This case was my first introduction to the service industry of insurance companies.

1. Manzana’s Fruitvale branch in terms of Lean Principles is not doing so great. They are
not assessing what activities are adding value to the customers and what are adding
to the waste. They are not following Kaizen for their performance either. On the
contrary, their loss rates are higher than the previous year. They are also wasting
human potential and running under capacity. The pull mechanism is not being used to
gain more customers and hence market share.
2. Yes, the branch manager of the Fruitvale branch, John Lombard is not in touch with
his employees to find out what actually happens when a new request is made, and
the times of it etc. By talking to the workers, the leaders of the company would get an
insight into figuring out waste, and hence banishing it.
 
 
3. Fruitvale branch posted its first quarterly loss of $174,000 in 1991 and then a loss of
$121,000 in the second quarter. The revenues have decreased than the previous year
(1990), but their losses (primarily from renewal losses I believe) have grown a lot.
Their operating expenses are increasing (possibly from simple inflation), and the Plus
program is not helping them. This comes in the face of their arch competitor Golden
Gate being aggressive in flinching market share. (Exhibit 5)
4. (a) Lack of performance has many causes, perhaps the most important being
increased processing time and hence turnaround time (TAT) from 4.7 days to 6.2 days
(1989-1991. They also lost more renewal parties than the previous years, decreasing
revenues and increasing losses. They are running with low utilization for Raters and
Policy Writers, adding no value.
 
(b) The turnaround time represents the days it would take for a request to start
processing. Since a request has to go through their underwriting flow to be
completed, the company might be expecting a shorter turnaround time, however
they are taking into account that by running the branch at high utilization for
underwriting staff, they are increasing the turn around time. I also feel like the
95th percentile approach of their standard completion time (SCT) might be too
conservative and it might end up taking more time than that.
 
(c) I feel like the requests are flowing through the different components smoothly.
There is a very non-uniform distribution of work load, and utilization, hence some are
overworked, and some are underworked. This is damaging the net efficiency of the
branch. Their passive approach towards the RERUNS is also very concerning,
especially when they can earn the company similar revenues as compared to the new
requests, RUNs.
(d) The company is definitely not stapling themselves to an order resulting in
bottlenecks and increased turnaround times. When they are facing competition this
strongly, they have to take steps towards not losing any accounts, they are doing
quite the opposite. They are not prioritizing their orders in the Order Management
Cycle (OMC), nor are they cost estimating and pricing their different services RUN,
RERUN, RAP, and RAIN. There are several vertical gaps within the organization
causing the orders to be delayed.
I see activities (2) Order Generation, (4) Order Receipt and Entry, (6) Scheduling, (7)
Fulfillment, (8) Billing taking place in their OMCs.
 
(e) My suggestions would be establish FIFO without priorities, this means RERUNs get
put in the same order processing sequence as RUN and RAP. RERUNS are not as time
sensitive if they schedule well in advance before the expiration of the policy to avoid
delays and possible account loss. They also have to reconsider their TAT calculations,
as they are clearly off. They are facing employee turnover threat from Golden Gate,
however the Plus program hoping for retention is damaging their financial bottom-
line, while creating little value. They have to work towards retaining their existing
accounts, by not delaying them further their expiration dates. They have to get the
entire branch up to a uniform and optimum utilization for maximum efficiency. This
means higher utilization for Raters and Policy Writers, and uniform workload among
three Underwriting Teams.