OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan

)

Manzana Insurance Fruitvale Branch case study
Executive Summary Manzana’s Fruitvale branch is suffering from declining profitability. The main issues resulting in this phenomenon are its falling renewal rate and rising turnaround time. 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 its three underwriting teams. There are also problems of understaffing in the Distribution and Underwriting teams and possible idle capacity in the Rating and Policy Writing teams. To compound matters, the branch is using an incorrect methodology for computing turnaround time. Addressing these underlying issues is key to Manzana’s ability to compete with Golden Gate, whose quicker guaranteed turnaround time will generate loyalty among independent agents and result in further loss of business for Manzana. To prevent this, the following steps are recommended:(i)the FIFO system on all requests received should be strictly implemented; (ii)the reward system for employees should be reviewed and aligned to support the implementation of (i); (iii) RERUNs should be sent to Distribution Clerks at least three days prior to the expiry of the old policy; (iv) The workload among the three underwriting teams should be better balanced; (v)The SCT for the rating and policy writing teams need to be reviewed as they are possibly based on outdated figures. This can lead to redeployment of some staff in these departments to the understaffed departments of Distribution and Underwriting; and

Page 1 of 11

but employees systematically deprioritise RERUNs in favour of securing new business through RUNs and RAPs. Improving this is key to attracting new business and retaining existing business as agents will go elsewhere if Manzana’s TAT is not reduced and Golden Gate is able to deliver on its guaranteed TAT of 1 working day. or RERUNs. Vimalan. The primary cause of this increase is the fact that renewals are often not processed internally before they expire. This links to the second major issue that needs addressing. and Jonathan) (vi) the methodology for computing TAT needs to be reviewed as current methodology employed is incorrect and provides an inflated TAT figure. Major issues at the Fruitvale Branch The most alarming issue facing the Fruitvale branch is the sharp increase in renewal loss rate. These two issues have contributed significantly in overall branch profitability declining. and is still increasing. as their salary bonuses are linked to these.Team 2 (Rishi. As renewals represent roughly three quarters of the company’s revenue. This would be fine if the DC’s were idle or if RERUNs were a top priority from there. the percentage of late RERUNs has more than doubled this year. As a result. Geoff. this is a crucial area to improve. Rose. Causes and discussion of possible solutions Late processing of RERUNs due to prioritization Renewals. causing agents to recommend other insurers to their customers. Accurate SCT figures also need to be used in the computation of TAT.OM Manzana Case Study . from 33% to 47% in the last year. The turnaround time (TAT) for insurance requests is far longer than Manzana’s main competitor Golden Gate. are not issued to the distribution clerks (DCs) until the day before they are due. A simple solution would be to enforce the company’s official FIFO policy and not Page 2 of 11 .

the one day notice for DCs should be increased to three days to ensure sufficient time for a renewed contract offer to reach the agents on or before the expiration date of the old policy . The utilization rates based on Tom Jacob’s calculations and exact utilization rates (based on 39 requests per day_) are set out below. Tom Jacobs states that the Fruitvale branch is overstaffed. Geoff. the Fruitvale branch has the highest agent to underwriter ratio of approximately 25. Distribution 89% 89% Underwriting 89% 82% Rating 78% 76% Policy Writing 73% 64% Tom Jacobs’s calculation Exact calculation* *Detailed calculations are set out at Appendix A. A guideline of 80% utilization rate is suggested as a fair compromise between productivity and having the flexibility to respond to potential variability in demand. In Page 3 of 11 . compared to 20 for the largest and smallest Manzana branches. the current utilization rates suggest that there is insufficient reserve capacity in the system to handle variability in demand as the utilization rates are relatively close to 100%.Team 2 (Rishi. they need more staff. Of the three examples given. and Jonathan) have any prioritisation rules. However. Rose. it is possible to analyze whether the Fruitvale branch has enough employees to cover the workload. and to support this the bonus salary structure should be reviewed and revised so that a more aligned target. However. Although this may not be based on the most up to date information. Vimalan. Tom Jacobs’ “rough calculations” indicate that the team is still working within its capacity. such as turnaround time or profit is rewarded. or as John Lombard insists. it will not be far off and is vastly preferable to losing the business Insufficient Capacity Once the question of prioritisation is removed. In addition.OM Manzana Case Study .

