Manzana Insurance: Fruitvale Branch

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To:John Lombard
CC:Raymond Johnson
Date: [ 4/8/2010 ]
Re:Manzana Insurance: Fruitvale Branch
Manzana’s Fruitvale Branch is experiencing a significant loss in profits. Loss stems from operating performance failures in their process characterized by delays in processing, increased renewal loss , and loss of market share. Key Problems and issues

* Declining profitability
* Increasing turnaround times compels agents to seek out alternative business * High renewal loss rates because of increasing volumes of late renewals

Problem Definition
The Fruitvale branch of the Manzana Insurance Company is at the bottom of the list in the performance figures on Property Insurance and its high turnaround time of 6 days resulting in the loss of policy renewals. The branch is over emphasizing new policies and putting less priority on renewals. The reduction of turnaround time is vital as a high turnaround time will result in loss of renewals, loss of agents, and customers thereby loss of business. The current company renewal loss rate of 47% this quarter is a 14% raise from the same quarter last year, and significantly higher than that of leading competitor’s, Golden Gate Insurance Company, whose estimated renewal loss rate is only 15%. As a result, agents are making recommendations of the use Golden Gate’s Insurance to their customers. The combined loss of renewals and positive word-of-mouth endorsement for Manzana’s leading competitor there has been considerable loss in market share. There is also a significant lead time of approximately 2 days the calculations on Exhibit 1 of the attachment. The organization’s inactive growth rate in terms of request processed per quarter is evident despite the increase in industry growth rate. Another key issue in Manzana’s Fruitvale Branch is profitability, which is declining and suffered a loss of $174 and $121 in the first and second quarter of 1999. Lastly there is a major concern for their turnaround time days increasing every quarter. Since last year TAT has increased from 5.1 days to 6.2 days and the percentage of late processed request has gone up from 10.3% to 19.69%. The current problems plaguing the company can be explained by an unbalanced proportion of work. The variation leads to employees with significant amounts of work in one week, and little to no work in the subsequent week leaving the member idle. The priority of processes has also lead to the inefficient use of the organizations resources. In the current FIFO system, Under Writing team is processing in the order of RUN, RAP, RAIN, and RERUN. Since RUN and RAP are processed first there is a delay in processing RERUN and many renewal requests are lost or delayed. Policy writers use a different system putting priority on easier task than moving on to the more complex task. RAP approval request can come anywhere between the first and tenth day leads to uncertainty and difficulty when trying to predict how much resources need to be allocated to that area. The due date for RERUN is known one month in advance but requests to Distribution Clerks are only given one day notice which leads to delays in RERUN and inflexibility. The Industry

Manzana Insurance is a leading player in the Californian commercial insurance space. The Fruitvale Branch is positioned in property insurance only. In the 1970s Golden Gate Casualty entered the market putting Manzana with severe price competition and intensive marketing pressure. The underwriting process in the industry is as follows: Independent agents interact directly with the client whereas functional underwriting teams are occupied with the underwriting process. At Manzana a typical policy is passed on by the agent to a Distribution Clerk who transfers it to a geographically organized Underwriting Team. These Teams evaluate, classify and price the requests, then being passed on to Rating and Policy Writing. The key performance indicator is the...
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