Manzana Insurance: Fruitvale Branch Case
In 1991, Manzana Insurance’s Fruitvale branch was suffering on many performance measures including obtaining new policies, retaining current policies, long turnaround times, and the accumulation of a backlog of renewal policies. There are a number of problems leading to these poor performance measures including unbalanced work load on the underwriting teams, department utilization, work prioritization, and some simple miscalculations in determining standard completion times (SCT)and total turnaround times (TAT) for policies. In order to correct some of the problems at the Fruitvale branch, the workload on each of the underwriting teams should be balanced as some of the teams may be handling more policies than the other teams. It appears that some of the tasks accomplished in the Rating Department and the Policy Writing could be eliminated with upgraded computer systems. Additionally, a strict policy for handling all policies should be implemented. If the first in-first out (FIFO) method is to be used, it must be used uniformly by each department. Lastly, the method to calculate SCT and the resulting TAT may be flawed resulting in inflated and unrealistic expectations. Summary of the major problems at the Fruitvale Branch
Performance has steadily declined over the last 3 years at the Fruitvale branch. Profitability had declined as the backlog of policies increased along with a decline in the growth of new policies. Additionally, the turnaround time had increased. This turnaround time may have been the root cause of the profitability as agents referred customers to competitors due to this turnaround time. In additions, the long turnaround time was also the cause for the increase in the backlog of policies. In effect, there was a snowball effect occurring at Fruitvale. As the turnaround time increased, a backlog of policies grew and service suffered resulting in agents and customers leaving Manzana Insurance. If these problems were not fixed, the company may have eventually failed. Discussion of each of the problems stated is discussed below Unbalanced workload in underwriting teams
There is an apparent unbalanced workload in the underwriting teams. Since each team is divided by geographic location and relies on dedicated agents to initiate policies, no territory will ever be identical in workload. However, the Fruitvale branch appears to have a repetitive pattern in utilization of the territories. Territory 1 is consistently running at a higher implied utilization than territory 3. This pattern is obvious from Exhibit 1, but is consistent in all years analyzed. Additionally, since the underwriters wait for agents to initiate policies, it is easy to see how it is possible that the underwriting teams may be extremely busy one week and not so the next. One solution would be to move away from a territory based system and to pool all underwriters into one department to handle all policies. However, if the territory system was developed to give individual attention to each agent they are handling, a second solution would be to reallocate the territorial lines so that each group had similar workloads. An additional option would be to pool resources so that when one team is slower anther could help without taking away from the individual relationships with the agents. Additional solutions include adding personnel to team 1 or to cross train members of other departments. Unbalanced workload across all departments
Just as the workload for each underwriting team is unbalanced, the workload and subsequent implied utilization for each work department is unbalanced. Assuming that distribution sees all RAP’s once and the approved RAP’s again and that policy writing only sees the approved RAP’s, we can use the same calculation to determine the implied utilization for each department. Results are shown in Exhibit 2....
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