Vimalan. and no doubt results in substantial delays for some requests.Team 2 (Rishi. Rose. the Fruitvale branch is understaffed in both the Distribution and Underwriting departments. Only territory 3 is running at an effective capacity. especially RERUNs and RAINs which are down the priority order. Geoff.92 87% Territory 3 1430 11. highlighted by Tom Jacobs. it shows that this is in fact the case. As suspected. which is unsustainable. Territory 1 1867 15.4min each) Utilization (using 450mins available) It is clear that territory 1 is running close to its peak capacity.4% Territory 2 1657 13. who are only allocated jobs from specific agents. Unbalanced workload amongst the Underwriting teams Another factor to consider is that the above calculation is for average utilization. that staff are overworked at times and idle at others.6 443. This may be hiding the fact. This can result in an uneven volume of work for each territorial team. This is particularly likely to happen in the Underwriting team. This could cause bottlenecks in these areas so will be examined further below. Even territory 2 is being stretched at an unsustainable level. verifying insurance competitor’s quotes and overseeing the ratings operations. and Jonathan) the premises. using the average number of requests per day.04 98.8 391. even more Page 4 of 11 . the underwriters are indeed the bottleneck in the process. with Exhibit 3 confirming that there are more requests at this stage than everywhere else put together.9 337. The Distribution figure is particularly concerning as the calculations do not even take into account the other responsibilities performed by that department such as analysing and disseminating industry data every month. If the same utilization analysis is used for each territory.96 75% Number of requests (H1 ’91) Requests per day (120 days total) Time required (using 28.OM Manzana Case Study .

However. smoothing the utilization across the teams with each of them at an average of 87%.OM Manzana Case Study . This will add some time to an already overloaded Distribution team. and Jonathan) so for RAINs and RERUNs. However. It should also consider using the Review and Distribution (Distribution) function to identify which requests require personal relationships and prior knowledge. Vimalan. and that this is the most time-consuming step at 3. The company could do away with the territory system altogether. Manzana should consider increasing its Distribution and Underwriting resources and hiring new staff in this area. If this is still the case.Team 2 (Rishi. which were deemed a “critical factor in building and sustaining market share and profitability” for Manzana. To improve this situation Manzana needs to balance the territorial workloads. to seriously improve its TAT. and simply allocate incoming requests to the first team available on a FIFO basis. but will help balance the underwriters workload and therefore ease the primary bottleneck. and which are more mechanical and can be done by any available underwriting team. the company should not switch to FIFO with respect to allocation of requests to its underwriting teams. Instead it may consider redefining the territories so that territory 3 takes on some of territory 1’s agents (assuming the first half of 1991 is consistent with future expectations). Geoff.4 days. this is still higher than the optimum value of 80%. These can both be largely automated thanks to the development Page 5 of 11 . The drawback of this model is that it would reduce the effect of personal relationships held between agents and underwriters. Rose. and relationships are more important than simply reducing turnaround time. Automation of Rating and Policy Writing Stages A further area that could be improved to reduce the turnaround time is the rating and policy writing stages. suggesting that John Lombard’s request for more underwriters is valid.

Page 6 of 11 .OM Manzana Case Study . and Jonathan) of computers in the late 80’s. In the premises. Vimalan. the liability crisis and subsequent takeover of Manzana by Banque du Soleil and the switch of focus to property insurance only for the Fruitvale branch. making the SCT inaccurate.6 days within which Distribution clerks clears its backlog. There is a chance that staff freed-up in this area can develop the skills needed in the bottleneck stages outlined above. For example. based on the current system the manager calculates TAT assuming that various activities wait for earlier activities to complete before commencing. from Exhibit 3. Secondly. Further. Firstly. Manzana cannot compete with Golden Gate until they do. before the development of computerized rating and policy writing.Team 2 (Rishi. The Fruitvale branch spends 2/3 of the processing time on these two stages. A more accurate calculation of the TAT for that week is set out at Appendix B. Problems with the current measurement system for TAT There are four main issues with the current system/methodology used by the branch to compute TAT. Rose. the Underwriting team starts work after 0. the current measurement system for turnaround time is based on the SCTs calculated in 1986. The TAT as computed for the week ending 6th September 1991 as set out in Exhibit 3 is incorrect as the assumptions that the calculations are based on are fallacious. therefore maintaining the current headcount and reducing any need for expensive and time-consuming recruitment and training without affecting staff morale with retrenchments. it is likely that the SCTs set out in Exhibit 3 and used to compute TAT are outdated and overstated. suggesting they have not capitalized on technological developments. it assumes that policies move from one activity to another in batches equal to the total number of policies with the department. Geoff.

