MANAGEMENT AND ACCOUNTING REVIEW, VOLUME 20 NO 3, DECEMBER 2021

The Mediating Role of Customer Satisfaction

in the relationship between Service Quality
and Customer Loyalty
Kamisah Ismail♣, Jamie Wan Chiou Tin, and Jacinta Phooi M’ng Chan
Faculty of Business and Economics, University of Malaya, Malaysia

ABSTRACT

The purpose of this paper is to examine the relationships between

service quality, customer satisfaction and customer loyalty in the context
of the life insurance business. The Theory of Planned Behaviour was
used in constructing the framework which measured service quality.
The questionnaire survey method was used to obtain data related to the
perception of life insurance policy holders towards their current insurance
company. The analysis of 150 life insurance policy holders using multiple
regression and SOBEL test showed that customer satisfaction plays a
mediating role in the relationship between service quality and customer
loyalty. In other words, the effect of mediation is present where service
quality gives a positive impact on customer satisfaction, which subsequently
gives a positive impact on customer loyalty. Further analysis also revealed
that among the five dimensions in the SERVQUAL model, reliability played
the most important role in determining customer satisfaction and customer
loyalty. The outcome drawn from the current study offers insights for the
insurance industry to focus on the dimensions that play a significant role in
retaining and capturing more loyal customers. This will assist businesses
in gaining profitability and sustainability.

Keywords: Customer Loyalty, Customer Satisfaction, Service Quality

ARTICLE INFO
Article History:
Received: 20 June 2021
Accepted: 01 November 2021
Available online: 01 December 2021
♣
Corresponding Author: Kamisah Ismail, Department of Accounting, Faculty of Business and
Economics, University of Malaya, 50603 Kuala Lumpur, Malaysia; Email: [email protected].
my ; Tel: +603-79673804
MANAGEMENT AND ACCOUNTING REVIEW, VOLUME 20 NO 3, DECEMBER 2021

INTRODUCTION

Life insurance is an important substitute or replacement income for a family,

in the event that a mishap happens to the breadwinner of that family. Hence,
life insurance policies provide several benefits, such as savings for education,
savings for retirement, tax benefits and protection against rising health
expenses. In the Malaysian context, all insurance and takaful including life
insurance is under the supervision of Bank Negara Malaysia (BNM) since
1988 (BNM, 2001). BNM issued standards and guidelines to govern and
supervise all insurance and takaful operators in Malaysia. This industry
has recorded a consistent growth for itself since then. The market growth
of the life insurance industry is driven by the awareness of society on the
importance of life insurance. As reported by the Life Insurance Association
Malaysia (LIAM), the life insurance industry grew by 15.7%, with the
amount gained from new individual life business premiums amounting to
RM 2.8 billion for the period from January to June 2014, as compared to
RM 2.4 billion for the same period in year 2013. At present, there are 15
life insurance companies in Malaysia, yet the growth rate of this industry
is still far behind that of the national mission of ensuring that 75% of the
population is insured. According to LIAM, the penetration of life insurance
is relatively low compared to other developed countries.

Life insurance companies are customer-oriented. Their main source

of income is from policies purchased by customers. Existing customers’
intention to repeat purchase is mainly affected by the loyalty of the customer
towards the company (Goodman, 1999). Customer loyalty is one of the
factors that leads the industry to profitability, and to accomplish its financial
performance (Oliver, 1999). Even a small increase in customer loyalty (5
percent) could increase the profit by 25 to 85 percent (Reichheld & Sasser,
1990). Thus, customer loyalty could bring a significant impact on the
sustainability of a company.

In today’s competitive market, what can a company provide to the

customer to be able to stand out among its rivals? Since we know that the
main sources of life insurance are from customers, therefore focus should be
on customers. How to retain and attract customers? What can an insurance
company do to encourage customers to repeat purchase and continue to
renew their policies? Loyalty is the key word. Does the quality of service

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really affect customers’ satisfaction that will then lead to customer loyalty?
Is service quality really the main concern for customers in Malaysia to be
loyal? Does customer satisfaction lead to customer loyalty?

