Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 ISSN 1855-931X THE DETERMINANTS OF SUCCESSFUL CONFLICT MANAGEMENT ON THE INSURANCE MARKET IN POLAND, FROM THE PERSPECTIVE OF THE EXPLORATIVE RESEARCH1 Malwina Berger University of Economics in Katowice, Depa ment of Marketing and Market Research rt Poland malwina.berger@ue.katowice.pl Abstract The paper discusses successful seller-buyer conflict solving, including the measurement issues. Its purpose was to explore the antecedents of effective conflict management on the insurance market in Poland. It allowed for the enrichment of the multidimensional measuring model of perceived justice of complaints handling as well as for the adaptation of the model to the insurance industry in Poland. There were some new antecedents of effective conflict management found, which should be included in measures of justice, e.g.: providing the client with the possibility of choosing compensation, a single-person complaint handling, the competence of the personnel. The good management practices include, among others, the isolation of special units in the company’s structure dealing with complaints handling along with the empowerment of the employees, which would effect in the positive outcomes of the complaint. Keywords: conflict management, justice theory, complaints, insurance market Topic Groups: marketing and consumer behavior, conflict management 1. INTRODUCTION Modern-day firms realize the value of long-term relationships with customers, and considerable evidence exists that validates the profit impact emanating from strong relationships (Barry et al. 2008). The creation of long-term relationships with customers requires knowledge of the dimensions contributing to the establishment and maintenance of such relationships. The quality of relationship between company and its customers is determined for example by communication, trust, commitment, empathy, satisfaction and shared values (Sin et al. 2002; Mitręga 2008; Theron & Terblanche 2010). Studies show that conflict fundamentally influences the quality of the company-customer relationship, and its 1 Project financed with the resources of National Science Centre on a basis of decision no DEC-2012/07/N/HS4/00269 ABSRJ 6 (1): 31 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 effective management can contribute not only to maintaining the relationship but even to deepening it (Gruber et al. 2010, s. 360, Palmatier et al. 2006). Conflicts are an universal phenomena, they are present in a variety of contexts and situations. Although in recent years more and more authors draw attention to the importance of this issue, there is still a need for further research (Palmatier et al. 2006, p. 152, Orshinger et al. 2010). The professional literature depicts the conflict in a variety of ways relating the phenomenon to the emotional states, cognitive states or conflict behavior of the participants (see Samaha, Palmatier & Dant, 2011; Wall & Callister 1995; Gaski 1984). In an attempt to define a conflict between buyer and seller we may assume that a conflict indicates disrupted understanding between a company and a consumer, generated by their diverging stands, the clash of aims and opinions and manifested by acting in response to the disruptions. One of the obvious expression of a conflict between a client and a company is submitting a complaint by the client. Therefore, the literature in the area of complain management were used in the research. The aim of this paper was the exploration of determinants of effective conflict/complaint management on the insurance industry in Poland. It was due to the need to adapt the measurement model to the polish insurance industry. The author uses justice theory to achieve this aim. 2. CONFLICT – ASPECTS OF MEASUREMENT AND THE NEED OF RESEARCH ON POLISH INSURANCE MARKET Prior studies show that conflict, which is most often manifested by rising a complaint, affects customers’ positive and negative behavioral intentions. Among destructive outcomes of conflict the following can be mentioned: the termination of the relationship with a company, spreading negative opinions about the company, the desire for revenge and the desire for avoidance (e.g Blodgett, Hill and Tax, 1997; Ward & Ostrom, 2006; Grégoire et al. 2009). The effective coordination of the course of conflict may, in turn, result in the increase of overall satisfaction, positive word of mouth and deepening of the relationship (e.g. Maxham & Netemeyer, 2002; Maxham, 2003; Homburg & Fürst, 2005). Considering the above, it seems important to identify the factors determining the effective conflict resolution in buyer- seller relationship. Justice theory appears to be dominant theoretical framework applied to complaint handling. In most of studies, the three dimensions of justice are investigated (e.g. Maxham & Netemeyer, 2002; Davidow, 2003; Wirtz & Mattila 2004; Homburg & Fürst, 2005; Hocutt, Bowers and Donavan, 2006; Siu, Zhang and Yau, 2013). These are: distributive justice which refers to the perceived outcome, procedural justice which refers to perceived fairness of the policies and procedures used by decision makers in arriving at the outcome of a dispute, and interactional justice which refers to perceived manner in which the customer is treated (Mattila, 2001). The effect of justice constructs on the results of conflict is indirect via their effects on satisfaction with complaint handling (SATCOM). In meta-analysis conducted by Orshinger et al. (2010) it was found that among the studies that consider the joint effects of all three justice dimensions, the majority (61%) identifies distributive justice as the most strongly related to SATCOM (e.g., Homburg and Fürst 2005; Smith et al. 1999). 