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Manzana Insurance:

Fruitvale Branch (Abridged)


A case study writeup submitted to
Prof. Jyotirmoy Dalal
In partial fulfilment of the requirements of the
course
Operations Management
By
Priyankar Samal (166120)
Sanjay Saroj (166150)
Anmol Sharma (166015)
Nikita Jakhodia (166094)
Thirumagal G (166184)
On
11-10-2016

1. How is the Fruitvale Branch doing?


According to Exhibit 5, the profit earned by Fruitvale branch has been declining since
1989. In fact the company is running into losses for the 2 quarters of the FY 1991.
Hence, the company has been facing various problems due to which these losses are
being incurred. Following are the problems being faced by the Fruitvale branch:
a) Workload of the staff is uneven, sometimes they are working overtime and at
times they are idle.
b) No of late renewals is increasing thus leading to backlog as well as customer
dissatisfaction due to which they are losing clients. Comparing renewal loss
rate with competitors, Manzana Fruitvale has a renewal loss rate of 33 %
while Golden gate (one of the prime competitors) has a renewal loss rate of
just 15 %.
c) From Exhibit 6, it can be inferred that the turnaround time i.e. TAT is
increasing drastically from 4.7 days (1989 Quarter 1) to 6.2 days (1991Quarter 2).
d) Rising threat in the form of losing agents posed due to better promises and
performance by competitors especially Golden Gate.
2. What are the causes of these problems?
Following are the underlying reasons for the problems mentioned above:
a. Workload of the staff is uneven. The main reason for this problem is
capacity under-utilization as can be seen from the excerpt of the letter
by Tom Jacobs, Manzanas Senior Vice President. There is a huge
difference between the average time required for Review and
distribution (26.7 hours), underwriting(20 hours), Rating(46.7 hours),
Policy writing(27.5 hours) and Capacity available for Review and
distribution (30 hours), Underwriting(22.5 hours), Rating(60 hours)
and Policy writing(37.5 hours).
b. FIFO method was being followed but the priority was given to RUNs
and RAPs as they were more profitable to the company in comparison
to RERUNs and RAINs. Moreover, due to higher TATs and lower
priority to RERUNs agents were moving to other insurers for renewal
of old policies.
c. The methodology followed to calculate TAT is flawed and is leading to
loss of customers. Presently, the high TAT value is due to use of 95 %

SCT for calculating throughput days which is way too higher in


comparison to the competitors. Moreover, 95 % SCT method does not
account for non-productive works.
d. Golden Gate currently is providing TATs of 2 days in comparison to
Manzanas Fruitvale branch which was providing the TAT of 5 + days.
Golden Gate had announced TAT of one working day and 10 %
premium discount if there was any delay. If they were able to deliver
the promise, Manzana may lose lots of loyal agents.
3. Can you identify any issues in the way Manzana is calculating turnaround
time in Exhibit 3?
In Exhibit 3 Manzana is calculating Turn around Time(TAT) by using 95 %
Standard Completion Time. This SCT based TATs calculation gives a Turn
around time of 8.2 Days. The consequence of this TAT is that the agents are
moving towards companies like Golden Gate having a TAT of almost 2 days to
provide time value and money for end customers. SCT based calculation is
impacting the customers negatively and leading to loss in customer retention.
Also, as the process reaches a steady state the TAT would not be summation of
individual throughput days as all the processes would run in parallel.
As SCT method does not account for the time taken for non-productive work,
there is a need of Mean Time which accounts for time required for both nonproductive and productive work. Mean time (From Exhibit 4) gives a more
realistic picture of the process involved and reduces the turn around time to
4.7 days which will lead to a positive impact on the agents as well as end
customers.
Calculation of TATs:
SCT Method:
For RUN:
No of Distribution Clerk: 4
Average Per Distribution Clerk = 0.25 i.e. (1/4)
From Exhibit 4,
95 % of SCT for RUN gives a policy processing time of 128.1 Minutes.
Therefore, time taken for 1 Distribution Clerk to finish RUNs process is
approximately 32 minutes. Similarly for RAPs (80.9 Minutes), RAINs(17
Minutes), RERUNs(118.8 Minutes) in case of distribution Clerk. Summing up
all i.e. (32 + 80.9 +17 + 118.8 = 248.7 minutes).
Throughput days = 248.7 / (7.5 x 60) = 0.55 (approx. 0.6). Similarly
calculating for other Operating steps we get, TAT = 8.1 days.
Mean Time Method:
Using Mean Time, following similar steps we get TAT of 4.7 days approx.

