
87a Gap
Market price estimation / market
001/2019 BLH Overturning KDWY 1 1
87b value value
88a 002/2019 BLH Overturning KDWY Body 2 2 unexhausted asse
88b 002/2019 BLH Overturning Garage Body 1 0 customer over expectation
88c 002/2019 BLH Overturning Garage Mech. 5 4 unexhausted asse
074/2017 NFS Overturning Garage Mech. 1 1
89a policy
89b 074/2017 NFS Overturning Garage Mech. 1 1 unexhausted asse
Mech. & information gap
044/19 ADD KDWY 23 2
90a body
Mech. & customer over
044/19 ADD KDWY 7 0
90b body expectation/fraud
Mech. and Working
91 017/2019 22M Overturning KDWY 10 2 procedure/rule/guidelines
body
92 037/2019 22M Collision KDWY Body 1 1 Spare part Problem
93 046/2018 FFN Collision KDWY Mech. 1 0 customer over expectation
Total 362 158
87
ANNEX B: SERVQUAL QUESTIONNAIRE

SECTION 1: Customers Service Expectation Questionnaire
No. Questionnaire Strongly Disagree…...…Strongly Agree
Insurance Company should have all the necessary modern

1 equipment (Crane, Hydraulic Jacks, Diagnoses Machine, 1 2 3 4 5 6 7
Computer, Security Camera.)
Insurance policies and Statement should be clear and well

1 2 3 4 5 6 7
2 explained
Surveyors/inspectors should have suitable personal protective

3 1 2 3 4 5 6 7
equipment's (PPE) for non-office work
Insurance Company should have Convenient parking, wreck

1 2 3 4 5 6 7
4 yard and waiting arrangements
Insurance Company should respond for customers claims fast

5 1 2 3 4 5 6 7
and deliver good service within the time frame
Customers should feel safe in all interaction with the

1 2 3 4 5 6 7
6 Insurance Company or insurer
Advertising and promotion of insurance service should reflect

7 1 2 3 4 5 6 7
the reality
Insurance Company should maintain less error working

1 2 3 4 5 6 7
8 process
Insurance Company should inform their customer when

9 1 2 3 4 5 6 7
service will occur
Whenever clients face problem employees should help them

1 2 3 4 5 6 7
10 to solve the problem
11 Employees should respond fast to customers' requests 1 2 3 4 5 6 7
12 Behaviors of staff should instill confidence in customers 1 2 3 4 5 6 7
Employees should have adequate knowledge and competent

13 1 2 3 4 5 6 7
to answer client request
14 Giving care and individual attention to customers. 1 2 3 4 5 6 7
Employees should always inform customers and support them

15 1 2 3 4 5 6 7
on taking correct action
88
SECTION 2: CUSTOMERS SERVICE PERCEPTION QUESTIONNAIRE
No. Questionnaire Strongly Disagree ….…Strongly Agree
Company X has all the necessary modern equipment (Crane,

Hydraulic Jacks, Diagnoses Machine, Computer, Security 1 2 3 4 5 6 7
1 Camera.)
Company X policies and Statements are clear and well

1 2 3 4 5 6 7
2 explained to you
Company X Surveyors/inspectors have suitable personal

1 2 3 4 5 6 7
3 protective equipment's (PPE) for non-office work
Company X has Convenient parking, wreck yard and waiting

1 2 3 4 5 6 7
4 arrangements
Company X respond for your claims fast and deliver service

1 2 3 4 5 6 7
5 within the time frame
You feel safe in all interaction with the Company X 1 2 3 4 5 6 7

6
Company X advertising and promotion you heard or seen

1 2 3 4 5 6 7
7 reflect the reality
8 Company X follows less error working process 1 2 3 4 5 6 7
9 Company X employees inform you when any service occur 1 2 3 4 5 6 7
Whenever you face problem Company X employees help you

1 2 3 4 5 6 7
10 to solve it
11 Company X Employees respond fast to your requests 1 2 3 4 5 6 7
12 Behaviors of Company X staff instill confidence in you 1 2 3 4 5 6 7
Company X Employees have enough knowledge and

1 2 3 4 5 6 7
13 competent to answer your request
14 Company X employees give care and attention to you. 1 2 3 4 5 6 7
Company X employees inform you and support you on taking

1 2 3 4 5 6 7
15 correct action
16 Company X have convenient working hours and days 1 2 3 4 5 6 7
89
SECTION 3: IMPORTANCE OF SERVQUAL MODEL
1 2 3 4 5 6 7
Very unimportant very important
Answer No. Statements

