Manzana Case Study Submitted By: Bhaskar Jain (105), Abhimanyu Maheshwari (109), Prannoy Pillai (114), Pranjal Saiwal (115) Question and Answers

(1) What are the problems that the Friutvale Branch is facing? What are the

causes of these problems?

Answer: Problems faced and the causes for these problems:

Problems faced:

Improper scheduling of work resulting in tighter schedules or idle time.

Decline in profits – the Fruitvale branch reported a loss of $ 174,000 & $

121,000 during the first quarters of 1991.

High interest rates and competition by Golden gate casualty.

High Turn Around Time (TAT) – TAT announced by Golden Gate was less (2

days) compared to Fruitvale (5 days).

Renewal Loss Rate of Fruitvale went up to 33% as compared to 15% of

Golden Gate.

Rising level of settlements on liabilities were unprofitable.

Brand profit declined and backlog of policies.

Causes for these problems:

Improper utilization of resources:

The uneven pattern of work given to the underwriters, overstaffed in

rating and policy writing. Sometimes one team is stretched to work

and the other team is idle. According to the status given, there is vast

difference between the average working hours and the capacity

available (Capacity available being higher than the average working

hours).

Method prioritization:

Although the company policy was to use FIFO, but in practise it was

found that RUNs and RAPs were given priority over the RAINs and

RERUNs. This resulted in backlog of RERUNs as the emphasis was laid

on new requests and hence the notice was sent to agents on the last

day.

Flaw in TAT:

Mean time for processing a request should be taken in TAT instead of

Standard Completion Time.

Renewals Loss:

As the RUN and RAP method were being emphasized, there was loss

of renewals according to the data provided. As the notice was sent

on the last day to the agents, agents preferred to recommend to

their clients other insurance firms.

(2) Analyze current processes used to handle various types of service requests.

What is your assessment of the rules used to assign priorities in Fruitvale

operations? Can you identify the problems in the way Manzana is calculating

turnaround time in Exhibit 3 of the case?

Answer:

The Manzana case discusses the inefficiencies of operations at Fruitvale

branch of Manzana Insurance Company. There are various major concerns like

Declining Profits, Policies Backlog, and Improper balancing of load among

employees and also the High and increasing Turn-Around Time (TAT) which is

the Total time required to completely process the insurance request compared

to its competitor, Golden Gate. Golden Gate has recently announced TAT of

one day, which can add serious competition-resulting in increasing renewal

loss rate (47%) and late renewals (44%).

According to the Manzana case discussed, TAT is calculated and found to be

8.2 days.

And there are various flaws in the method which is used to calculate TAT of

the process:

1. The mean time for processing should be considered for the calculations

instead of the 95% SCT (Standard Completion Time). Mean process time

provided already accounts for time required for non-productive work.

2. Once the process reach a steady state, the TAT will not be addition of

through put time of all 4 processes as the processes will run parallel, reducing

the overall TAT. Moreover, it will also depend on the individual loads of UT

teams 1, 2 & 3.

Hence, considering above flaw, the revised TAT is 4.7 days which is still higher

than Golden Gate. Exhibit 3 shows the new calculated TAT considering the

mean time for each process.

3. While utilization for the distribution clerk is already quite high, the clerks

also have others tasks: “Distribution was also responsible for analyzing and

disseminating data published each month by the state insurance

commissioner, researching and verifying insurance rates quoted by local

competitors, and overseeing the rating operations.” The extent of this extra

work should be identified. Given that utilization is already at 97%, any effects

on capacity could increase waiting time significantly.

4. The calculation for the Underwriting teams does not take into account the

different territories allocated to each team and associated variations in

workload.

5. Exhibit 4 lists the policy processing times as calculated in 1986. The data

does not take into account the decrease in the time taken to write policies as a

result of introducing computers in the late 1980’s and early 1990’s.

Computerization also deskilled the role performed by rating staff which would

again have reduced the time take to perform this step. The Policy Processing

Times for these operating steps times should be remeasured.

3) If you were Bill Pippen, what would you recommend that Fruitvale do?

Answer

As Bill Pippen, we will suggest Fruitvale to do following changes in their system:

Reduce staff in Rating and Policy Writing.

Boss has already written letter to Bill Pippin stating about having more underwriters who are just sitting and doing nothing. The case states that rating had become "purely mechanical," and the amount of time taken to write a policy had decreased significantly in recent years.

Uniform staff workload.

For systematic working of operations, workload should be uniformly distributed. One day an underwriter is totally free and has nothing to do and other day working hours of underwriter is stretched.

Training of staff.

Training will deliver documentation and helps in standardizing procedures. Training for underwriting team is required so as to decrease time duration and increase customers.

Emphasis on profitability.

Emphasis should be on profitability rather than on a specific type of policy so as to increase sales and to reduce losing their business.

Decrease turnaround time.

Turnaround time is an important indicator of service quality used by originating agents to help customers choose an insurance company. Fruitvale’s average TAT for processing a request had grown to six days when Golden Gate began guaranteeing one day TAT.Bcause of this fruitvale is losing their business.

The new system will automate certain tasks and track the processing status of requests. These changes should create efficiencies that will lead to shortened turnaround time. In addition, TAT calculations will be periodically reviewed and revised to ensure so as to know status of TAT and by how much it has increased or decreased.

Following FIFO approach for requests.

RERUNs are currently held until the last day before their due date. Agents expect a renewed contract offer before the expiration of the old policy. In this way, further losing on their business will be reduced.

The prioritization of processing requests will be controlled by the system using a modified FIFO approach with sufficient time before expiration. FIFO means First In First Out. Solving request first that has been submitted early. Processing will be monitored so that alerts are generated when processing falls behind schedule.

Decrease backlog of policies.

The new system will automatically calculate processing due dates and assign processing priorities to each request that enters the system. A new computerized workflow will help standardize and enforce prioritization.

New Organization Structure.

A structural reorganization will facilitate implementation of the new system.

Document and standardize procedures.

Updated procedures will be developed along with the new system. Proper procedures must be observed and maintained.