Customer Knowledge Management (CKM) in Insurance Sector

Raghavendra A.N. 1, Pulavarthy S G R Kundan Kumar 2

1
Associate Professor,
Department of Management Studies,
Christ (Deemed to be University)
Bangalore-560029
Email: [email protected]

2
BBA Student,
Department of Management Studies
Christ (Deemed to be University)
Bangalore-560029
Email id: [email protected]

ABSTRACT
The business environment is changing from industrial to information environment andthis
transition includes the reassignment of core capabilities in organizations. By using
knowledgemanagement companies can improve the relationship with their valuable
customers tocreate loyal customers and obtain competitive advantage.Sinceknowledge
management is responsible for acquiring and collecting the expertise andknowledge within
organizations to promote innovation in organizations it can create new ideas and provide
improved and new services through customer knowledge management.Customer Knowledge
Management is increasingly seen as central means to foster and enhance learning, knowledge
sharing and integration in organizations. In this context, a survey was conducted in eight
insurance companies in Bangalore to study customer knowledge management process. Using
database to store customer information was the priority in storing customer knowledge while
using Information technology to distribute customer knowledge was the first priority in
distributing and transferring customer knowledge in insurance sector. Linear regression
analysis carried out using SPSS software indicate that 66.4% of the variation in the insurance
sector customer retention was due to customer knowledge management practices followed by
the insurance companies.

Key Words: customer knowledge management, customer retention, insurance sector,

knowledge storing, knowledge distribution and transfer
INTRODUCTION
Customer Knowledge Management (CKM) is concerned with the management and
exploitation of customer knowledge. It comprises the processes that are concerned with the
identification, acquisition, and utilization of knowledge from beyond a firm’s external
boundary in order to create value for an organization. In today’s dynamic business
environment, the organizations are developing sound change management strategies in order
to counter the opponents. Knowledge management has gained popularity in last decade in
many areas of both service and product based industries. Knowledge management is about
developing, sharing and applying knowledge within the firm to gain and sustain a competitive
advantage. Crafting Customers Knowledge management requires a set of activities, i.e., plan,
design, build, and implement, which seek to create or leverage the firm’s distinctive core
competencies in order to attain a sustainable competitive advantage.

Further, the knowledge management helps the organizations and anyone who takes it to
achieve potential to influence many spheres of an organization. It makes large extent of
hidden tacit knowledge can be codified and made explicit. To achieve business competence,
and edge over its counter parts, the organizations are advancing from customer relationship
management to customer knowledge management as knowledge based strategy for
anticipating and meeting customers; needs profitably. Knowledge management has emerged
as an important tool to improve organizational effectiveness.

It is well known that, every customer requires proper information regarding any product or
service. So it is important that every firm should provide sufficient information to its
customers by promoting its products and services in a better way. This study helps in
understanding the various strategies implemented by Life insurance Companies to provide
information about their services, evaluate them and suggest few best strategies to overcome
the issues of reaching the customers.

In this information age, Knowledge Management (KM) has become the main competitive
strategy of a company. Especially Customer Knowledge Management (CKM), which
emphasizes on knowledge management of their customers, is the main successful factor of
current corporations.

The study on the scenario of life insurance business in the 21st century have clearly witnessed
that the monopoly business of life insurance sector in the name of LIC has changed to the
situation of cut throat competition with 23 private life insurance companies giving tough
competition to each other. The growing demand in the market has made the companies to
introduce new life insurance products. The initial success especially in capturing market
share has made the companies to introduce many products in the market. And many products
which were released in the market have shown giving tough competition to traditional
products like Term plans and Whole life plans.
The growing demand to the Unit Linked Insurance Plans (ULIPs) has made the market more
competitive with positive flow in the market. As a result, the companies have found the
customers as more valuable. In order to inducing the customers to get life insurance plans, the
companies have started to replace the traditional concept of Customer Relationship
Management (CRM) to Customer Knowledge Management (CKM). Encouraging the
customers to know about the need for insurance to their families and for self health has been
the main motto of CKM. More than 70% of the Indians are yet to be insured and also more
than 50% of the Indian are in the age group of teen and young age. These positive aspects
have created tremendous market opportunities to the life insurance companies. As part of
CKM, the companies have realized the importance of making the customers to be well aware
about the type of life insurance plans and the type of products introduced by their respective
companies. As a result the need for CKM for life insurance market is growing rapidly. Hence
a study is undertaken with the following objectives of understanding the customer knowledge
scenario in the insurance sector with specific reference to Life insurance policies.
 To study the factors influencing storage of customer knowledge in insurance sector
 To determine the factors influencing distribution and transfer of customer knowledge
in insurance sector
 To analyse the impact of CKM on customer retention in insurance sector

REVIEW OF LITERATURE
According to Rowley (2002)Customer Knowledge Management (CKM) is concerned with
the management and exploitation of customer knowledge. It comprises the processes that are
concerned with the identification, acquisition, and utilization of knowledge from beyond a
firm’s external boundary in order to create value for an organization.
Paquette (2006) describes an important aspect of customer knowledge is that it is knowledge
not owned by the firm, but by the others who may or may not be willing to share such
knowledge. The processes that a firm employs to manage the identification, acquisition, and
internal utilization of customer knowledge are collectively referred to as customer knowledge
management.