Using modern equipment (Crane, Hydraulic Jacks, Diagnoses Machine, Computer,
……. 1 Security Camera.)
……. 2 Clear and well explained insurance policies and Statements
……. 3 Suitable personal protective equipment's for non-office work
……. 4 Convenient parking, wreck yard and waiting arrangements
……. 5 Respond claims fast and deliver service within the time frame
……. 6 customers should feel safe in all interaction with the Insurance company
……. 7 Advertising and promotion should reflect the reality
……. 8 Follows less error working process
……. 9 Inform customers when any service occur
……. 10 Whenever customers face problem employees should help them to solve it
……. 11 Respond fast to customer requests
……. 12 Instill confidence in customers from good behaviors of staff
……. 13 Enough knowledge and competent to answer customers request
……. 14 Give care and attention to customers.
……. 15 Inform customers and support them on taking correct action
……. 16 Convenient working hours and days
90
ANNEX C: KANO'S MODEL (VOC) – QUESTIONNAIRE

SECTION 1: Demographic Information of Respondents and Overall Activities.
Demographic information of respondents and Overall activities.
No. Question
1 What is your gender?  Male  Female
What is your age?  18-30 years 31-45 years 46-60 years

2
above 60 years
What is your education Level?

3
 High school Complete Diploma Degree  Master  Other
What is your occupation?  Doing own business Private organization employed

4
Government employee NGO’s employee Others
How long are you a customer of the Company? More than 10 years 6-10 years
5
1-5 years Less than 1 year
What type of motor insurance cover do you have in the company?

6 Compulsory Third Party  Third Party Only  Third Party Fire and Theft
Comprehensive Motor Insurance
SECTION 2: Kano’s Model Functional and Dysfunctional Question.
Answers ( write (√) in

No. Question
the box you choose)
. I like it
If insurance Surveyors/inspectors have suitable personal . I expect it
1a protective equipment's (PPE) for non-office work, how do . I'm neutral it
you feel? . I can tolerate it
. I dislike it
. I like it
How would you feel, if insurance Surveyors/inspectors . I expect it
1b have not suitable personal protective equipment's (PPE) . I'm neutral it
for non-office work? . I can tolerate it
. I dislike it
2a . I like it
91
. I expect it
How would you feel, if you have Convenient parking, . I'm neutral it
wreck yard and waiting arrangements? . I can tolerate it
. I dislike it
. I like it
. I expect it
If you are not able to get Convenient parking, wreck yard
2b . I'm neutral it
and waiting arrangements, how do you feel?
. I can tolerate it
. I dislike it
. I like it
. I expect it
How do you feel, if insurance respond to your claims fast
3a . I'm neutral it
and deliver good service within the time frame?
. I dislike it
. I like it
. I expect it
If you are not able to have good service and fast respond
to your claims within the time frame, how do you feel?
. I dislike it
. I like it
. I expect it
How would you feel, if you have feel safe in all interaction
with the Insurance Company or insurer?
. I dislike it
. I like it
. I expect it
If you don't have feel safe in all interaction with the
Insurance Company or insurer, how do you feel?
. I dislike it
. I like it
. I expect it
If insurance company maintain less error working
process, how do you feel?
. I dislike it
. I like it
. I expect it
How would do you feel, if insurance company have error
working process?
. I dislike it
How do you feel, if insurance employees inform you . I like it
6a
when any service occur? . I expect it
92
. I'm neutral it
. I dislike it
. I like it
. I expect it
If you are not able to have information when service
occur, how do you feel?
. I dislike it
. I like it
. I expect it
If you are able to have fast respond to your requests from
insurer workers, how do you feel?
. I dislike it
. I like it
. I expect it
How would you feel, if you are not able to have fast
respond to your requests?
. I dislike it
. I like it
. I expect it
How would you feel, if you have good behaviors of staff
that instill confidence in you?
. I dislike it
. I like it
. I expect it
If you are not able to have good behaviors of staff, how
do you feel?
. I dislike it
. I like it
. I expect it
If you have care and individual attention from insurance
employees, how do you feel?
. I dislike it
. I like it
. I expect it
How do you feel, if you are not able to have care and
individual attention from insurer.
. I dislike it
. I like it
How would you feel, if insurance workers inform and
10a . I expect it
support you on taking correct action?
. I'm neutral it
93
. I dislike it
. I like it
If you are not able to have enough information and . I expect it
10b support from employees on taking correct action, how do . I'm neutral it
you feel? . I can tolerate it
. I dislike it
SECTION 3: IMPORTANCE OF KANO’S MODEL
1 2 3 4 5 6 7 8 9
Very unimportant Extremely important
Answe No
r . Statements
How important is using modern equipment (Crane, Hydraulic Jacks,
……. 1 Diagnoses Machine, Computer, Security Camera.)?
How important is having clear and well explained insurance policies and
……. 2 Statements?
How important is having suitable personal protective equipment's for non-
……. 3 office work?
How important is having convenient parking, wreck yard and waiting
……. 4 arrangements
How important is having fast claims respond and deliver service within the
……. 5 time frame?
How important is having feel safe in all interaction with the Insurance
……. 6 company?
……. 7 How important is having advertisement and promotion that reflect the reality?
……. 8 How important is having less error working process?
……. 9 How important is informing customers when any service occur?
……. 10 How important is having employees that strive to solve customers' problem?
……. 11 How important is having fast respond to customer requests?
How important is having a good behaviors of staff that instill confidence in
……. 12 customers from?
How important is having enough knowledge and competent to answer
……. 13 customers request?
……. 14 How important is having care and attention to customers?
How important is having fast claims respond and deliver service within the
……. 15 time frame?
……. 16 How important is having convenient working hours and days
94
ANNEX D: MULTIPLE CRITERIA DECISION MAKING, ANALYTICAL