This paper aims to examine the relationship between service quality,

customer satisfaction, and customer loyalty, among life insurance customers
in Malaysia. The study is important to the life insurance companies in
Malaysia as it conducts a much needed survey on customers’ perception
of the relationship that they have with their insurance companies in terms
of service, satisfaction, and loyalty. It is vital to conduct this study because
the expectations of customers has been evolving due to the growing amount
of information affected by advancing technology, and the availability of
many competitive companies in the insurance industry. As the insurance
companies are very much dependent on their clients (customers) to sustain,
it is therefore very crucial to conduct a study focussing on insurance
companies. Thus far, to the authors’ knowledge, there is no published study
on this area which used insurance companies, particularly life insurance, as
their sample. Previous studies on service quality and customer loyalty have
focussed on retail banking customers (Caruana, 2002; Kaura et al., 2015;
Özkan, Süer, Keser & Kocakoç, 2019, Yadav & Rai, 2019), public electricity
utility (Chodzaza & Gombachika, 2013), individual shoppers at department
stores (Gong & Yi, 2018), hospitality industry (Myo, Khalifa & Aye, 2019;
Priyo, Mohamad & Adetunji, 2019), supermarkets (Slack and Singh, 2020),
and armed forces health organisations (Ismail et al., 2016). The outcome
derived from this study is crucial as it could provide life insurance companies
the information that could help them to enhance their current service quality
for sustainable customer satisfaction and loyalty. Moreover, even though
SERVQUAL is a well established measure for service quality, research
done in Asian countries is very much lacking. Most of the studies in this
area were conducted in Western countries. Different cultures might have
different perceptions on service quality (Furrer, Liu & Sudharshan, 2000),
and the relationship among the variables. Western countries’ perception
on service quality, customer satisfaction and loyalty might differ from the
perception of Asian countries such as Malaysia.

This paper will be organised in the following manner. The literature

review and hypotheses development will be discussed in the next section,
followed by research methodology, results and discussion. Finally, this paper

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concludes with some theoretical and practical implications, limitations, as

well as suggestions for future research.

LITERATURE REVIEW AND HYPOTHESES

DEVELOPMENT

Service Quality

Service quality can be associated with the impression of the

customer (Bitner and Hubbert, 1994), judgement of overall performance
(Parasuraman, 1998) and customer requirements (Anderson and Fornell,
1994). A customer’s perceived quality is the determinant of what was
expected and experienced during the delivery process. Service quality
is measured between the expectation of service and perception about the
service delivered (Parasuraman et al., 1988). Service quality may have
an influence on the insurance industry because this industry is customer
oriented. Prior studies have revealed that customers who are given good
quality service and treated well tend to have a positive perception towards
a company, and are more loyal and willing to pay a higher price for the
products offered (Stamatis, 2018; Woods, 1999).

From a life insurance company perspective, it is important to provide

good service experience and perception so that existing customers can be
retained and to attract new ones. The success of a life insurance companies
depends on the customers’ choices and the quality of services provided
(Siddiqui, Khand & Sharma, 2010).   Life insurance companies need to
ensure what type of quality service is being offered to customers if it aims
to win, attract and motivate more customers to engage with their companies.
Good service quality not only retains existing customers; it also encourages
them to purchase more products.

Customer Satisfaction

Customers’ perception on the service quality provided will determine

the level of their satisfaction. In the life insurance industry, customer
satisfaction is an important element to the industry’s success as it will
generate a positive word-of-mouth message effect (Swan & Oliver, 1989;

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Ali & Raza, 2015). Customer satisfaction will also lead to customer loyalty
(Anderson & Fornell, 1994; Heskett, Jones, Loveman, Sasser & Schlesinger,
1994; Chodzaza & Gombachika, 2013; Kaura, Durga Prasad & Sharma,
2015; Ismail, Omar Zaki & Rose, 2016). The more satisfied the customers
are, the better the retention of the customers by companies. This, can in
turn, ensure higher profits for the company.

Customer Loyalty

In any service industry, customers are important, hence any ability

to retain a customer is better than the challenge of seeking new customers
(Gremler & Brown, 1996). To do this, companies need to have strategies to
retain their customers, such as building customer loyalty. Customer loyalty
can be viewed in terms of behaviour and attitude. Purchase frequency, repeat
purchase, recommendations, and willingness to pay a premium price are
some of the customer loyalty behaviours (Anderson and Sullivan, 1993;
Zeithaml et al. 1996). Customer loyalty has an important impact on the
sustainability of a company as it could bring more profitability (Duncan &
Elliott, 2004). Many studies have been conducted on the variables that affect
or are related to customer loyalty such as customer satisfaction and customer
retention (Bahri-Ammari & Bilgihan, 2019), service quality (Zeithaml et
al., 1996), profitability (Reichheld et al., 2000) and many others.

