Manzana Insurance (Case Analysis Report)

Topics: Insurance, Average, Arithmetic mean Pages: 8 (1314 words) Published: July 16, 2006
The Case Brief:

Manzana Insurance is the second largest Insurance Company in the Property Insurance space in California. The case relates to one particular branch, the Fruitvale branch, which has been losing market share to its competitor Golden Gate. This branch deals with the commercial property insurance and has three underwriter teams that cater to 3 geographic territories. On an average, the Fruitvale branch receives around 39 requests per day (22 requests for new insurance and 17 renewals). The underwriting teams are supported by distribution clerks, the rating team, and the policy writers. 'Requests for New Policies-RUNs' are considered to be the most profitable business, followed by 'Requests for Price-RAPs'. 'Requests for Additional Insurance-RAINs' are considered third and 'Requests for Renewal-RERUNs' are placed last. The employees process requests on a FIFO basis within these prioritized categories of requests.

The Problem:

- High turnaround time (TAT) - Loss of renewals business to competitors

- Worsening finances over the years; the branch reported a loss of US$ 174,000 and US$ 121,000 during the first two quarters of 1991

- Backlog of Policies

- Improper load balancing among employees - resulting in tight schedules and idle time

- Pressure due to competitor Golden Gate's assurance of a single day turn around time (TAT)

The Objective:

To identify bottlenecks in Manzana's operations using process flow analysis.

The Analysis:

Manzana is a service company and hence, it has a constraint of not being able to store its products for supply unlike a manufacturing company. In this case the turnaround time or TAT defines the service quality. Manzana has a problem of not being able to renew its insurance policies on time as a result of which, many clients choose to go elsewhere. Further, in a service industry the peak demand creates backlogs and these, when allowed to be carried forward, can affect the future services of the company. In this case Manzana has bottlenecks in its underwriting department. The VP of underwriting operations calculates the capacity of the departments based on the mean time required to process the requests and claims that the Fruitvale branch has enough capacity to handle the requests. However the problem with such an argument is that it does not consider the fact that some requests have deadlines before which they must be completed. Hence one cannot calculate capacities based on mean time to service requests but instead calculate the capacities based on the 95% SCT (Standard Completion Time). An SCT of 95% means that only 5% of the requests will not take more than that time to be completed. So we have recalculated the capacities of each of the departments based on the 95% SCT.

We have been provided data pertaining to the processing requests during 6 months in 1991. During these 6 months, the firm would have had 120 working days (1month - 20 working days). We can thus calculate the average number of requests of each type per day.

Number of requests during the last 6 months

Territory 1 Territory 2 Territory 3 Total

Agents 23 26 27 76

Policies in force 1151 1393 1402 3946

RUNs originating as RUNs 162 100 88 350

RAPs converted to RUNs 112 79 83 274

Total RUNS 274 179 171 624

Total RAPs 761 513 524 1798

RAPs not converted to RUNs 649 434 441 1524

RAINs 196 125 130 451

RERUNs 636 840 605 2081

Renewals lost 403 227 296 926

Average Requests per day

Territory 1 Territory 2 Territory 3 Total

RUNs originating as RUNs 1.35 0.83 0.73 2.92

RAPs converted to RUNs 0.93 0.66 0.69 2.28

Total RUNS 2.28 1.49 1.43 5.20

Total RAPs 6.34 4.28 4.37 14.98

RAPs not converted to RUNs 5.41 3.62 3.68 12.70

RAINs 1.63 1.04 1.08 3.76

RERUNs 5.30 7.00 5.04 17.34

Renewal lost 3.36 1.89 2.47 7.72

Total Requests per day 14.63 13.15 11.23 39.00

Now we can analyze the bottleneck by calculating the number of hours the various...
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