HIERARCHY PROCESS FOR HOQ RELATIONSHIP MATRIX
1. Parking and Wreck Yard
Parking and
Wreck Yard
TR1 0.05 0.03 0.01 0.03 0.02 0.16 0.02 0.11 0.05
TR2 0.15 0.10 0.27 0.02 0.23 0.27 0.03 0.26 0.16
TR3 0.15 0.01 0.04 0.01 0.02 0.16 0.02 0.18 0.07
TR4 0.15 0.49 0.27 0.08 0.39 0.16 0.01 0.01 0.20
TR5 0.24 0.03 0.19 0.02 0.08 0.16 0.03 0.18 0.12
TR6 0.02 0.02 0.01 0.03 0.03 0.05 0.78 0.11 0.13
TR7 0.24 0.30 0.19 0.57 0.23 0.01 0.09 0.11 0.22
TR8 0.02 0.01 0.01 0.25 0.02 0.02 0.03 0.04 0.05
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
2. Fast response to claims
Fast respond
to claims
TR1 0.04 0.02 0.28 0.12 0.01 0.03 0.02 0.01 0.07
TR2 0.13 0.07 0.17 0.20 0.01 0.03 0.35 0.02 0.12
TR3 0.01 0.02 0.06 0.29 0.02 0.02 0.15 0.47 0.13
TR4 0.01 0.01 0.01 0.04 0.36 0.02 0.02 0.20 0.08
TR5 0.31 0.47 0.17 0.01 0.07 0.40 0.25 0.01 0.21
TR6 0.13 0.20 0.28 0.20 0.01 0.08 0.01 0.20 0.14
TR7 0.13 0.01 0.02 0.12 0.01 0.40 0.05 0.02 0.10
TR8 0.22 0.20 0.01 0.01 0.50 0.03 0.15 0.07 0.15
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
95
3. Less error working process
Less error
working TR1 TR2 TR3 TR4 TR5 TR6 TR7 TR8 W
process
TR1 0.03 0.01 0.01 0.20 0.00 0.01 0.03 0.01 0.04
TR2 0.20 0.08 0.56 0.16 0.00 0.03 0.02 0.02 0.22
TR3 0.14 0.01 0.06 0.16 0.00 0.30 0.23 0.37 0.14
TR4 0.00 0.01 0.01 0.02 0.00 0.02 0.03 0.01 0.02
TR5 0.20 0.02 0.31 0.16 0.00 0.49 0.38 0.01 0.24
TR6 0.20 0.24 0.02 0.11 0.00 0.10 0.23 0.37 0.14
TR7 0.09 0.40 0.02 0.07 0.00 0.03 0.08 0.16 0.12
TR8 0.14 0.24 0.01 0.11 0.01 0.01 0.03 0.05 0.08
1.00 1.00 1.00 1.00 0.01 1.00 1.00 1.00 1.00
4. Good behavior of staff
Good
behavior of TR1 TR2 TR3 TR4 TR5 TR6 TR7 TR8 W
staff
TR1 0.03 0.02 0.02 0.10 0.05 0.01 0.03 0.00 0.03
TR2 0.08 0.05 0.37 0.17 0.06 0.03 0.02 0.01 0.10
TR3 0.14 0.02 0.12 0.24 0.14 0.30 0.23 0.19 0.17
TR4 0.01 0.01 0.02 0.03 0.09 0.02 0.03 0.08 0.04
TR5 0.25 0.35 0.37 0.17 0.43 0.49 0.39 0.25 0.34
TR6 0.20 0.15 0.04 0.17 0.09 0.10 0.23 0.19 0.15
TR7 0.08 0.25 0.04 0.10 0.09 0.03 0.08 0.25 0.12
TR8 0.20 0.15 0.02 0.01 0.05 0.01 0.01 0.03 0.14
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
96
5. Support on taking correct action
Support on
taking correct TR1 TR2 TR3 TR4 TR5 TR6 TR7 TR8 W
action
TR1 0.04 0.02 0.02 0.12 0.13 0.02 0.03 0.01 0.05
TR2 0.13 0.06 0.36 0.12 0.08 0.03 0.02 0.01 0.10
TR3 0.21 0.02 0.12 0.20 0.13 0.29 0.23 0.10 0.16
TR4 0.01 0.02 0.02 0.04 0.08 0.02 0.03 0.10 0.04
TR5 0.13 0.28 0.36 0.20 0.39 0.49 0.39 0.29 0.31
TR6 0.21 0.17 0.04 0.20 0.08 0.10 0.23 0.16 0.15
TR7 0.13 0.28 0.04 0.12 0.08 0.03 0.08 0.29 0.13
TR8 0.13 0.17 0.04 0.01 0.04 0.02 0.01 0.03 0.16
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
97

