zana Insurance: Fruitvale Branch Group 3 submiss
Submitted To:
Prof. D Krishna Sundar
Submitted by:
1301045 Sunil Kumar
Nasam
1301109 Vivek Sundar M
1301110 Beri Pradeep
Case Background
Manzana Insurance is an insurance provider based out of Sebastopol, California
founded in 1902. It provides insurance in the categories of orchard, farm, home and
commercial property. Manzanas major competitor is Golden Gate.
Manzana dont deal directly with competitors and its sales force were independent
agents who worked on a commission basis. Agents were paid a commission of 25%
for each new policies sold and 7% on a policy renewal.
The case talks about the Fruitvale Branch, a smaller branch of Manzana, which is
losing its business to Golden Gate. It discusses about the inefficiencies in operations
at the branch and how the branch profitability is declining due to high turnaround
time compared to its competitors and increasing policy renewal loss rate.
Operational Flow at Fruitvale Branch
The FruitVale branch handles property insurances and processes RUN (Request for
Underwriting), RERUN (Request for Renewal), RAP (Request for Price) and RAIN
(Request for Additional Insurance). It has a team of 76 agents which keeps on
feeding the request to distribution clerks.
Distribution clerks receives request from the Agents for underwriting and performs
the necessary action before assigning it to the respective underwriting team
responsible for handling that RUNs originating agent. The underwriting team
evaluates, selects, classifies and prices the RUN and forwards it to the Rating team.
The rating team calculates the policy premiums and forwards it to the Policy Writing
Team which after processing distributes the completed copies.
Almost, every other request passes through all the stages (Exceptions: 85% of
RAPs, which didnt generate any new policies, didnt require the Policy Writing
Stage).
Problem Overview
Fruitvale Branch, which specializes in property insurance, has been facing
performance issues. The problems faced by branch is its poor Turnaround Time(TAT)
of 6 days compared to the Golden Gate turnaround time of 2 days, the all-time high
rate of late renewals and increase in renewal loss rate. The growth in new policies
seems like stagnating when compared to the competitor Golden Gate.
The branch is getting lots of complaints from agents about its high TAT and there is
a great chance that these agents would defect the business to the competitor if
there is no improvement in TAT. The backlog of policies had increased since 1989
despite being overstaffed in rating and policy writing. The branch is facing issues in
handling requests that lead to uneven workload among different operating activities
and late processing of RERUNs due to prioritization to RUNs ultimately leading to
loss of business. These problems coupled with low conversion of RAPs to RUNs lead
to decline in market share and profits.
Problem Analysis:
Capacity utilization using 95% SCT time vs mean time
95% SCT (Year1990)
Distributio
n Clerks
Underwrite
r Team
Rating
Team
Policy
Writing
Team
Total
Minutes
Total
Policies
(1990)
Required
man hours
RUN
RAP
RAIN
RERU
N
128.1
107.8
68.1
43.2
107.2
87.5
49.4
62.8
112.3
88.7
89.4
92.2
89.3
72.1
67
436.9
284
279
265.2
678
3079
895
4987
4936.
97
14573.
93
4161.
75
22042.
54
Total
Man
Hours
Max.
man
hours
Capacity
Utilization
45715.19
36000.
00
127.0%
Max.
man
hours
Capacity
Utilization
Mean(Year 1990)
Distributio
n Clerks
Underwrite
r Team
Rating
Team
Policy
Writing
Team
Total
Minutes
Total
Policies
(1990)
RUN
RAP
RAIN
RERU
N
68.5
50
43.5
28
43.6
38
22.6
18.7
75.5
64.7
65.5
75.5
71
54
50.1
258.6
152.7
185.6
172.3
678
3079
895
4987
Total
Man
Hours
Required
man hours
2922.
18
7836.0
6
2768.
53
14321.
00
27847.77
36000.
00
77.35%
From the above, we can see that the capacity utilization is 127% for 95% Standard
Completion Time which is infeasible. Considering the mean-time, the capacity
utilization comes to 77.35% which is quite feasible. Hence, adapting the mean time
seems to be feasible for the forward calculations.
Calculation of Turnaround Time (TAT)
By considering the mean time which seems to be feasible (as proven in the earlier
step), the TAT time comes down from 8.2 days to 4.7 days.
Turn Around Time (TAT)
Distributio
n
Underwriti
ng Team
Rating
Policy
Writing
No. of
Requests
Mean
Time
Total
Time
No. of
Requests
Mean
Time
Total
Time
No. of
Requests
Mean
Time
Total
Time
No. of
Requests
Mean
Time
Total
Time
RAI
N
RERU
N
RUN
RAP
11
68.5
50
43.5
28
68.5
150
43.5
308
10
47
43.6
38
22.6
18.7
174.
4
380
158.
2
878.
9
12
54
75.5
64.7
65.5
75.5
377.