30% of the studies indicate that interactional justice is stronger (e.g., Tax et al. 1998; Smith and Bolton 2002) and only 9% of studies find procedural justice as the most related to SATCOM (e.g. Maxham and Netemeyer 2003). ABSRJ 6 (1): 32 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 However, one may notice that justice dimensions’ definitions are highly “capacious”. Nevertheless, the specific wording and scaling used for each measure of justice is very limited. Moreover, a few recent studies analyze the impact of perceived justice which include informational justice as an independent variable (Mattila & Cranage, 2005; Mattila, 2006; Ambrose, 2007;). Informational justice refers to the perceived adequacy and truthfulness of information explaining the causes for unfavorable outcomes (Colquitt, 2001; Mattila & Cranage, 2005). Lee and Park (2010) claim that the lack of an explanation and dishonest information provision are the main reasons for lowering the customer satisfaction level. Other studies indicate that there is a positive relationship between informational justice and post-recovery satisfaction (Mattila & Cranage, 2005; Ambrose, 2007) and negative relationship between informational justice and switching intentions (Nikbid et al., 2012). Furthermore, previous studies on the negative aspects of the relationships were related to different sectoral and cultural contexts, which means that, they did not include the specificity of Polish reality of running a business such as: the influence of the so called real socialism on the customer service culture, as well as the impact of the specific Polish national culture. Meanwhile Orshinger, Valentini and De Angelis (2010) maintain that cultural differences should be taken into account, since the results of research on factors determining the results of complaint situation depend on these differences. For example, in high individualistic cultures (e.g. USA) the specific behavior of the contact personnel plays a crucial role (Mattila & Patterson, 2004) The research was conducted on the insurance market. Two aspects were taken into consideration while considering the market. First of all, to the best knowledge of the author, there had been no research concerning conflict/complaint management conducted on the market. Restaurants, hotels, and health care are among the service categories most investigated (eg. Smith & Bolton 2002; McColl-Kennedy & Sparks, 2003; Wirtz & Mattila, 2004; Mattila & Cranage, 2005; Back & Shanklin, 2005; Hocutt et al. 2006; Ambrose et al. 2007, Alavarez 2011; Siu et al.. 2013). Second of all, the market of insurance services is a specific one. The insurance services’ consumers, who decide to purchase an insurance policy, wish to obtain a sense of security. The occurrence of an insured event, triggers strong emotions and high expectations towards the insurance company. It means that any shortcoming/failures on the part of the company may result in violent reactions from the customers. What is more, on one hand, the majority of Polish insurance companies understate the compensation (Ciężkie grzechy ubezpieczycieli… 2014), on the other hand the market is prone to extorting compensation by clients2. Hence, some subconscious prejudices may appear in a complaint situation, which hinders successful conflict management. The following paper presents the first phase of the research conducted by the author, the qualitative research, whose aim was to explore the antecedents of successful conflict management. The research enabled to enrich the measurement model of a multidimensional justice of complaint handling assessment, and to adjust the model to the insurance industry in Poland. 3. QUALITATIVE RESEARCH DESCRIPTION Qualitative research was aimed at the exploration of determinants of effective conflict management in the relationship between an insurance company and a consumer. An interpretive approach was used. Qualitative research was chosen since it is best suited for 2 The Polish Chamber of Insurance estimates that in 2012 fraudsters tried to extort more than 110 million PLN. ABSRJ 6 (1): 33 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 studying complex and dynamic social phenomena, knowledge of which is small. Moreover, using the qualitative approach enables the recognition of many nuances in the attitudes and behavior, which may not be noticed by the researchers applying other methods (Babbie 2008, p. 312-322) A total of 26 in-depth interviews were conducted: 9 with consumers and 17 with employees who represented 7 insurance companies. Individual interviews are the optimal method in the studies of controversial and intimate issues, towards which the respondents have an emotional attitude. The consumers who were willing to participate in the research were initially found on portals devoted to the subject of insurance matters. The recruitment of the insurance companies‘ representatives was possible thanks to GoldenLine network3 and