Theory of Planned Behaviour

The Theory of Planned Behaviour was used to support the research

model in Figure 1. This Theory was designed to predict and explain human
behaviour in specific contexts (Ajzen, 1985; Ajzen, 1991). A central factor
in the Theory is the individual’s intention to perform a given behaviour.
Intentions are assumed to capture the motivational factors that influence a
behaviour. In this study, service quality (motivational factor) was expected
to influence customer satisfaction, which will subsequently lead to customer
loyalty (behaviour).

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r in the Theory is the individual’s intention to perform a given behaviour. Intentions are assumed
re the motivational factors that influence a behaviour. In this study, service quality (motivation
r) was expected to influence customer satisfaction, which will subsequently lead to customer loyal
viour).
MANAGEMENT AND ACCOUNTING REVIEW, VOLUME 20 NO 3, DECEMBER 2021

H1 H2
(+ve) (+ve)

H3
(+ve)

Figure 1: Research Model

The Relationship Between

Figure 1 Service Quality
: Research Modeland Customer
Satisfaction.

Service quality is conceptualised differently from customer satisfaction

even though both may be closely related (Parasuraman, Zeithaml & Berry,
1994). While satisfaction is a broader concept, it may be influenced by many
dimensions such as price, personal factors, product quality and many more.
4
In contrast, service is often measured by its quality, hence service quality
is more specific. It is linked to the various service dimensions (Zeithaml,
Bitner & Gremler, 2006). In this regard, service quality can be defined as
a customer perception that is influenced by the five dimensions stated in
the SERVQUAL model.

Research looking at these two variables in different industries have

noted that there was a positive significant relationship between service
quality and customer satisfaction. This includes the banking industry
(Kumar, Kee & Manshor, 2009; Ali & Raza, 2015; Narteh, 2018; Yadav &
Rai, 2019), retail sector (Vesel & Zabkar, 2009), telecommunications (Lai,
Griffin & Babin, 2009), and others. Customer satisfaction is measured in
line with customer experience on a service encounter. When quality service
is served, customers will be satisfied (Kaura et al., 2015; Ismail et al., 2016;
Gong & Yi, 2018: Slack and Singh, 2020). This means that an increase
in service quality tends to lead to an increase in customer satisfaction.
Therefore, the following hypothesis was formulated:

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H1: There is a positive relationship between service quality and customer

satisfaction.

The Relationship Between Customer Satisfaction and

Customer Loyalty

Customer satisfaction is said to be the major factor leading to customer

loyalty (Wong, Tong & Wong, 2014; Akroush & Abu-ElSamen, 2012; Oliver,
1997; Anderson & Sullivan, 1993; Cronin & Taylor, 1992). It is believed
that if a customer was satisfied with the services offered, or the services
offered were above their expectations, positive words-of-mouth would
disseminate among customers, thereby leading to future repeat purchases
(Kaura et al., 2015; Ali & Raza, 2015; Oliver, 1997). A satisfied customer
has the tendency to remain with a company, whereas a dissatisfied customer
would definitely be driven away. Anderson and Fornell (1994) pointed out
that satisfaction is viewed as the antecedent of a relative attitude because
satisfaction would lead consumers towards the loyalty of a brand, hence
promoting brand loyalty. Based on this, the hypothesis formulated was:

H2: There is a positive relationship between customer satisfaction and

customer loyalty

The Relationship Between Service Quality and Customer

Loyalty

Service quality integrates the service provider and the customer. The
success of an organisation is highly dependent on its relationship with its
customers (Panda, 2003). There are limited number of studies focusing
on the relationship between service quality and customer loyalty (Cronin,
Brady & Hult, 2000; Zeithaml, 2000). Loyalty can be viewed to be more
significant in the service industry as compared to the tangible goods industry
(Zeithaml, 1981). This is because service provides more interaction between
people. Therefore, a quality service provider has a higher opportunity to
gain more loyal customers (Parasuraman, Zeithaml & Berry, 1985). Service
quality can influence the outcome of an organisation, such as promoting
customer loyalty (Newman, 2001; Chodzaza & Gombachika, 2013; Ismail
et al., 2016; Gong & Yi, 2018; Budianto, 2019). Loyalty is also described
as repurchasing, and the willingness to recommend; it has been found to