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ADDIS ABABA UNIVERSITY

ADDIS ABABA INSTITUTE OF TECHNOLOGY (AAIT)

SCHOOL OF MECHANICAL AND INDUSTRIAL ENGINEERING (SMIE)

DEVELOPMENT OF SERVICE QUALITY ASSESSMENT AND

IMPROVEMENT APPROACH OF A MOTOR INSURANCE COMPANY

ADDIS ABABA, ETHIOPIA

Motor Insurance Company in Ethiopia

A Thesis Submitted to the School of Graduate Studies of Addis Ababa University

in Partial Fulfillment of the Requirement for the Degree of Masters of Science in

Industrial Engineering Stream

Advisor Dr. Ameha Mulugeta

Co-advisor Mr. Shimelis Tilahun

Addis Ababa University

Addis Ababa Institute of Technology (AAIT)

School of Mechanical and Industrial Engineering (SMIE)

ADDIS ABABA UNIVERSITY

SCHOOL OF GRADUATE STUDIES

POSTGRADUATE PROGRAM IN INDUSTRIAL ENGINEERING

DEVELOPMENT OF SERVICE QUALITY ASSESSMENT AND IMPROVEMENT

APPROACH OF A MOTOR INSURANCE COMPANY IN ETHIOPIA

By: Girma Telila

Approved by Board of Examiners:

____________________ _______________ _______________

Chairman of Department Signature Date

Dr. Ameha Mulugeta _______________ _______________

Thesis Advisor Signature Date

Mr. Shimelis Tilahun _______________ _______________

Thesis Co-Advisor Signature Date

Dr. Haileleul _______________ _______________

Examiner Signature Date

Dr. Birhanu B. _______________ _______________

Examiner Signature Date

quality assessment and improvement approach of a motor insurance company in Ethiopia” is

of materials used for the thesis have been accordingly acknowledged.

2.6.1. Principle of Insurance ............................................................................................. 35

SERVQUAL……………. Service Quality

GDP……………………...Gross Domestic Product

NBE……………………...National Bank of Ethiopia

RATER…………………...Responsibility, Assurance, Tangibility, Empathy and Reliability

VOC………………….…. Voice of Customers

HOQ……………………. House of Quality

TR………………………. Technical Requirements

MCDM…………………. Multiple criteria decision making

AHP………………….... Analytical Hierarchy process

Quality is a multi-dimensional phenomenon. Parasuraman, Zenithaml, & Berry, (1985)

1.2. STATEMENT OF THE PROBLEM

1.3. RESEARCH QUESTIONS

 What is the influential Service quality dimension in motor Insurance?

1.4. GENERAL OBJECTIVE

1.5. SPECIFIC OBJECTIVE

The specific objective of the research;

 To study insurance service processes of operation in claims and underwriting activities.

 To identify problematic areas in pre and post risk assessment stages.

 To illustrate systematic illumination of the inefficiency in the processes and identify

1.6. SIGNIFICANCE OF THE STUDY

1.7. SCOPE AND LIMITATIONS OF THE STUDY

1.8. LIMITATIONS OF THE STUDY

1.9. ORGANIZATION OF THE THESIS

The contents of the chapters are as follows:

2.2. SERVICE QUALITY

____________ _ _________

Dr. Ameha Mulugeta _ _

Mr. Shimelis Tilahun _ _

Dr. Haileleul _ _

Dr. Birhanu B. _ _