author’s acquaintances‘ personal contacts. Additionally, the letters with requests to take part in the research were sent to the headquarters and branches of every insurance company in Poland along with 30 insurance agencies. The selection of the participants for the research was purposeful. The consumers who made a complaint against their insurance company in the past two years took part in the research. Another requirement was the fact that the insurance company against which the complaint had been made, was at that time the major provider of insurance services for that particular consumer. The greatest demographic diversity was maintained. The duration of the relationship with the insurance company was also taken into account. In the case of the insurance companies representatives, interviews were conducted with first-line employees (among others: the customer service workers and the compensation section) together with the middle and senior managers of marketing and sales departments. There was a condition that the respondents had to represent companies with a key position on the market (as measured by the share in premiums) and with a diverse origin (the country from which the capital was obtained). The position and job experience were also taken into consideration. The interviews were transcribed in full and then they underwent a coding process. Also so- called theoretical notes were formulated. It is consistent with the principles of so-called qualitative data analysis - QDA (Myers, 2013). 4. RESEARCH RESULTS The names of antecedents of effective conflict/complaint handling (inductive codes) and narratives are included in table 1. Quotes are given only for the variables, which were identified during the interviews but which were not used by authors in measurement scales in prior studies. Gray shade marks those variables which were used in the measurements scales in prior studies. Additionally, the first column indicates which of the justice dimension corresponds to the given factors of effective conflict management. 3 This is a website designed for people looking for work and is an open database of CVs, where one can find people performing specific occupations. ABSRJ 6 (1): 34 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 Table 1: Antecedents of effective conflict/complaint handling and narratives. Name of antecedents Narratives* Complying with the terms of the contract The fulfillment of client’s requests Finding a solution to the reported problem Compensation di st rib ut iv e ju st ic e The possibility of choosing compensation I was harmed, it was the insurer who messed up, so someone should suggest some compensation choice. They should have a range of proposals. Speed of resolving customer complaints Prompt consideration of the matter Procedures' flexibility Single-person complaint handling Given complaint should be handled by a single person. Like a person, with whom one can talk, but not a case when a new person responds to an e-mail each time and the conversation starts all over again. The conversation brings no change. Being informed about the status of the complaint I wish to be informed about all the phases of the complaint procedure. I wish to keep my finger on the pulse. Initiating the contact by the company If all the communication channels are available, why is it only me who uses them? The insurer forgets that he can send an e-mail, respond, call. One needs to reach their clients. Empowerment Since the lady could do nothing about the case, the conversation made no sense Not anonymous contacts During the conversation he gave his name straight away. I knew his phone number so I could phone him any time. He wasn’t hiding behind any helplines or some other things. The opportunity to communicate face to face Everything is done via e-mail (…) no branch, no representatives, no direct contact. And that is often a problem. pr oc ed ur al ju st ic e Handling the complaint on the spot They adjusted the complaint, but they could have done it when I phoned them for the first time, because it was obvious and they could have handled it on the spot. Politeness Honesty Willingness to help Empathy Showing respect Being interested in customer's problem Ability to listen to a customer Apology in te rp er so na l j us tic e Personnel competence The employee was very competent and he was telling me thoroughly and incisively what I was to do. ABSRJ 6 (1): 35 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 Procedural knowledge The most important thing is to know what one sells and what steps can be taken when a failure occurs. One needs to know what can be done for a client, what the procedures comprise. (ICE) Product knowledge Without the knowledge of the product it is impossible to have a professional conversation and reach an agreement with the customer. (ICE) Take customer seriously I had the impression that I was not being treated seriously and thus, as I stated, the incident resulted in a reduction of my satisfaction with the cooperation with the insurer and consequently led to my giving up on the cooperation. Patience I believe that one can learn patience, expressing oneself calmly, these are the features I expect from the employees who attend upon our most problematic customers. (ICE) Being nice That man was really nice and he was even joking in a nice way. Cultural behaviour The person who attended upon me was cultured, so it also resulted in a quiet approach to the issue, without shouting or unnecessary comments. Optymistic attitude to a customer The man was even joking pleasantly (…). He was an example of a constant optimist, I guess. The right person doing the right job. He defused stress. Explanation of complaint and decision procedures Reasonable explanations in fo rm at io na l j us tic e Using language understandable to the client All those justifications, explanations are mostly nothing but law, some parts of an Act or the terms and conditions of the insurance, which the customer does not understand. One needs to use language understandable to the client.