The mediation effect of customer satisfaction on service quality – customer loyalty link in insurance sector of Ethiopia- A study

Although Ethiopia has huge population base and untapped insurance market the industry faced a challenge of high customer churn rate. Customers are lapsed increaseingly from the existing providers in which the defect customer damaged the company by spreading company bad experience to others and decreaseing income of the company as they may not renewal one or two or three of the policies. So, insurers need to cement their relationship to customers by meeting their needs inorder to retain them in the company. Insurers in order to survive and prosper they should have to find ways to retain their current customers by concentrating on different factors which enhances customer loyalty

Thus, this study aims at to analyze the direct and mediating influence of service quality on customer loyalty in the insurance sector of Ethiopia. In order to achieve this objective, the research methodology designed for this study is non –experimental (descriptive –analytical) in nature and the method used in this thesis is quantitative study. Thus, to elicit policyholders attitude, questionnaires are designed, and then based on the data gained from respondents’ the analysis is done and results are explained. Pearson correlation and regression analysis were used to examine the relationship between service quality, customer satisfaction, and customer loyalty in SPSS 16.0 and Amos soft wares.

The results of the study indicate that service quality and customer satisfaction; have direct and positive relationship to customer loyalty. Service quality influences customer loyalty directly and it can also affect directly customer satisfaction and it is also found that customer satisfaction has mediating effect on the relationships between service quality and customer loyalty link.