5
776.
4
524
4077
NA
56
71
NA
54
50.1
355
NA
486
2805
.6
Workers/Te
am
Total
Total Throughput
Time
=
SUM(68.5+150+43.5
+308)/ (4*60*7.5) =
0.317
1.179
1.599
1.621
4.715
Capacity utilization of Underwriting Teams at different territories:
Processing Requests, Fruitvale Branch 1991(6 months, 120 working days)
Territory 1:
RUNs
No of Policies
Mean
time(min)
Total
time(min)
162
RAPs
RAINs
RERUNs
Total
761
196
636
1755
43.6
38
22.6
18.7
7063.2
28918
4429.6
11893.2
Average time/request(min)
No of requests per day
Time utilized per day (min)
Total capacity available per
day(min)
Capacity Utilization
52304
29.8
14.6
435.9
450
97%
Territory 2:
RUNs
No of Policies
Mean
time(min)
Total
time(min)
100
RAPs
RAINs
RERUNs
Total
513
125
840
1578
43.6
38
22.6
18.7
4360
19494
2825
15708
Average time/request(min)
No of requests per day
42387
26.9
13.2
353.
2
Time utilized per day (min)
Total capacity available per
day (min)
Capacity Utilization
450
78%
Territory 3:
RUNs
No of Policies
Mean
time(min)
Total
time(min)
RAPs
RAINs
RERUNs
Total
88
524
130
605
1347
43.6
38
22.6
18.7
3836.8
19912
2938
11313.5
Average time/request(min)
28.
38000.
3
No of requests per day
Time utilized per day (min)
Total capacity available per
day (min)
Capacity Utilization
2
11.
2
316
.7
450
70
%
As can be seen from the above tables, underwriters of Territory 1 are having tight
schedule with 97% utilization compared to territory 2 and 3 at 78% and 70%
respectively.
Cause of the problems
1. Improper utilization of the resources at hand
Because of the uneven pattern in assigning work, the work wasnt spread out
evenly leading to inefficiency in the system. From the problem analysis, we
can see that the Territory 1 underwriters have been over-burdened while that
of Territory 2 and 3 were underutilized.
2. Misrepresentation of Turn-around Time
The TAT time was mentioned to be 8.2 days while it turned out to be 4.7days
when the mean processing times are considered.
3. Random flow of orders
The flow of requests to be processed was random and was deviated from the
actual FIFO policy. RUNs and RAPs were being given more priority over
RERUNs and RAINs.
4. Delay in releasing the RERUNs
The RERUNs were not released to the distribution clerks until the last day
before the due date. This led the agents to turn away from Fruitvale and
move to its competitor.
Recommendations
1. Pooling of underwriting resources:
As can be seen from the earlier tables, the resources have been underutilized
in Territory 2 & 3, while the resources in Territory have been overburdened.
Hence, pooling the resources will lead to equal distribution of work across the
employees as can be evident from the below table.
2. Prioritization of RUN over RERUNs:
As the commission for the agents for RUNs are 25% and while that for
RERUNs are 7%. It seems that the agents are pushing for more RUNs at the
cost of RERUNs. This can be evident from the below table which shows the
data over the previous 9 quarters where RUNs have increased at 2.5%
quarterly whereas late RERUNs increased at 10.2%.
1989
Total RUN
requests
processe
d
Late
RERUNs
Increase
in
RERUNs
Increase
in Runs
1990
1991
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
263
262
270
273
266
278
290
288
298
326
205
191
220
201
225
248
310
387
425
468
Total
Avg.
over 9
Qtrs.
6.83
%
15.18
%
8.64
%
11.94
%
10.22
%
25.00
%
24.84
%
9.82
%
10.12
%
91.66%
10.18%
0.38
%
3.05%
1.11
%
-2.56%
4.51%
4.32%
-0.69%
3.47
%
9.40%
22.23%
2.47%
Prioritization should be system generated where it will automatically update
processing times, due dates and assign priorities to each request that enters the
system thereby the workflow can be standardized.
3. Temporary solution: Shift manpower from rating to policy department:
For temporary purpose man power can be shifted from rating department to
the policy writing department which is the bottleneck in the process currently
to manage the handling requests better.
Initial
Staff
Distribution
Clerks
Underwriting
Rating
Policy writing
Actual
Capacit
y
Staff after
reallocatio
n
Capacity
after
reallocation
Weighted
Avg.
Processing
Time(Exhibit
4)
41.00
43.90
43.90
3
8
5
28.40
70.40
54.80
47.54
51.14
41.06
3
7
6
47.54
44.74
49.27
From the above shifting of man power, the bottleneck has been shifted from
policy writing to distribution department and also better usage of man power
across departments. Else, cross-functional training of the staff across
domains might help in reducing the burden by shifting of manpower to an
over-burdened department.