(ICE) * The quotations, which are the statements of the insurance companies’ employees are marked by the ICE symbol. The research conducted reveals that the variables identified by means of empirical interviews fall into the definitions of justice dimensions. One part of the variables was used in the measures of justice, but there appeared to be a lot of variables which enrich the measurement models and seem to have a significant importance when it comes to the insurance market. For instance, handling the complaint by a single person enriches/complements the procedural justice dimension and seems to be important for two reasons. First of all, in the past 10 years there has occurred an evident outsourcing process in the customer service through the medium of telephone. In case of outsourcing projects, there appears to be an ongoing problem of constant employees turnover as well as careless matching of the consultant with the project. People, working in the call centres often do not possess the basic knowledge of insurances. Therefore, the evaluation of the process will aggravate in the eyes of the clients. Second of all, the research indicates that consumers expect the agent to handle the complaint, meanwhile, due to a varied degree of decision- making in insurance companies, the role of an agent often comes down to informally speeding up and monitoring the case. ABSRJ 6 (1): 36 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 Empowering employees seems to be of particular importance as well. Most of the customers that were interviewed complained that the lack of empowerment leads to extending of the complaint handling process. The procedures and systems often do not let front-line employees take even the easiest appropriate interventions without informing/asking the management. On the other hand the first line employees in insurance companies do not possess the authority to make decisions while a conflict with a customer happens. The employees emphasized that the clients did not understand and did not approve of the complexity of the decision-making process. The issue of communication with clients in conflict situations seems to be important as well. Majority of consumers have reported a number of defects in this area. Initiating the contact by the company along with informing the client about the status of the complaint, would influence the client’s perception of the procedural justice in a positive way. Most of representatives of insurance companies admitted that clients often call or write e-mails in order to ask about what is happening with the complaint they made. Product and procedural knowledge may also be of significant importance, due to a high level of complexity of financial services (for instance, the form and volume of contracts). Clients often seek advice and guidance from front-line employees, who receive the complaints. The majority of clients and insurance companies’ employees emphasized that the personal knowledge of the staff influences successful solving of their problems. The interviews have also revealed that another determinant of effective conflict management is treating customers seriously. Underestimating or ignoring the client results in a series of negative emotions such as anger, irritation and stress which, in turn, increases the severity of the assessment and the customer reaction, making it difficult to resolve the dispute. These variables could enrich the interpersonal justice. Most of the customers have also complained about the incomprehensible language, the insurance companies use, formulating their decisions and explanations mainly on the basis of the general insurance terms, the Civil Code and the procedures existing in the company. Using language understandable to the client seems to be very important. This variable would complete the informational justice dimension. The research has additionally revealed that majority of customers think that the compensation is a nice touch in the unpleasant situation. Some of the insurance companies’ representatives reported that customers’ expectations in the field of compensation are diverse and difficult to meet. Nevertheless, the decision about compensation is rarely made and depends mostly on the prior cooperation: how long has the customer been with the company for, the loss ratio and premiums paid. Providing the client with the possibility of choosing compensation would enrich the distributive justice. In the research moderators between the antecedents and outcomes of effective conflict management were additionally identified. The strength and direction of these relationships are affected by, among others: