Relationships in Financial Services
The insurance industry has been existent since classical
times and was well established around the 17th century. The majority of
policies were sold via intermediaries (insurance agents) as they may not be
easily understood by the public and highly intangible (Durvasula et al., 2004;
Tsoukatos and Rand, 2006), and these agents are typically the customers’ only
contact point with the insurance company (Crosby et al., 1990).
The cost of sale of an insurance policy is typically steep
and recoverable only after the policyholder has paid 3-4 years’ premiums
(Zeithaml et al, 1996). Thus it is imperative that customer retention and
satisfaction remains high, not just for distribution cost recovery; high
customer loyalty leads to opportunities to up and cross-sell (Lombardi, 2005),
increased referrals, and better overall financial performance (Moore and
Santomero, 1999. Diacon and O’Brien, 2002).
To achieve higher customer retention, quality service
levels, relationship, advice and integrity of the agent (Toran, 1993) are
critical factors (Slattery, 1989). Personal interactions with their insurance
agent and insurance service staff perception make up critical components of
brand loyalty (Soloman et al, 1985. Gro¨nroos, 1990).
 |
Agent – Customer – Insurer Literature Map
|
There are 2 journals with relevant cases studies worth
analysing. Both were done in Europe; one in Ireland and the other in Italy.
Irish Case Study
A study was done in Ireland by O'Loughlin,
D. and Szmigin, I. in 2005. Their paper titled ‘Customer perspectives on the
role and importance of branding in Irish retail financial services’ explores
the customers’ perception of the functional and emotional factors when making a
financial services purchase. Although the research findings indicate that
consumers in Ireland place more emphasis on functional values, the researchers
highlight a lack of differentiation in the services and rates offered. Instead
of using emotional advertising messages, financial companies could add value by
focusing on the ‘people-based process’; providing superior advice, expertise,
service quality and flexibility.
Mediterranean (Italy) Case Study
Another
similar study was conducted by Petruzzellis, L., Romanazzi, S. and Tassiello,
V., 2011 titled, ‘Branding relationships in financial services: a Paradigm
shift in Mediterranean countries.’ Despite the availability of other channels,
Italians have a closer relationship with their financial services staff as
compared to the Irish; human interaction, familiarity and personable service
are much highly valued and feature strongly in the decision making process.
Amazingly, statistics from the Bank of Italy in 2017 shows that 40% of Italians
do not use online banking (Banca D’Italia official statistics website, 2017)
with many preferring to visit the bank.
These case studies illustrate that while functional values
are on the mind of the Irish consumer more than the Italian, it is still
beneficial for the company to focus on the service process. This is especially
so when the perceived risk of the product is higher; in such a situation, trust
in the brand and the advice of financial service staff is highly valued (Gill,
2008).
What about Singapore?
It is interesting to note that although both Ireland and
Italy are in Europe, the attitude towards financial services decision-making
show marked differences. This may be attributed to each country’s cultural
differences and practices. Culture is usually defined as a set of values,
norms, behaviour, etc. that is peculiar to a country, society, or group and
differentiate it from another (De Mooij, 2013. Giddens et al, 2016). These are
usually formed through socialisation (Ghemawat and Reiche, 2016) and influenced
by tastes, preferences and religion (Cohen and Varnum, 2016).
How will the Singaporean consumer attitude towards financial
services compare? Against the other 2 countries, Singapore is a young nation
(gained independence 1960s) with a diverse mix of people (Chinese 77%, Malays
15%, Indians 6%, Others 2%).
 |
Hofstede Cultural Comparison for Ireland, Italy &
Singapore
|
From Figure 2c, we can see marked differences in some of the
dimensions. In Power Distance which marks social inequality and relationship
with authority (Bian and Forsythe, 2012), Singaporeans are the most accepting
of uneven power distribution in society and organisations (Hofstede, 1980b;
Hofstede and Minkov, 2010). Even more remarkable are the gulfs in the
dimensions of Individualism and uncertainty avoidance; Singaporeans abide by
rules for nearly everything in life!
Will the combination of high power distance, collectivism
and need for structure see the Singaporean consumer ‘give face’ and respect the
advice of their insurance agent? Or will the thriftiness and eye for a bargain
drive the Singaporean to online insurance channels to save on cost?