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have a positive relationship with service quality (Dean, 2002). Customers

who experience poor service quality tend to feel unfavourable behavioural
intentions (Oliver, 1997). Based on this, the following hypothesis was
formulated:

H3: There is a positive relationship between service quality and customer

loyalty

The Mediating Role of Customer Satisfaction

Service quality has a direct impact on customer satisfaction (Abu-

ElSamen, Akroush, Al-Khawaldeh & Al-Shibly, 2011). Good service
quality would offer customers a positive experience. This positive customer
experience affects the customer’s purchase intention which is one of the
determinants of customer loyalty. Therefore, service quality is necessary,
but it is not sufficient to create customer loyalty unless service quality leads
to customer satisfaction.

According to Baron and Kenny (1986), the mediator effect takes

place when:

1. The independent variable (service quality) affects the mediator

(customer satisfaction).
2. The independent variable (service quality) affects the dependent
variable (customer loyalty).
3. The mediator (customer satisfaction) affects the dependent variable
(customer loyalty) in the presence of the independent variable (service
quality)

Hence, it can be hypothesised that:

H4: Customer satisfaction mediates the relationship between service

quality and customer loyalty.

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METHODOLOGY

Data Collection

This study used a questionnaire survey as a data collection method.

The questionnaire was divided into four parts. Part A focussed on the
demographics of the respondents. Part B measured the independent variable
(service quality). Part C measured the mediator (customer satisfaction) and
Part D measured the dependent variable (customer loyalty). All questions
relating to service quality, customer satisfaction, and customer loyalty were
based on the 5-point Likert scale varying from 1 (Strongly Disagree) to 5
(Strongly Agree). The questionnaire was sent to the ten potential respondents
(policy owner) for pilot testing, and to ten academicians for pre-testing.
Several amendments were then made to the contents and the wordings
of the questions, mainly to fine tune clarity, and face and content validity
before the final version was sent to the respondents.

Measurement of Variables

The measurements for each variable had already been used and
validated in many research. Service quality (independent variable) was
adopted from the SERVQUAL model as suggested by Parasuraman,
Zeithaml and Berry (1988). It measures consumers’ perception on service
quality by using 22 items. It consists of five dimensions: tangibles (physical
facilities, equipment, and appearance of personnel), reliability (ability to
perform the promised service dependably and accurately), responsiveness
(willingness to help customers and provide prompt service), assurance
(knowledge, ability and courtesy of employees to inspire trust and
confidence), and empathy (caring, individualised attention the organisation
provides its customers). The SERVQUAL model can be considered an
established measurement for service quality as it has been used in many
studies (E.g: Ismail et al., 2016; Narteh, 2018), among others. Customer
satisfaction, which acted as a mediator, was adopted from Amin, Isa and
Fontaine (2013). Customer loyalty (dependent variable) was adopted from
Zeithaml et al. (1996), Vesel and Zabkar (2010), and Amin et al. (2013)
with a slight modification to ensure comprehensiveness and suitability to
the context of the study. Loyalty on intangible service was defined as related
to the purchase, attitude, and cognition. Both customer satisfaction and
customer loyalty measures consisted of 6 items, respectively.

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Sampling Design

The sampling population for this study consisted of individuals

residing in Malaysia, and owning a life insurance policy. This study used
simple random sampling. The target sample were adults aged 18 and
above, and who owned a life insurance policy. This is because the legal life
insurance policy owner must be of 18 years and above. The respondents
were randomly invited to answer the questionnaire as long as they owned
a life insurance policy. All respondents were from Peninsular Malaysia.
The sample size used in this study was based on Tabachnick and Fidell’s
(2007) sample size calculation: N > 50 + 8m (m= number of independent
variables) which equals to 58 respondents. However, to fulfil the factor
analysis assessment, a minimum of 150 respondents are necessary to be
considered as sufficient for the study (Tabachnick and Fidell, 2007).

