Case Analysis - 2
Manzana Insurance (Fruitvale Branch)
The Fruitvale branch of Manzana Insurance is facing stiff competition and is being severely outperformed by Golden Gate casualty Insurance. On every measure of performance, Fruitvale branch seems to be falling apart. Following are the problems faced by Fruitvale branch: 1)Turnaround Time (TAT) is too high
TAT, or the number of days between the receipt of a RUN and the issuance of a final policy, is an important indicator of service quality used by originating agents to help customer choose an insurance company. Fruitvale’s average TAT of 6 days for processing a request far exceeded Golden Gate’s guaranteed TAT of 1 day.
2)Large backlog of policies
The prime reason is that the computer-generated RERUNs are not released to the distribution clerks until the last day before the due date. Hence, the rating department is unable to address its backlog because of consistently late RERUNs from the underwriting department. The prioritization of requests are in the order RUN,RAP ,RAIN & then RERUN’s. This clearly shows that downstream problems are mainly due to inconsistent priority systems among departments.
3)Large number of late renewals
Late renewals are causing a dramatic rise in the renewal loss rate, representing a significant loss of business and an overall reduction in the number of policies in force
As is evident from the financial statement in exhibit 5 of the case, Fruitvale branch, for the first time in three years, has reported losses to the tune of $174000 and $121000 in the first and second quarter of 1991.
5)Operations workflow is not optimal
The current inefficient workflow is based on a non-optimal distribution of staff. Improper workload balancing among employees is resulting in them being over-burdened at some point in time and sitting idle at some other time. Moreover, rather than sticking to FIFO policy employed by Fruitvale, employees are giving preference to requests under RUN and RAP and employing FIFO policy within these two priority classes.
6)Salaries and bonuses are not aligned properly with profitability The “Salary Plus” program rewards senior underwriters and branch manager for each new policy written. As a result, certain employees are placing increased emphasis on new policies and price quotes at the expense of renewals. Also agents are granted 25% commission on new policies & just 7% on the renewals, thus RERUN’s are neglected
Calculation of capacity utilization at each desk
Team Capacity = (no of people * 7.5 hrs *60 mins/Weighted avg time ) (A)Avg Number of requests handled per day (B)Capacity utilization = (A/B*100)Combined capacity utilization Distribution43.903988.83%
Calculation of requests on each underwriting territory team (From Exhibit 7) 6 month values RUNRAP(total)RAINRERUNTotal Desk wise Requests (A)% of total requests B = (A/4680*100)Per day requests (B*39/100) Underwriting 1162761196636175537.50%14.625
Calculation of requests on Policy Writing desk per day (From Exhibit 7) 6 month values RUNRAPS converted to RUNSRAINRERUNTotal (A)% conversion (B = A/4680*100)Per day requests(B*39/100 ) Policy Writing 3502744512081315667.44%26.3
1.The percentage of requests for each underwriting desk is calculated based on the six month values in Exhibit 7 and scaled to one day which has 39 requests. 2.Capacity is calculated by dividing the total work minutes by the weighted average time taken for...