Karl M. Wiig, (1997)found that leaders of successful organizations are consistently

searching for better ways to improve performance and results. Frequent disappointments with
past management initiatives have motivated managers to gain new understandings into the
underlying, but complex mechanisms ‐ such as knowledge ‐ which govern an enterprise’s
effectiveness. Knowledge Management, far from being a management “fad”, is broad,
multi‐dimensional and covers most aspects of the enterprise’s activities. To be competitive
and successful, experience shows that enterprises must create and sustain a balanced
intellectual capital portfolio. They need to set broad priorities and integrate the goals of
managing intellectual capital and the corresponding effective knowledge processes. This
requires systematic Knowledge Management. With knowledge as the major driving force
behind the “economics of ideas”, we can expect that the emphasis on knowledge creation,
development, organization and leverage will continue to be the prime focus for improving
society.

According to Neeli Bendapudi, Robert P. Leone (2002), Customers form relationships with
the employees who serve them as well as with the vendor firm these employees represent. In
many cases, a customer’s relationship with an employee who is closest to them, a key contact
employee may be stronger than the customer’s relationship with the vendor firm. If the key
contact employee is no longer available to serve that customer, the vendor firm’s relationship
with the customer may become vulnerable. In this article, the authors present the results of
two studies that examine what business-to-business customers value in their relationships
with key contact employees, what customers’ concerns are when a preferred key contact
employee is no longer available to serve them, and what vendor firms can do to alleviate
these concerns and to retain employee knowledge even if they cannot retain the employee in
that position. The studies are based on a discovery-oriented approach and integrate input from
business-to-business customers, key contact employees, and managers from a broad cross-
section of companies to develop testable propositions.

Barua, A. (2004)reports that life insurance is one of the sectors which have an adequate
growth potential. It is the only financial asset which provides return in addition to the life risk
coverage. In the modern era term assurance has got less importance since it provides only risk
coverage and no return. The investors in life insurance are looking for both good return and
life risk coverage. Hence the new policies framed by the companies will have both the
elements. After privatisation of life insurance sector in 2000, drastic changes occurred in the
sector. Linked policies were framed in place of the conventional policies. The investors are
looking for the gains from the securities market also. These investors can invest in mutual
funds but it does not cover life risk. The potential for growth and spread of life insurance in
India is high due to large population and no pension system among the larger work groups
which leads to no old age income. The insurance sector provides for the long term contractual
savings for the investors. In life insurance business, India ranked 9th among the 156
countries. During 2010-11, the estimated life insurance premium in India grew by 4.2 per
cent (inflation adjusted). However, during the same period, the global life insurance premium
expanded by 3.2 per cent. The share of Indian life insurance sector in global market was 2.69
per cent during 2010, as against 2.45 per cent in 2009.

HYPOTHESIS STATED FOR THE STUDY

Today, the value of customer knowledge management is recognizable for many leading
companies in providing services and products to customers. The CKM approach emphasizes
for allocation of resources and support business activities for competitiveness. Akhavan et al.,
(2008) insist that organizations using customer knowledge management to increase the
quality of its services to clients, understand the importance of using knowledge management
in retaining customers. In this study, we considered the followed hypothesis that is tested by
collecting details from eight insurance companies in Bangalore.

H1: There is a significantimpact of customer knowledge management on customer retention

RESEARCH METHODOLOGY
The research design refers to the overall strategy that a researcher choose to integrate the
different components of the study in a coherent and logical way, thereby, ensuring the
effective addressing of the research problem; it constitutes the blueprint for the collection,
measurement, and analysis of data.

The study is descriptive in nature. Descriptive Research is defined as research that determines
the cause of something and/or describes the behaviour of something. Coming to market
research perspective, descriptive research can be an important tool in understanding customer
knowledge about variety of products that he buys during a given period of time.108
employees working in eightLife Insurance Companies in Bangalore City were taken as the
survey respondents. Purposive sampling – a non-probability method was used for the
study.Purposive sampling is a non-probability sampling technique where the researcher
selects units to be sampled based on their knowledge and professional judgment. This type of
sampling technique is also known as authoritative sampling. Purposive sampling is used in
cases where the specialty of an authority can select a more representative sample that can
bring more accurate results than by using other probability sampling techniques. The process
involves nothing but purposely handpicking individuals from the population based on the
researcher's knowledge and judgment.Primary data was collected using a structured questionnaire
method. The secondary data for this work was obtained from company brochures, website, internet,
reports and journal publications.

The data collected from various sources was tabulated and represented using the percentage
and ranking method. The hypothesis stated for the study was tested using linear regression
analysis with the help of the software SPSS Version 25.

