FACTORS AFFECTING CUSTOMER RETENTION IN LIFE INSURANCE SECTOR: THE CASE OF ETHIO LIFE AND GENERAL INSURANCE COMPANY (ELiG)

Abstract

Customer retention is more profitable strategy because keeping the existing customer is cheaper than searching for new customer. Customer retention is a very important issue for the insurance industry. It is the concern of every insurance companies as each company’s profitability and growth depends on the capacity of retaining their existing customers. In most cases, it is the core focus area of activity in insurance business. The main objective of this study is to identify factors that influence customer retention in the life insurance sector in the case of Ethio Life & General Insurance Company, Addis Ababa, Ethiopia. In this research, customers of life insurance sector were targeted as the population while customer service, premium, switching barriers, customer loyalty, competition, and claim trend were taken as predicting variables towards customer retention as criterion variable. The design of the study is explanatory research design as the study tries to examining the explanatory factors affecting customer retention in life insurance sector. The study used questionnaire to collect relevant data for the research questions from census respondents of 158 customers of Ethio Life and General Insurance Company. Pearson correlation and multiple regression analysis were used to examine the relationship between the independent variables and customer retention using SPSS 20.0 and the results showed that all factors contributed to explain customer retention but comparatively premium had the largest impact on customer retention than customer service, switching barrier, customer loyalty, competition, and claim trend. Thus insurance companies should design a strategy to address these factors for increment of their existing customers’ retention.