customer knowledge of consumer law, the time needed to find another attractive offer, the duration of the relationship with the insurance company, type of personality, importance of the service, prior experience or company image. However, due to the volume size limits, only the antecedents of effective conflict management were widely presented. ABSRJ 6 (1): 37 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 5. DISCUSSION Conflicts are inevitable in buyer-seller relationships. It is impossible to eliminate them, however it is possible to manage conflicts effectively so that the negative consequences will be minimized and positive outcomes maximize. Varied factors which affect effective conflict management between an insurance company and customers were indentified in the exploratory research. The research reveals that the variables identified by means of empirical interviews fall into the definitions of justice dimensions. One part of the variables was used in the measures of justice, but there appeared to be a lot of variables which enrich the measurement models and seem to have a significant importance when it comes to the insurance market. For example, prior research conducted on the insurance market showed that personnel product and procedural knowledge plays a significant role (Gayathri et al. 2005, Kaur & Negi 2010, Siddiqui & Sharma 2010, Gera 2011). The study confirms that it is also important while complaint situation, so it is recommended to include this variables in interpersonal justice. The reason of that is probably the high complexity of the market and insurance matters and the increasingly demanding customers. The lack of personnel knowledge about products and procedures may result in making some mistakes and it leads to the state of customer dissatisfaction. Donoghue and de Klerk (2009 p. 463) emphasize that before staff can handle complaints, they should first gain proper product knowledge to facilitate them in recognizing product problems since many employees sell products and handle complaints about products that they have never owned or used themselves. A meta-analysis conducted by Orishinger (2010) reveals that most of the research concerning fairness of complaint handling identifies the distributive justice as having the strongest influence on the satisfaction coming from complaint handling. The exploratory research shows that clients did not expect a compensation from the insurance companies, but they expected the company to comply with the terms of the contract. Nevertheless the research reviled that the possibility of choosing compensation may play important role while handling the complaint. Some respondents claimed that they would have been more satisfied with the compensation when given the opportunity to choose from alternatives. It confirms the research conducted by Mattila (2010), in which it was emphasized that service organizations might benefit from offering several choices among recovery options instead of merely compensating for the failure with a standardized recovery method. Moreover, understanding of the customer is the key attitude of the personnel of insurance companies what is consistent with prior studies that investigated variables which affect consumer satisfaction on the insurance market (Gayathri et al. 2005, Gera 2011). There are certain situations and contexts in which empathy should cause particularly positive customer reactions and complaint situation is one of them. The authentic sympathy and empathy can save from escalation of the problem. Customer apologizing skills are attributed great importance, although the literature provides different opinions on the subject (see Davidow 2003). Apologizing alleviate the negative customer reactions and influence the customer’s assessment of the company, whether it is rigorous or not, during the complaint handling. ABSRJ 6 (1): 38 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 The research has also indicated that in the process of successful conflict management, serious customer treatment is of significant importance, as well as, the ability to actively listen. All these antecedents were confirmed by the research conducted by Gruber (2006) but also by the Polish authors writing on the subject of insurance marketing (among others Nowotarska-Romaniak 2012). In addition, most of the customer reported claims in relation to the procedures of the company with which they were in conflict. The remarks concerned mainly delayed complaints processing. Meanwhile, time was for the customers a major indicator of well-functioning complaint systems within the insurance company. Meanwhile, high uncertainty avoiding cultures, such as Poland, need call for immediate and professional response in unclear situations (Reimann et al. 2008). The customers’ expectations regarding one person complaint handling seem interesting. According to the customers it would influence the efficiency and rapidity of dispute solving. De Vyre (1994) claims that 70% of the customers is satisfied if the problem reported by them is being dealt with by one person in the company. If they need to discuss the problem with two employees, the number of satisfied customers drops to 61% and when more employees responsible for problem solving appear, the number of satisfied customers gradually decreases. Allocating one person to the