See Appendix-1 for comparison of TAT using SCT and Mean Time.
4. If you were Bill Pippen, what would you recommend that Fruitvale do?
As Bill Pippen we would recommend Fruitvale to make below changes in work
procedure:

Follow FIFO approach strictly for all the policies rather than only for RUN

and RAP in order to reduce the renewal loss rate.


Reduction of staff in rating and policy writing divison. As per Tom Jacobs
these two divisons are over staffed and also these two process are converting
into pure mechanical due to use of new technology and computerisation of

all processes.
Calculate TAT using an appropriate parameter like Mean Time that gives more
realistic picture of the process by which it can show to client that it can also
deliver policy in less time. Also TAT can be reduced further by automating

other processes that can improve efficiency and is mechanical.


It should also start giving a premium discount in the event of delay to attract

new customers.
Try to make equal work load for all the employee. As we have seen no. of
request per day for each teritory is different but no of employees assigned is
equal for all the territories which indicates work load is not balanced for all the

employees.
Try to reduce the no of back logs by giving equal priority to all policies. For
Ex. Giving RERUNs same priority to retain customers and maintain postive
perception among agents and customers which would further lead to reduction
in losses incurred.

Appendix 1:
Process Flow Diagram:
According to Exhibit 7, No of request per day can be calculated as given below:
Fruitvale handles: 22 requests for new insurance, endorsements, or price quotes a day
and approx 17 renewals. Thus total requests per day handled is approx. 40 requests
per day (according to Tom Jacobs assumption of 40 requests per day).
Thus, in order to calculate no of requests handled by each department we consider
Exhibit 7 data:

No of Working days: 20 days (given)


1991 data given according to 6 months. Therefore total no of working days is 120
days.
For Territory 1 :
a)
b)
c)
d)

RUN: 162
RAP: 761
RAIN:196
RERUN: 636

Therefore, requests handled of territory 1 is given by:


No of requests per day from in territory 1: (162+761+196+636)/120 = 14.625 requests
per day.
Similarly,
For territory 2:
a)
b)
c)
d)

RUN: 100
RAP: 513
RAIN:125
RERUN: 840

No of requests per day from in territory 2: (100+513+125+840)/120 = 13.15 requests


per day

For territory 3:
a)
b)
c)
d)

RUN: 88
RAP: 524
RAIN:130
RERUN: 605

No of requests per day from in territory 3: (88+524+130+605)/120 = 11.225 requests


per day
Also total RAPs given in exhibit 7 is 1798 requests (for 6 months in 1991), i.e.
14.983 requests per day. As given only 15 % are converted for policy writing.
Therefore, for policy writing the number of requests is 2.247 requests per day.

Therefore total no of requests send for policy writing in a day is (40-14.983 + 2.247)
= 27.264 request per day.
These territorial requests are assigned to teams based on geographical feasibility. Thus
the requests handled by team per day is as shown below:

27.264

40

40

40

40

Comparison of Throughput days using SCT and Mean Method:

Operating Steps

Number of Requeststo be
Processed
RAIN RERU
RUNS RAPs
s
Ns

Distribution (DC)
Average Per DC
Using 95 % SCT
Total Minutes using 95
% SCT
Using Mean Time
Total Minutes Using
Mean Time

0.25
128.1
32.02
5
68.5
17.12
5

Underwriting
Average per UT
Using 95 % SCT
Total Minutes using 95
% SCT
Using Mean Time
Total Minutes Using
Mean Time
Rating
Average per RT
Using 95 % SCT
Total Minutes using 95
% SCT
Using Mean Time

0.75
107.8

37.5

0.25
68.1
17.02
5
43.5
10.87
5

1.33
107.2
142.5
76
43.6
57.98
8

3.33
87.5
291.3
75
38
126.5
4

2.33
49.4
115.1
02
22.6
52.65
8

15.67
62.8
984.0
76
18.7
293.0
29

0.625
112.3
70.18
75
75.5

1.5
88.7
133.0
5
64.7

1
89.4

6.75
92.2
622.3
5
75.5

80.85
50

89.4
65.5

Total
Through
put
Days

2.75
43.2
118.8
28

0.6

77

0.3

3.4
1.2

2.0

Total Minutes Using


Mean Time
Policy Writing
Average per PWs
Using 95 % SCT
Total Minutes using 95
% SCT
Using Mean Time
Total Minutes Using
Mean Time
Total TATUsing 95 %
SCT
Total TAT using Mean
Time

47.18
75

1
89.3

97.05

65.5

89.3
71

1.8
72.1
129.7
8
54

71

97.2

8.1
4.7

509.6
25

1.6

11.2
67
750.4
50.1
561.1
2

2.2
1.6