RESULTS AND DISCUSSION

Descriptive Analysis

A total of 150 questionnaires were distributed almost equally to both

male and female respondents, with the difference of 14 respondents. The
total comprised 54.7% females and 45.3% males. The majority of the
respondents (48.7%) were aged between 30-39 years old, followed by other
age groups. Ethnicity was divided into four categories and the Chinese
comprised 48.7%, the Malays comprised 38.7%, the Indians comprised
10%, and others made up 2.7%. A total of 146 respondents out of 150
respondents possessed qualifications above the SPM (Sijil Peperiksaan
Malaysia – O level). The respondents were mostly married (63.3%) and this
led to the majority household size comprising 2 to 5 people. The household
income of the majority or 62% was above RM 6,000. This indicated that
the respondents had a stable income.

The average total number of insurance policies owned by the

respondents were between two to three policies. Medical and health policies
were the policies most purchased, as shown by the 83.3% of respondents
who claimed to make such purchases. In this analysis, it appeared that
investment-linked policies overtook the traditional whole life policies, in

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terms of ownership, with a difference of 3.3%. The demographic profile of

the respondents is summarized in Table 1.

Table 1: Demographic Profile of Respondents

Percentage
Variable Category Frequency
(%)
Gender Male 68 45.3
Female 82 54.7
Age 18-29 23 15.3
30-39 73 48.7
40-49 40 26.7
50 & above 14 9.3
Race Malay 58 38.7
Chinese 73 48.7
Indian 15 10.0
Others 4 2.7
Marital Status Single 51 34.0
Married 95 63.3
Divorced 4 2.7
Highest Level of SPM & below 4 2.7
Education STPM/Certificate/Diploma 31 20.7
Bachelor Degree/Master/PhD 107 71.3
Professional Qualification 8 5.3
Household Size 1 15 10.0
2-3 58 38.7
4-5 72 48.0
6 & above 5 3.3
Monthly Household Less than RM 2,000 6 4.0
Income RM 2,001 – RM 4,000 12 8.0
RM 4,001 – RM 6,000 39 26.0
RM 6,000 – RM 8,000 37 24.7
Above RM 8,000 56 37.3
Occupation Professionals 25 16.7
Management Level 55 36.7
Executives 40 26.7
Self-Employed 16 10.7
Housewife 5 3.3
Others 9 6.0
No of policies bought 1 39 26.0
from the same insurer 2-3 73 48.7
4-5 27 18.0
6 & above 11 7.3
Type of policies Whole life 75 50.0
Term 22 14.7
Endowment 39 26.0
Investment-Link 80 53.3
Medical & Health 125 83.3

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Results of Hypotheses Testing

Service quality (SQ) and customer satisfaction (CS)

Table 2 shows the results of the multiple regression analysis. The
mediator - customer satisfaction, was considered as a dependent variable. As
noted in the table, the R Square value of 0.848 indicated that service quality
explained 84.8 percent of the variance in customer satisfaction. The result
also showed that service quality had a positive relationship with customer
satisfaction. The significance value was less than 0.05, thereby indicating
that service quality made a significant contribution to the prediction of
customer satisfaction (β=.921, p<0.05). In this regard, hypothesis H1 was
supported. This result is consistent with previous research (Parasuraman,
1998; Ali & Raza, 2015; Gong & Yi, 2018; Narteh, 2018) which explains
that service quality has a positive impact on customer satisfaction. Based
on this, it can be concluded that if a company provides quality service to
customers, it could lead to satisfaction among customers.

Table 2: Results of Multiple Regression Analysis

Constant
Hypothesis Relationship R2 Beta p-value
(Alpha)
H1
SQ and CS 0.848 0.142 0.921 0.000
(Direct)
H2
CS and CL 0.864 0.256 0.929 0.000
(Direct)
H3
SQ and CL 0.783 0.003 0.885 0.000
(Direct)
H4 SQ and CL 0.869 0.109 0.192 0.013
(Indirect) CS and CL 0.753 0.000

Customer satisfaction (CS) and customer loyalty (CL)

As depicted in Table 2, the R Square value of 0.864 indicated that
customer satisfaction explained 86.4 per cent of the variance in customer
loyalty. The result also showed that customer satisfaction had a positive
relationship with customer loyalty, as noted in the beta value of 0.929.
Moreover, the significance value was less than 0.05, thereby indicating
that customer satisfaction made a significant contribution to the prediction
of customer loyalty (β=.929, p<0.05). In this regard, hypothesis H2 was
supported. This finding is consistent with previous studies (Eg.; Wong et al.,
2014; Akroush & Abu-ElSamen, 2012) which found that satisfaction is an

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important antecedent to customer loyalty. Satisfied customers tend to engage

with the same service provider due to their loyalty (Kaura et al., 2015).

