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Manzana Case Analysis Group 1

Manzana Case Analysis Group 1

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Published by Praveen Abraham

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Published by: Praveen Abraham on Jul 12, 2012
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11/13/2013

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MANZANA INSURANCE
Operations Management Case StudySubmitted to
 –
Prof Jishnu hazraBy - 
VIVEK KUMAR BHAGBOLE 1011144ASHISH KUMAR DANDALE 1111093GAURAV KUMAR 1111106PRAVEEN P ABRAHAM 1111132SHWETA SRIVASTAVA 1111145
 
Operations Management MANZANA INSURANCE
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Introduction
Manzana Insurance was founded in Sebastopol, California in 1902. It originally specialized in orchard andfarm insurance. It deals in property, flood and commercial property insurances.Manzana operated through a network of relatively autonomous branch offices in 3 states of the UnitedStates of America
 –
California, Oregon, and Washington. Each branch was treated as a separate profitand loss center. Its sales force comprised about 2,000 independent agents who represented Manzanaand other competing insurers.The Fruitvale branch of 
company’s performance started taking a hit in early 1970s. This was due to
emergence of a nimble competitor, Goldengate, and high interest rate regime. The case is concernedwith the performance of a branch, by name Fruitvale, which has been consistently losing business to itsarchrival Goldengate in its territory. The Fruitvale branch performed badly on various measures like totalnumber of requests for new policies, endorsements, and renewals processed, very high turnaround timeresulting in late renewals and increased renewal loss rate
.
Problem Overview
The Fruitvale branch of Manzana handled property underwriting i.e., issuing new insurance policies,quotes, endorsements or renewals. It had come under the scanner due to declining branch profitability.
InsuranceIndustrySectorPersonalProperty LiabilityCommercialproperty Liability
 
Operations Management MANZANA INSURANCE
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It was suffering from poor turnaround time of 6 days and poor percentage late figure. In comparison,Golden Gate consumed a turnaround time of 2 days only.The key problem faced by the Fruitvale Branch of Manzana Insurance is declining market share andprofits, which may be attributed to their being non-competitive in following parameters:
 
High turnaround time (TAT), despite being overstaffed in rating and policy writing. Theturnaround time of Manzana as compared to Golden Gate is an alarming extra 5 days.
 
The backlog of policies had increased since 1989, and the number of new policies andendorsements appeared to be stagnating, whereas Golden Gate reported moderate growthrates.
 
All time high number of late renewals, causing a dramatic rise in the renewal loss rate, whichwas unattractive particularly for agents.There are systemic issues with the process for handling requests that have led to this deterioration,including the incorrect prioritization of requests and the uneven distribution of workload amongst itsthree underwriting teams. Other problems in the Fruitvale branch include ineffective incentive systems,increase in shift to newer policies, bottlenecks in operation, possible idle capacity in the Rating andPolicy Writing teams, etc.
Operations - Policy Processing
Manzana processes 4 types of policies:
RUNS (Request for Underwriting)
The Process of writing a new commercial policy began when a distribution clerk received a writtenrequest for Underwriting from an agent. The Clerk after performing all the required functions passes itto the Underwriting team to evaluate, select, classify and price it. From there it is passed on to the policywriting department where the actual typing, assembly and distribution takes place.
RERUNS (Policy renewal)
 It dealt with annual revaluation and if necessary re-pricing of risks insured by the commercial policy. Theprocessing was similar to that for RUNS with the difference that renewals are generated by the system.The renewal was done on the anniversary of the policy date.
RAIN (Policy endorsement)
 If there was any physical change in the property being insured, a policy endorsement was needed toamend the terms of the existing policy. The processing of a policy endorsement was called RAIN.

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