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This study discusses the importance of service fairness variables – Interactional Fairness, Procedural Fairness, and Distributive Fairness – toward customer satisfaction, which further leads to customer intention to pay. There is limited previous empirical research on the effect of service fairness to service delivery, particularly in the healthcare industry. The authors hypothesised that there was a positive influence from three variables of service fairness, from customer satisfaction, to customer satisfaction, to intention to pay. Using the descriptive quantitative method, this pilot study was conducted to review the service delivery of BPJS Kesehatan service providers in various cities in Indonesia, with BPJS Kesehatan members as respondents. Data analysis was analysed with PLS-SEM with SmartPLS software. The study showed that there was a positive impact of Interactional Fairness and Distributive Fairness on customer satisfaction, and customer satisfaction on intention to pay. However, this study failed to show the relationship between Procedural Fairness to customer satisfaction. This study strengthens the building evidence of service fairness to customer satisfaction, specifically in-service delivery and in healthcare industry. Corresponding author: Diena Dwidienawati Email addresses for corresponding author: diena.tjiptadi@gmail.com First submission received: 20th December 2017 Revised submission received: 14th February 2018 Accepted: 25th March 2018 Introduction Studies have found that besides quality evaluation, fairness is another important factor which influences satisfaction (Oliver, 2015). Oliver and Swan (1988), in Vinagre & Neves (2010), confirm that as disconfirmation of expectation, fairness is considered as an important predictor of satisfaction. It is assumed that patients are satisfied when they perceive treatment is fair. Previous studies review fairness in various industries, including retail banking (Chebat & Slusarczyk, 2005), air travel, restaurants, auto repair, dental (Goodwin & Ross, 1992), hotels, and the retail-wholesaler relationship (Brown et. al., 2006). However, the issues covered by fairness studies are mostly service recovery (Goudarzi, Borges, & Charles, 2013; Mattila, Cho, & Cheyenne, 2011a; Mccollkennedy, Sparks, & Nguyen, 2011; Noone, 2012; Prasongsukarn, Patterson, & Patterson, 2012; Ro & Olson, 2014; Sharifi & Aghazadeh, 2016; Yilmaz, Varnali, & Tari, 2016c), organisational behaviour (Beugre & Baron, 2001; Chan & Lai, 2017; J. B. DeConinck, 2010b; W. M. Hur, Park, & Moon, 2014; Karkoulian, Assaker, & Hallak, 2016) and price fairness (Fernandes & Calamote, 2016; Homburg, Totzek, & Krämer, 2014; Malc, Mumel, & Pisnik, 2016). There are still a few studies reviewing fairness in service delivery and its impact on satisfaction. Furthermore, the author only found two studies done in the healthcare industry (Ramsaran-Fowdar, 2008; Vinagre & Neves, 2010). Most fairness studies are conducted with an experimental design (Goudarzi et al., 2013; Homburg et al., 2014; Malc et al., 2016; Ro & Olson, 2014; Sharifi & Aghazadeh, 2016). The experimental design might give high internal validity, but there is a trade off with external validity (Sekaran & Bougie, 2016). Only a few studies, especially in service delivery, are conducted with a survey design. Besides commitment, trust, positive emotion, and attitude are known to be the antecedents of behaviour intention (Abubakar, Ilkan, Meshall Al-Tal, & Eluwole, 2017; Fernet, Trépanier, Demers, & Journal of Business and Retail Management Research (JBRMR), Vol. 13 Issue 1 October 2018 www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) 39 Austin, 2017; Gan & Li, 2018; Hussein, Oon, & Fikry, 2017; Liang, Choi, & Joppe, 2018), customer satisfaction is one of the most studied antecedents of behaviour intention. Customer experience is considered a critical influence on proceeding behaviour in product purchase (Joo, Park, & Shin, 2017). Indonesia is one of the low and middle-income countries aiming to improve their health financing system and to implement universal health coverage (UHC). Starting just in January 2014, and within less than three years, BPJS Kesehatan has successfully had a large coverage. In January 2017, BPJS Kesehatan has 172.97 million members, according to BPJS official website. It is considered the biggest single payer institution of Universal Health Coverage program in the world (Teh, 2015). The target is to reach 100% coverage in 2019 (Presiden Republik Indonesia, 2004). The rapid expansion of insurance coverage has created a demand which cannot be met by the current healthcare system (Bredenkamp et al., 2015). Furthermore, Bredenkamp et al. (2015) state that the sudden increase of demand will disrupt the delivery of service, especially in the public hospitals. The disruption of service, consequently, will influence the satisfaction level. The Center for Health Economic and Policies Study from the University of Indonesia showed that