Service quality (SQ) and customer loyalty (CL)

The R Square value of 0.783 indicated that service quality explained
78.3 per cent of the variance in customer loyalty. The result showed that
service quality had a positive relationship with customer loyalty, as can
be noted in the beta value of 0.885. Further, the significance value was
less than 0.05, thereby indicating that service quality made a significant
contribution to the prediction of customer loyalty (β=.885, p<0.05). In
this regard, hypothesis H3 was supported. As expected, service quality is
one of the determinants of customer loyalty (Caruana. 2002; Chodzaza &
Gombachika, 2013; Ismail et al., 2016; Gong & Yi, 2018; Budianto, 2019).

Service quality (SQ), customer satisfaction (CS) and

customer loyalty (CL)
Multiple regression analysis was used to further test the hypotheses.
As depicted in Table 2, both service quality and customer satisfaction had
a positive relationship towards customer loyalty. Customer satisfaction
had a stronger contribution towards customer loyalty (β=.753, p<0.05)
as compared to service quality (β=.192, p<0.05). The beta value of 0.753
in comparison to 0.192 revealed the difference in contribution from both
variables. Clearly, both service quality and customer satisfaction carried a
significance value of less than 0.05. This showed that both variables had a
significant relationship with customer loyalty.

The multiple regression results above can be put in an equation as:

CL = 0.109 + 0.192SQ + 0.753CS + e

Where;
CL = Customer Loyalty
SQ = Service Quality
CS = Customer Satisfaction
e = error term

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Mediation Effect

The results of the multiple regression further showed that the

requirement needed to activate the mediation effect was present. The beta
value of service quality on customer loyalty was much less in the fourth
equation as compared to the third equation. Perfect mediation did not
occur since the beta for the service quality in the fourth equation was still
significant (p < 0.05). Nevertheless, a mediation effect can be confirmed
as the beta value declines dramatically (Caruana, 2002).

Sobel Test

The Sobel test was carried out to support the findings of the mediating
effect of customer satisfaction, on service quality and customer loyalty
(Baron & Kenny, 1986). The Sobel test performs best and converges closely
with sample sizes greater than 50 or so (MacKinnon, Warsi & Dwyer, 1995).
The test is conducted by using a web-based online calculator (Preacher &
Leornardelli, 2010). The details of the coefficient and standardised error on
the relationship between service quality and customer satisfaction are then
followed by the relationship between customer satisfaction and customer
loyalty. Both the coefficient and standardised error value are obtained from
the regression analysis through the SPSS. Preacher and Hayes (2004) and
Preacher and Leonardelli (2010) indicated that if the p-value < 0.05, then
there is evidence of mediation.

Table 3: Results of Sobel Test

Coefficients Standard error
Service Quality to Customer Satisfaction 1.052 0.037
Customer Satisfaction to Customer Loyalty 0.746 0.076

Test Statistic p-value

Sobel Test 9.27842 0.00

As shown in Table 3 show the result for the test statistic for the Sobel
test was 9.27842 with a p-value of 0.00. The p-value was below the alpha
level of 0.05, thereby indicating the evidence of mediation (Preacher &
Hayes, 2004; Preacher & Leornardelli, 2010). In this regard, hypothesis
H4 was supported. This finding is consistent with the findings of Caruana
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(2002), Chodzaza and Gombachika (2013), Kaura et al. (2015), Ismail et

al. (2016), and Slack and Singh (2020) among others, even though based
in different contexts.