complaint resolving requires transferring some decision-making power. Empowering the employees in another factor determining successful conflict management, which confirms the research by Boshoff and Leong (1998). Front-line employees are often not permitted to get involved in complaint handling. As Hart et al. (1990, p. 150) point out, they are often not expected to use their discretion or to participate actively in unusual or unexpected situations which customer complaints inevitably are. Moreover, providing customers with the information of the status of the complaint influence customers’ satisfaction with complaint process. As a result, the procedural justice dimension could be enriched with these elements. The issue of giving customers clear information and appropriate explanations seems to be very important on the insurance market what is consistent with research conducted by Pashaie et al. (2013) and Witkowka (2008). They emphasized that insurance companies should provide customers with transparent and clear explanations since insurance matters are highly complicated. Lee and Park (2010) claim that the lack of an explanation and dishonest information provision are the main reasons for lowering the customer satisfaction level in the context of online retailing. Taking this into consideration it is reasonable to use informational justice in the model of effective conflict management on the insurance market. 6. CONCLUSIONS AND IMPLICATIONS The customers-companies relationships are current and popular research issues, in the management science, especially in marketing. The research and findings help enrich the existing limited stock of knowledge on complaint management in relationships between company and its customers by offering a deep insight into determinants of effective conflict management. The study especially advances academic understanding of a company’s complaint management by introducing new antecedents of effective conflict/complaint ABSRJ 6 (1): 39 Advances in Business-Related Scientific Research Journal (ABSRJ) Volume 6 (2015), Number 1 handling that should be included in the dimension of perceived justice in the specific culture and on the particular market. The research allows for the enrichment of the measures of perceived justice of complaint handling and for its adaptation to the specificity of the Polish insurance market. Although the exploratory research represents a substantial value in the social science, its main disadvantage is the fact that it does not provide definite answers. It merely indicates the answers and suggests what are the means to obtain them (Babbie 2013, p. 109). Therefore quantitative researches are recommended. Further research should focus on the construction and testing of the effective complaint handling measurement tool. The scale items used for the previous research ought to be taken into consideration. New scale items, that result from the words/terms appearing in the explorative research, should also be included. The quantitative research would enable the verification of the relationships on the Polish insurance market. For instance, it would permit the verification of the dimension of justice which plays a crucial role in restoring customer’s satisfaction. For instance, we may assume, that the clearness and fairness of the complaint handling procedures will be particularly appreciated since Poland is the country where it is common to avoid uncertainty. It is also important to include factors moderating the relationship between determinants and outcomes of conflict which appeared in the study. For example, we may expect that the longer the duration of the customer-company relationship, the greater influence the four dimensions will have on the satisfaction from the complaint resolution. The study enables to formulate some management recommendations. Conflicts are not solely some disturbances which need to be overcome in order for both parties to return to the pre-conflict functioning. Understanding the sources of conflicts and working out how to best manage them can have a positive effect on quality relationship between insurance company and its customers. Thus, it is appropriate to accept the inevitability of conflicts occurrence and consequently develop rational methods of manage them, so the negative consequences are minimized and all possible benefits of conflict are achieved. It seems unavoidable to monitor the effectiveness of the complaint handling process as well as to restore patency of the communication channels used to connect with the client making the complaint. Companies should develop clear and transparent complaints handling procedures and introduce internal appeal units into the process of complaint management. It also seems necessary to train personnel and invoke in the employees the feeling that the customers’ complaints are an easily accessible source of information about the market and the company’s image, and it should be used to enhance the quality of action. Since customers want employees to have both an understanding of the company's products and those policies and procedures that relate to complaint management in a company, there is a clear need for the regular personnel trainings in this area but also for the precise selection of employees in contact centres. 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