Manzana Insurance: Fruitvale Branch
Manzana Insurance is one of the largest property-liability insurers in California (USA). Fruitvale is one of Manzana’s smaller branches, with three underwriting teams supporting 76 agents in three geographical territories. Fruitvale is at this moment facing deteriorating profits due to operational problems. The effect of these operational problems is (particularly in comparison with competing insurers like Golden Gate) a high Turnaround Time (TAT), a high percentage ‘Renewals late’ and a high ‘Renewal loss rate’. For managing the deteriorating profits an analysis of the operational problems Fruitvale faces is required. Questions / Answers: 1. Analyze and assess Manzana Operations (that process Insurance requests as depicted by exhibit 2) by taking the following questions as a lead: a. What is the capacity of the various resources? b. What is the utilization of the various resources? c. Does Manzana have adequate capacity to meet the demand? Ad a. In the following tables we present a calculation of the capacity of the four resources of Fruitvale. Departments: a. Weighted average processing time per request (Exhibit 4) b. Requests per hour (60 minutes / a) c. Employees per team (Exhibit 2) d. Hours per day per fte (Page 2) e. Total amount of hours/day (c*d) f. Capacity, requests per day / resource (b*e) Distribution 41,00 1,46 4,00 7,50 30,00 43,90 Underwriting 28,40 2,11 3,00 7,50 22,50 47,54 Rating Policy Writing 70,40 0,85 8,00 7,50 60,00 51,14 54,80 1,09 5,00 7,50 37,50 41,06
The capacity of the four resources varies from 41,06 requests per day (Policy Writing) to 51,14 requests per day (Rating). Ad b. With the capacity of the four resources and the request data for 1991 (months) given in Exhibit 7, it is possible to calculate the utilization of the resources. Fruitvale is facing an average of about 41,28 requests per day, based on the first 6 months of 19911. 1
Departments: Distribution Underwriting Rating Policy Writing g. Average demand (Exhibit 6*) 41,28 41,28 41,28 30,96 h. Utilization (g/f) 94% 87% 81% 75% * The resource Policy Writing is not involved in processing a Request for Price. The average demand for the resource Policy Writing is 75% of the average demand numbers for the other resources.
Based on these utilizations it is suggested that the bottleneck seems to be the department of Distribution. But appearances can be deceptive, which is the case here as we will show. The utilization percentages are deceptive because in arriving at these percentages we didn’t take into account the utilization of the three different underwriting teams separately. The Underwriting Teams were reorganized in early 1990 along geographic lines. Each originating agent was assigned a specific underwriting team to handle all of that agent’s property insurance needs. Each team was also responsible for handling all of the insurance needs of the agents within its assigned territory. We calculate the utilization for each of the team as follows: Territories a Requests 1991 (total - 6 months) b Requests 1991 (per day - 6 months) (a/120) c Time required (28,4 minutes - Exhibit 4) (b*28,4) d Time available (1*7,5 hours*60 per territory) e Utilization (c/d) Territory 1 1.867,00 15,56 441,86 450,00 98,19% Territory 2 1.657,00 13,81 392,16 450,00 87,15% Territory 3 1.430,00 11,92 338,43 450,00 75,21%
Now we see that with a utilization of 98,19% the bottleneck clearly is the underwriting team for territory 1 as it shows by far the highest utilization of the entire operations flow. Another fact is causing the Underwriting Team to be the bottleneck and requests piling up at the Underwriting Team: the underwriting process has the highest standard deviation and therefore the highest variability, both for RUN’s and RERUN’s (and the second highest standard deviation for RAP’s). This means that the Underwriting Team is the most likely to have requests...