Additional Analysis (Pearson Correlation)

The Pearson Correlation analysis was then used to measure the

strength and the direction of the relationship between the two variables.
This additional analysis examined the five dimensions in the SERVQUAL
model to detect which of them had the most significant impact on customer
satisfaction and customer loyalty. The results as in Table 4 show that all
the five dimensions were significantly related to customer satisfaction and
customer loyalty. It appears that reliability has the most impact on customer
satisfaction and customer loyalty. The strength of the correlation is followed
by assurance, tangibles, and empathy for both customer satisfaction and
customer loyalty. Responsiveness has the least impact on both customer
satisfaction and customer loyalty. These findings are also noted to be quite
consistent with past studies which observe that reliability is the core aspect
of the service. It is mainly associated with the service outcome while
other dimensions (tangibles, responsiveness, empathy and assurance) are
associated with the deliverance of service (Parasuraman, Berry & Zeithaml,
1991).

Table 4: Results of Pearson Correlation Analysis

Customer Customer
Satisfaction Loyalty

Service Quality
Correlation

Correlation
p-value

p-value

dimension Test result

Tangibles 0.840 0.000 0.820 0.000 Supported

Reliability 0.894 0.000 0.867 0.000 Supported

Responsiveness 0.694 0.000 0.660 0.000 Supported

Assurance 0.872 0.000 0.846 0.000 Supported

Empathy 0.768 0.000 0.723 0.000 Supported

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CONCLUSION

This study has provided evidence highlighting the importance of service

quality and customer satisfaction on customer loyalty in the life insurance
business in Malaysia. The outcome of this study supports the service quality
model that was introduced by Parasuraman et al. (1988). All the four
hypotheses which focused on the relationships among these three variables
were found to be significant. Following Preacher and Hayes (2004), and
Preacher and Leornardelli (2010), the SOBEL test was also done. It was
observed that the effect of mediation was present where customer service
quality impacted on customer satisfaction, and customer satisfaction
impacted on customer loyalty, in the context of the life insurance business
in Malaysia.

This study, therefore, has narrowed the gap between customer

expectations and their perception of the service quality of the life insurance
industry in Malaysia. As the life insurance customers’ expectations
converged with their perception of the service quality, they were more
inclined to become satisfied, hence their loyalty could be obtained. Customer
loyalty helps to ensure more benefits for the life insurance companies, for
example, advertising for the companies by positive word of mouth, and/or
repeat purchases, both of which would greatly contribute to the sustainability
and profitability of the companies concerned. This study also revealed that
reliability and assurance in the service quality dimension play an important
role in customer satisfaction and customer loyalty.

This study has both theoretical and practical implications. From the
theoretical perspective, as this study used the Theory of Planned Behaviour
to support and explain the theoretical concept, as mentioned earlier, the
central factor in this Theory is the individual’s intention to perform a given
behaviour. Intentions are assumed to capture the motivational factors that
influence a behaviour. In this study, service quality (motivational factor)
was found to influence customer satisfaction, which subsequently led to
customer loyalty (behaviour).

In addition, the findings confirm that customer satisfaction mediates

the relationship between service quality and customer loyalty. This paper
signifies the importance of service quality in the life insurance business,

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and their impact on customer satisfaction and loyalty, with the use of the
SOBEL test for the mediation effect. Thus far, to the authors’ knowledge,
there is no published study in this area that used the SOBEL test for this kind
of relationship. Furthermore, this study also examined the five dimensions
in the SERVQUAL model that had the most significant impact on customer
satisfaction and customer loyalty.

As for practical implications, the paper has great significance for the life
insurance business. The findings could serve as a guideline for the strategic
planning of insurance companies in Malaysia. It is hoped that continuous
research on consumer behaviour is conducted on the heterogeneity of
customers. This is because the insurance company is required to put in more
efforts with more innovations so as to satisfy customers. A customer service
quality improvement strategy would definitely bring some differentiation to
the life insurance industry which desires to stand out among its competitors.

This study is also restricted by some limitations. As such, there

are ample opportunities to extend this study further. First, this study
focused on customer satisfaction as a mediating variable. Future research
should consider not only mediators but also potential suppressors such
as moderators and contingent factors that might conceal or influence
the relationship linking the independent variable (service quality) to the
dependent variable (customer loyalty). Factors such as behavioural or
ethical values are also worth researching. Second, the scales employed in
this study were based on individuals’ perceptions. Therefore, they may not
reflect objective reality. Future studies could replicate the current study
by utilising different methodologies such as experiments and case studies.

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