RESULTS AND DISCUSSION

Table 1 shows the demographic details of the survey respondents and majority of the young
male employees participated in the investigation. Concerning the experience, there were
respondents ranging from less than 5 years of experience to above 15 years. With respect to
education, majority of the respondents were under graduates along with few intermediate
holders.

Table 1: Demographic details of the respondents

Sl. No. Variable N Percent

Female 32 30
1 Gender
Male 76 70
Intermediate 11 10
Post graduate 54 50
2 Education
Under graduate 38 35
Others 5 5
Less than 5 Years 6 5
3 Work Experience
5 - 10 Years 59 55
 11 - 15 Years 27 25
Above 15 Years 16 15
Top Level 22 20
4 Managerial Position Middle Level 43 40
Operational Level 43 40
Source: Primary Data

Table 2: Factors influencing storage of customer knowledge in insurance sector

Average Ranking Chi-square Degrees of Significance Error

Factor
ranking of effect calculated freedom level percent
Using database to
store customer 1213 First 92.154 5 0.00081 0.05
information
Recording and
storing customer
knowledge after 978 Third
acquisition and
development
Storing customer
records 789 Sixth
information
Updating
customer 1146 Second
information
Accessing and
retrieving of
882 Fourth
customer
knowledge
Store transactions
per customer 819 Fifth
information
Source: Primary data

Table 2 indicates the factors influencing storage of customer knowledge in eight insurance
companies in Bangalore. Using database to store customer information with average ranking
1213 is the first priority followed by updating customer information. On the other hand,
storing customer records information with average ranking 789 is the sixth priority.

Table 3: Factors influencing distribution and transfer of customer knowledge in

insurance sector
 Chi- Degrees
Average Ranking Significance Error
Factor square of
ranking of effect level percent
calculated freedom
Providing data to
802 Second 134.2017 5 0.0024 0.05
clients
Transfer employee
knowledge while they 619 Sixth
leave organisation
Using IT to distribute
892 First
customer knowledge
Sharing customer
773 Third
knowledge
Knowledge transfer
regarding new 740 Fourth
services to customers
knowledge transfer
between customers 728 Fifth
and organisations
Source: Primary data

Table 3 indicates the factors distribution and transfer of customer knowledge in eight
insurance companies in Bangalore. Using Information technology to distribute customer
knowledge with average ranking 892 is the first priority followed by providing data to clients.
On the other hand, transferring employee knowledge while they leave organisation with
average ranking 789 is the sixth priority.

Hypothesis testing

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 0.815a 0.664 .089 0.271

a. Predictors: (Constant), CKM Practices

CKM - Customer Knowledge Management

ANOVAa

Model Sum of squares d.f. Mean square F Value Sig. Value

Regression 1.181 1 1.181 10.213 .002b

Residual 10.753 106 .116

 Total 11.934 107

a. Dependent Variable: Customer retention

b. Predictors: (Constant), CKM Practices

Co-efficientsa

Un-standardized Standardized
Model T Sig. Value
Coefficients Coefficients

Β Standard Error Beta

Constant 1.543 0.309 4.995 0.000

CKM Practices 0.654 0.111 0.815 3.196 0.002

a. Dependent Variable: Customer retention

The results revealed that the existing CKM Practices provided a tangible difference in
the customer retention level, albeit it could explain 66.4% of the variation in the customer
retention (F = 10.213, β = 0.654; p = 0.002). This result indicates that there are other factors,
which contribute to the customer retention that account for 33.6% of the variation such as
products and services offered, information technology usage etc.

CONCLUSION

In today’s knowledge-based economy, an organization’s ability to strategically leverage

knowledge has become a crucial factor for global competitiveness. Therefore, a growing
number of organizations, especially in knowledge-intensive industries, have introduced
knowledge management systems to use the resource knowledge more effectively and
efficiently(Davenport and Prusak, 1998). Hence Customer Knowledge Management is
increasingly seen as central means to foster and enhance learning, knowledge sharing and
integration in organizations. In this context, a survey was conducted in eight insurance
companies in Bangalore to study customer knowledge management process. Using database
to store customer information with average ranking 1213 is the first priority in storing
customer knowledge while using Information technology to distribute customer knowledge
with average ranking 892 is the first priority in distributing and transferring customer
knowledge in insurance sector. Linear regression analysis carried out using SPSS software
indicatethat 66.4% of the variation in the insurance sector customer retention was due to
customer knowledge management practices followed by the insurance companies.
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meet, KM Review, 11(3), pp. 24-29.
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3. Davenport, Tomas H., Laurence Prusak,(1998) Working Knowledge: How
Organizations Manage What They Know, Boston: Harvard Business School Press.
4. Karl M. Wiig, (1997) "Knowledge Management: An Introduction and Perspective",
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5. Neeli Bendapudi, Robert P. Leone (2002) Managing Business-to-Business Customer
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