Team 4 – Praveen Khanna , Raajesh Khumar , Vinesh , Vivek

MANZANA CASE REPORT
Problem Definition:
This case study focuses on the operational inefficiencies of the
Fruitvale branch of Manzana Insurance Company. The major areas of concern
includes: high Turnaround time (TAT), the turnaround time is the total time
taken to process a request. At present Manzana’s TAT is around six days
compared to one day TAT of its major competitor Golden Gate Insurance firm.
To reduce the TAT time to less than one day at par with its competitor, the
current bottleneck process in the system is identified and the work flow is
balanced. The inappropriate work force distribution at Manzana makes some
workers to be idle and others being stretched to work, making the system
inefficient.
There is significant proportion of policies which are being renewed late,
this is primarily because the policies which are required to be renewed
(RERUN) are being intimated to the customer only in the last day which
results in loss of business. The issue is addressed by notifying the customers
30 days prior to the due date giving sufficient time to the customer to renew
the policy.
The various departments in Manzana have different priorities resulting
in backlog of policies. The system is prioritized based on the profit
generation of various processes, with priority given in the following order
RUNs, RAPs, RAINs and RERUNs. The salary plus program offered to retain
workers in Manzana is not aligned towards the profitability of the company.
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Team 4 – Praveen Khanna , Raajesh Khumar , Vinesh , Vivek

Hence the structure should be aligned more towards the profitability and not
on the type of policies.
As Manzana faces a stiff competition, there are chances that they
might lose business if the agents tend to look out to do more business with
Golden Gate Insurance.Hence it is highly important for Manzana to
implement some of the above suggestions so that they can stay in business.
Analysis:
The process flow for the operations at Fruitvale branch of Manzana was
analyzed using the simulation software Extend.

The processes were

simulated with six different cases and the results were compared to settle on
the optimal case (refer appendix – Model 1). The present operating condition
is considered to be the base case and the simulation results depicted its TAT
to be 4.8 days, here underwriting is the bottleneck operation with utilization
of 99%.

(Refer appendix – Table 1) The profit from the operations was

around 26.7 million dollars and its maximum queue length was 83 requests.
The two other cases were simulated with change in priorities alone. In the
second case the current system was modified with equal priority given to
RUNs, RAPs, RAINs and RERUNs, the TAT was reduced from 4.8 days to 1.94
days. Though there is a significant decrease in the TAT, still it is incompetent
when compared to its competitor’s TAT.
RERUNs are the highest number of requests that come into the system,
but since the profit margin of RUNs is higher when compared to RERUNs,
they were given the lowest priority which had resulted in renewal loss rate of
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Team 4 – Praveen Khanna , Raajesh Khumar , Vinesh , Vivek

47%. Also, the salary plus payment structure for the employees at Manzana
favored processing of new requests, RERUNs weregiven least priority.

To

reduce this high loss rate the RERUN operation along with RUNs was given
highest priority and second priority to other two processes (refer appendix –
Model 2). The TAT was reduced from 1.94 days to 1.2 days.
In all the above three cases the bottleneck was the underwriting
process at territory 1 and the policy writing team was underutilized. To
balance the work flow the resources were shifted from policy writing to form
another underwriting team in territory 1. This reduced the TAT to 0.67 days
with maximum queue length of 8 requests. The reduction in TAT is highly
important for Manzana to stay in the business and retain its market share. If
this TAT is not reduced the agents might slowly turn towards its competitor,
Golden Gate.

