Introduction

• Manzana Insurance is the second largest Insurance company in the property Insurance in California.

• Main competitor:Golden Gate.

• In 1989 acquisition by Banque De Soil.

• Case concern is about the FruitVale Branch.

• Manzana did not deal directly with public,deals with agents.

• Property Insurance :65% of revenue and Liability Insurance:20 % of revenue.

• FruitVale branch deals with 76 agents.

Request for Underwriting.(RUN) Request for renewal(RERUN) Request for additional Insurance(RAIN)

Operational Flow

Operational Flow Cont…

Distribution(Clerks

)

• Process starts with when distribution clerks receives written request from agents

Underwriting

• Underwriting team took responsibility for evaluating,selecting,classifying and pricing it.

Rating

• Rating Department calculates the policy premiums.

Policy Writing

• Actual typing, assembly and distribution of policies takes place.

Current Business Scenario• Branch offices in California, Oregon and Washington.

• Treat each branch as separate profit and loss centre.

• Sales force consist of about 2000 independent agents

Property liability Insurance

Commercial insurance Personal insurance

Liability insuranceProperty insurance

• Manzana insurance is mainly specialized in Property insurance

operation flow

Business Scenario

• Adoption of back to basic strategy concentrating its efforts on cost control

• Rebuilding of Manzana share of the property insurance market

• Improvement in its financial performance in terms of revenues and sales growth in comparison with previous year

• To gain market shares from its main competitor-Golden Gates

Problems• Impact on branch possibility.

• Customer base retention

• Action plan to tackle late renewal

Major issues at the Fruitvale Branch

Problem 1: Average turnaround time (TAT) is too lengthy.

2nd Quarter of last year

2nd Quarter of this year

0

1

2

3

4

5

6

7

TAT in days

TAT in days 1 DAY

GUARANTEE

Manzana Fruitvale Golden Gate

Problem 2: Large number of late renewals.

• Renewals or RERUNs are not issued to the Distribution Clerks until the day before they are due.

• Agents expect a renewed contract offer before the expiration of the old policy.

• Late renewals result in a large renewal loss rate.

% of policies accounted

RUN

RAP

RAIN

RERUN

Problem 3: Large backlog of policies.

The consistency of late RERUNs from the Underwriting department lead Rating department unable to address its backlog…

Problem 4: Organization structure and operations workflow are not optimal.

• Improper load balancing among employees, resulting in tight schedules and idle time…

• Capacity utilization rate=Time required

/

Time available

Review & Dis-tribution

Underwriting Rating Policy writing0

10

20

30

40

50

60

26.67

20

46.67

27.530

22.5

60

37.5

Time required Time available

88.9% 88.9% 77.78% 73.33%

Factors Affecting the Performance

Prioritizing:

Company’s policy was to use FIFO system at each stage.

General perception that customers will anyway renew their policies.

RUNs, agents receive 25% commission. In case of RERUNs, they receive only 7%. Agents and employees emphasis is on following for

new requests. Results in increased backlog of RERUNs

(ReNewals)

Underutilization capacity utilization calculation shown in exhibit 2 is below

80% for rating and policy writers.

Increased waiting time and uneven pattern of loads given by utilization team

Teams in Exhibit 4 show

Team 1 - 97%,

Team 2 – 78%

Team 3 – 70%

situations where one team is completely loaded others might be Starving

So Strategy of allocating work might not be correct.

• Territory 1 is running close to its peak capacity, results in substantial delays requests, especially RERUNs,RAINs

• Territory 2 is being stretched at an unsustainable level.

• Territory 3 is running at an effective capacity

Underwriters are indeed the bottleneck in the process

Loss of Renewals

According to the data given :

44% of renewals processed late

47% of renewals lost Company gives very short notice for RERUNs to

agents, They recommend other insurance agencies to clients. Inability of the company to provide timely processing

of RERUNs. loss of a large volume of valuable customer base. Reducing its revenue and hence the profitability.

Automation of Rating and Policy Writing Stages

The Fruitvale branch spends 2/3 of the processing time on these two stages.

Both can be largely automated with latest computers implement technological developments

Manzana cannot compete with Golden Gate

Chance that staff freed-up in this area can develop the skills needed in the Bottleneck stages.

OBSERVATIONS

Turnaround Time (TAT)

• Instead of 95% Standard Completion Time (SCT), use Mean Process Time (from 8.2 Days to 4.72 Days)

• TAT will not always be addition of through put time of all four processes : Distribution, Underwriting, Rating and Policy Writing

RUNs RAPs RAINs RERUNs Workers/Teams Total Through-put TimeNumber of Requests 1 3 1 11Mean Time 68.5 50 43.5 28Total Time Taken 68.5 150 43.5 308

Number of Requests 4 10 7 47Mean Time 43.6 38 22.6 18.7Total Time Taken 174.4 380 158.2 878.9

Number of Requests 5 12 8 54Mean Time 75.5 64.7 65.5 75.5Total Time Taken 377.5 776.4 524 4077

Number of Requests 5 0 9 56Mean Time 71 NA 54 50.1Total Time Taken 355 NA 486 2805.6

4.71485TOTAL

Total Turnaround Time (TAT)

Rating 8 1.598583333

Policy Writing 5 1.620711111

Operating Steps

Distribution 4 0.316666667

Underwriting 3 1.178888889

Underwriter Disparity

Underwriter 1

  RUNs RAPs RAINs RERUNs TOTAL

Territory 1 162 761 196 636 1755

Mean Time 43.6 38 22.6 18.7 

Total Time 7063.2 28918 4429.6 11893.2 52304

Average Processing Time per request29.80285

Total Requests per day14.625

Average Time utilized per day 435.8667

Capacity Utilization 96.85926

Underwriter 2

RUNs RAPs RAINs RERUNs TOTAL

Territory 2 100 513 125 840 1578

Mean Time 43.6 38 22.6 18.7

Total Time 4360 19494 2825 15708 42387

Average Processing Time per request26.86122

Total Requests per day13.15

Average Time utilized per day 353.225

Capacity Utilization 78.49444

Underwriter 3

RUNs RAPs RAINs RERUNs TOTAL

Territory 3 88 524 130 605 1347

Mean Time 43.6 38 22.6 18.7

Total Time 3836.8 19912 2938 11313.5 38000.3

Average Processing Time per request28.21106

Total Requests per day11.225

Average Time utilized per day 316.6692

Capacity Utilization 70.37093

Underwriter Team 1 Underwriter Team 2 Underwriter Team 30

10

20

30

40

50

60

70

80

90

100

Capacity Utilization

Capacity Utilization

RECOMMENDATIONS

FIFO: RERUNs should be given equal priority.

TAT can be improved through balancing load on Underwriting teams.

Commission structure can be changed upto 15% for RERUNs

Variable pay for employees based on processing time

Multitasking by Policy Writers in case of overload of RAPs

THANK YOU