the satisfaction level of hospital service is 54%. The satisfaction level of doctor service is 44% (Thabrany, 2016). In one of descriptive study done by Dwidienawati & Abdinagoro (2017), reasons like long queues, long waiting times, poor service, discrimination in procedure, and treatment procedures are the most common patient complaints. The results of the study seem confirm Oliver (2015)’s statement that fairness is another principal factor influencing satisfaction, besides quality. This study is a pilot study aiming to see the impact of three variables of service fairness on customer satisfaction and how it will impact intention to pay or continuance of insurance premium payment. Literature Review Service Fairness The terminology “justice” and “fairness” have been used interchangeably in many studies. There is no specific reason why some authors use “justice” and others use “fairness”. Considering that this study deals more with the principle of equality rather than liberty, the terminology “fairness” is chosen instead of “justice” in this writing. Su & Hsu (2013b) state that in justice theory, a customer evaluates a service encounter as either just or unjust. Service quality and service fairness are distinctive concepts. It is said that individuals are motivated by comparison to others. Carr (2007) states that no matter how good the service, one will be more satisfied if he or she gets the same level of services as other customers. Service fairness is a customer’s perception of the degree of justice in a service firm’s behaviour (Su & Hsu, 2013b). Researchers have found that besides quality evaluation, fairness is another important factor which influences satisfaction (Oliver, 2015). Oliver and Swan (1988), in Vinagre & Neves (2010), confirm that as disconfirmation of expectation, fairness has been considered an important predictor of satisfaction. In general, it is assumed that patients are satisfied when they perceive treatment as fair (Oliver, 2015). There are three variables of service fairness. The first one is distributive fairness (DF). DF is concerned with how the outcomes are distributed equitably (Kandul, 2016). The second variable of service fairness is procedural fairness (PF). PF refers to the process and procedures by which allocation decisions are made (Folger and Greenberg, 1985; Thibault and Walker, 1975), as stated in J. B. DeConinck (2010b). PF reflects a transparency system that signals that all customers will be treated fairly (Kashyap & Sivadas, 2012). The last variable is interactional fairness (IF). IF is the way the customer is treated in terms of respect, politeness, and appreciation of other thoughts (Kashyap & Sivadas, 2012). IF refers to the interpersonal treatment within the organisation (Bies and Moag, 1986), as stated in J. B. DeConinck (2010b) . It focuses on the fairness of interactional communication and procedures (Karkoulian et al., 2016). IF is a perceived fairness of treatment (Yilmaz et al., 2016c). It includes interpersonal, such as courtesies and politeness, and informational, such as delivering all the related information well (Jung, Brown, & Zablah, 2017). DF, PF, and IF all have significant contributions to satisfaction. Some studies considered IF, PF, and DF as individual variables having a direct influence on satisfaction (Chebat & Slusarczyk, 2005; Kashyap & Sivadas, 2012; Poujol, Siadou-martin, Vidal, & Pellat, 2013; Sparks & Mccoll-kennedy, 2001a; Vinagre & Neves, 2010). Other studies considered IF, PF, and DF as dimensions of overall fairness (Carr, 2007; Su & Hsu, 2013a; Zhu & Chen, 2012). Beugre & Baron (2001) call the overall fairness, which consists Journal of Business and Retail Management Research (JBRMR), Vol. 13 Issue 1 October 2018 www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) 40 of IF, DF, and PF, as systemic fairness in the study in organisational fairness. Su & Hsu (2013a), in their study on the tourism industry, call the overall fairness service fairness. This study will consider IF, PF, and DF as variables of service fairness. This study reviews individual variables of service fairness, because the impact of each variable on satisfaction might not be similar. Satisfaction Oliver (2015) defines satisfaction as “the consumer’s fulfilment response”, a post consumption judgment by the consumer that a service provides a pleasing level of consumption-related fulfilment, including underor over-fulfilment. Satisfaction is a consumer positive affective response to a relationship exchange (Kashyap & Sivadas, 2012). Consumer satisfaction is at the very core of marketing theory and practice (Newsome & Wright, 1999). Since retaining customers may be more profitable than attracting new ones, dissatisfied customers may lead to unfavourable behaviour intentions, such as negative word of mouth, doing less business, or switching to an alternative service provider (Ramsaran-Fowdar, 200

Is service fairness influencing customers’ satisfaction and intention to pay insurance premium? A case in BPJS Kesehatan Indonesia