This presents an optimal case with TAT less than a day,

increase in profit by $2.9 million and reduction of lost orders from 3035
requests in the base case to 2455 requests (Refer appendix – Table 2).
The agent’s commission structure of 25% per policy for RUNs and 7%
per policy for RERUNs has a significant impact on the profitability of
Manzana. Though RUNs generate highest revenue per policy the higher
commission given to agents makes RUNs less profitable when compared to
RERUNs. (Refer appendix - Table 3). The profit calculation has been made by
considering 100 requests of each type. The calculations depict that out of
different policy types RERUNs has the highest profitability.
Conclusion and Recommendations:
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Team 4 – Praveen Khanna , Raajesh Khumar , Vinesh , Vivek

The key problems identified in the Fruitvale branch of Manzana are
high TAT, inappropriate work force distribution and backlog of policy
requests. The above problems have been addressed by changing the
priorities and shifting of resources to the bottleneck operation. The TAT has
been reduced to less than a day which would make Manzana at par with its
competitor and hence it would be assured of its market share. The number of
requests for RERUNs has been high compared to the other requests, by
assigning equal priority to RUNs and RERUNs and shifting of resources the
problem of backlogging, high TAT, inappropriate work force distribution has
been solved. The suggestions involve only shifting of existing resources and
hence there is no implementation cost involved. Though some of the other
solutions would also reduce the TAT, the optimal case suggested above
would result in higher profits, less number of orders lost, balanced work flow
and no implementation cost making Manzana a fierce competitor in the
insurance market.
A detailed plan is certainly necessary for a successful implementation
of the suggestions, however the case study does not expose to other details
like wages paid to workers and cost of overtime. Once these additional
information are collected, a better clarity would be obtained before
implementing these suggestions. In addition to the changes suggested, an
increase in the commission rate to the agents from the existing rate of 7%
for renewal requests, would entertain them to bring more RERUNs and hence
increase the revenues for Manzana.
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Team 4 – Praveen Khanna , Raajesh Khumar , Vinesh , Vivek

Appendix:
Table 1:
MODEL

1

2

3

Shift in
resources
( Optimal
Case )

PRIORITIES
RUNs – 1
RAPs – 2
RAINs -3
RERUNs -4
RUNs – 1
RAPs – 1
RAINs -1
RERUNs -1
RUNs – 1
RAPs – 2
RAINs -2
RERUNs -1
RUNs – 1
RAPs – 2
RAINs -2
RERUNs -1

TAT ( days )

BOTTLEN
ECK

4.8

Underwritin
g

1.94

Underwritin
g

1.20

Underwritin
g

0.67

Distributio
n

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Team 4 – Praveen Khanna , Raajesh Khumar , Vinesh , Vivek

Table 2:
PROFIT CALCULATION FOR BASE CASE
REQUEST TYPES
RUNS
RAINS
RERUN

NUMBER

GROSS PROFIT
PER POLICY

TOTAL

1276

4942.0

6306033.5

912

590.7

538746.7

4214

5715.8

24086483.9

TOTAL PROFIT $

30931264.1

PROFIT CALCULATION FOR OPTIMAL CASE (AFTER SHIFT IN
RESOURCES )
REQUEST TYPES
RUNS
RAINS
RERUN

NUMBER

GROSS PROFIT
PER POLICY

TOTAL

1243

4942.0

6142946.4

901

590.7

532248.7

4766

5715.8

27241618.9

TOTAL PROFIT $

33916814.0

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Team 4 – Praveen Khanna , Raajesh Khumar , Vinesh , Vivek

Table 3:
CALCULATION FOR MOST PROFITABLE TYPE OF REQUEST
REQUEST
TYPES
RUNs
RAINs
RERUNs

#
REQUES
TS

PREMIUM
PER
POLICY
($)

TOTAL
PREMIUM
($)

COMMISSIO
N FOR
AGENT ( $ )

100

6662.58

666257.67

166564.42

100

645.63

64563.11

0.00

6205.08 620508.00

43435.56

100

PROFIT
($)
499693.
25
64563.1
1
577072.
44

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Team 4 – Praveen Khanna , Raajesh Khumar , Vinesh , Vivek

Model 1: Base case

Exhibit: 1 Extend Model of Base
Case
8

Team 4 – Praveen Khanna , Raajesh Khumar , Vinesh , Vivek

Exhibit: 2 Extend Model after shifting the resources

Model 2: Optimal case (After shift in

9

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