it is recommended that the following steps be taken immediately. The RERUNs should be sent to the DCs three days before they are due to ensure they are processed in time. This figure is only calculated once a week. the processing times used have the staff’s unofficial prioritization process inherent within them. the maximum time used for one request exceeded the 95% SCT by eleven hours. headcount for the Distribution and Underwriting departments needs to be increased as the departments are understaffed as indicated by their utilization rates which are not able to cope with variability in demand. Page 7 of 11 . They do not therefore accurately reflect the processing times required for the requests if the official FIFO method were employed. To ignore these problem requests in the turnaround calculations leads to inaccurate expectations for team performance. as it ignores the 5% of requests that are most time consuming. Taking underwriting RERUNs as the worst case example. ensuring that RERUNs are not deprioritised and protecting Manzana’s largest revenue stream. Vimalan. Geoff. and Jonathan) Thirdly. the use of the 95% SCT itself is misleading. Rose. The first is to enforce the FIFO policy on all requests. Lastly. This will involve changing the salary plus bonus scheme so that not only new policies are rewarded. so agents may be given inaccurate due dates.OM Manzana Case Study . Secondly. and then used for that entire week to predict turnarounds times.Team 2 (Rishi. Recommendations To address the two major issues of dropping renewals and increasing turnaround times. The workload can change significantly in that time.

the company may still need to recruit in this area to successfully compete with Golden Gate.OM Manzana Case Study . Page 8 of 11 . and Jonathan) Thirdly. the system and the methodology for computing TAT needs to be reviewed based on an updated SCT and employing the methodology set out above. However. Vimalan. A strategic choice is required on whether to sacrifice the personal relationships between underwriters and agents in favour of improved turnaround times. Rose. Geoff. Fourthly. the territorial system for underwriters needs to be reviewed. Manzana needs to further implement technological developments in the computerization of the Rating and Policy Writing stages. This may free up staff to be redeployed in Distribution and Underwriting. Lastly. If Manzana are to maintain these relationships – possibly giving them a point of difference over Golden Gate’s model – they should balance the expected workloads and investigate which requests have to go to territory teams and which can go to anyone available.Team 2 (Rishi.

8 * 60 * 37.8mins/requ est 41. Vimalan.4mins/ request 47.OM Manzana Case Study .9 (1/41 * 60 * 30hrs) 39 Underwritin g 28.4 * 60 * 60hrs) 39 Policy writing 54.06 (1/54.54 (1/28. and Jonathan) Appendix A: Capacity Utilization rates Distributio n a) Weighted average processing time (Exhibit 4) b)Total Capacity (1/ a * 60 * capacity available) c) Total requests per day (22 +17) Capacity Utilization (c/b) 41mins/ request 43.4mins/ request 51. Geoff.14 (1/70.5hrs) 29 (75%) 89% 82% 76% 70% Page 9 of 11 .4 * 60 * 22. Rose.Team 2 (Rishi.5hrs) 39 Rating 70.

8 80.1 32.0 2.0 0.0 0.3 3.0 1.6 5.9 92. Vimalan.0 0.0 0.2 107.0 0.4 78.4 54.7 110.0 1.1 team members days 4.8 67.0 62.1 14.0 2.9 92.3 87.2 72.0 0.0 0.0 2.0 1.9 1.8 753.3 14.0 89.0 10.8 5.0 2.8 107.0 5.5 11.5 204.9 89.0 0.0 0.0 0.5 1.3 1.7 22.9 7.0 26.4 98.3 88.0 0.8 43.2 0.0 87.4 2.1 1.2 35.0 0.5 87.7 8.0 107.0 1.8 36.3 56. Rose.0 2.7 3.0 0.0 0.0 1.0 0.4 11.4 67.0 0.2 67.4 16.0 12.0 0.6 72.3 88.1 89.0 0.Team 2 (Rishi.2 89.1 team members days 0.1 115.8 team members days 3. Geoff.7 62.0 1.2 541.0 0.2 7.0 0.1 112.0 8.0 0.2 1.3 89. and Jonathan) Appendix B: Proper calculation of TAT for week ending 6th September 1991 DC no of requests request per person 95% SCT Time required UW backlog no of requests request per team 95% SCT Time required UW new no of requests request per team 95% SCT Time required Rating backlog no of requests request per person 95% SCT Time required Rating new no of requests request per person 95% SCT Time required PW backlog no of requests request per person 95% SCT Time required PW new no of requests request per person 95% SCT Time required PW last no of requests request per person 95% SCT 1.0 0.0 0.0 0.6 3.3 68.0 1.2 6.5 112.0 49.0 0.2 118.7 8.0 3.3 107.3 0.0 team members 5.6 team members days Page 10 of 11 .7 team members days 1.0 2.3 0.0 1.1 17.0 0.2 72.2 7.3 128.0 0.OM Manzana Case Study .2 10.0 0.8 4.2 47.0 0.3 49.0 89.0 5.2 80.0 723.8 230.0 3.6 team members days 1.0 11.3 team members days 1.

Rose.4 0.1 4.OM Manzana Case Study .9 0.Team 2 (Rishi.4 days days Page 11 of 11 . Geoff.4 13. and Jonathan) Time required 17. Vimalan.0 14.

Sign up to vote on this title
UsefulNot useful