In service providing industries, customers play important role in achieving organizational goal and profitability. However, the retention tendency of these customers is affected by the existing claim handling service. As different scholars and literatures revealed, satisfied customers would prefer to stay being a client from year to year; cost of the insurance company that would spent in finding new one would decrease.rnThe study target population was head office claim department clients of Nyala Insurance S.C. 186 samples of customers were selected based on their convenience and easiness to access. Questionnaire was distributed to the respondents to obtain their evaluation of the companyâ€™sâ€™ claim handling service based on identified variables form various literatures and to investigate the effect of this variables on customers retention. Those are Knowledge of Policy Cover, Prompt Feedback, Claim Investigation & Repair and Service Quality. The collected questionnaires were analyzed using descriptive and inferential analyses with the help of SPSS AMOS version 20 statistical software program.rnThe study revealed that only Prompt feedback and Service Quality variables significantly and positively affect the customer retention of Nyala Insurance SC clients. The remaining variables; Knowledge of Policy Cover and Claim Investigation & Repair has no significant positive effect on the dependent variable. Since the study took a sample only from the head office claim department and considered only four marketing variables, and concentrated on the motor class of business claim handling procedure only, the researcher suggest for further study to be conducted taking larger sample size from all the other branches and considering other service marketing elements in to account