Manzana Insurance has problems in the following areas -

- Decline in Profitability
- High Turnaround Time (TAT)
- Large number of Late Renewals & backlog of policies
- Uneven Workload

This resulted in oppurtunity to the competitor Golden Gate to capture the Market Share.
Also Fruitvale Branch Profitability is Declining and stagnating New Policies and Endorsements

From Page # 2
A Estimated requests per department Distribution Underwriting Rating Policy Writing
- Requests for New Insurance 22 22 22 22
- Requests for Renewals 17 17 17 17
Average (Expected) - Rounding off 40 40 40 40
Capacity Available (Hrs / Day) 7.5 7.5 7.5 7.5

Exhibit 7 Underwriting (Average Requests)

B
(1st 6 Months of 1991) Team 1 Team 2 Team 3 Total
Number of Requests 1755 1578 1347 4680
- RUNs 162 100 88 350
- RAPs 761 513 524 1798
- RAINs 196 125 130 451
- RERUNs 636 840 605 2081

Number of Months 6 6 6
Number of Days in a month 20 20 20
Average Number of Days 120 120 120 360

Avg No. of Requests / Day (E20/E28) 14.63 13.15 11.23 39.00

(handled today)

Exhibit 7 Policy Writing (Average Requests)

C
(1st 6 Months of 1991) Team 1 Team 2 Team 3 Total
Number of RAPs 761 513 524 1798
Average Number of Days 120 120 120 360
Avg. No. of RAPs/ Day (E35 / E36) 6.34 4.28 4.37 15

Avg. conversion ratio (RAP >> New 15% 15% 15% 15%
Policies ) - Page # 5
Avg No. of Requests / Day (E37 x E39) 0.95 0.64 0.66 2.25

Total Requests per day 14.63 13.15 11.23 39

(-) RAPs -6.34 -4.28 -4.37 -15
Avg. no of Requests / Day 8.28 8.88 6.86 24
RAP >> New Policies (E41) 0.95 0.64 0.66 2.25

Total Requests for Policy Writers 9.23 9.52 7.51 26.25

(E45 + E46)

G Revenue Analysis by Qtr

Exhibit 5 1989 1990

(Amount in $) Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1
 Gross Premiums 8,188.00 8,218.00 8,251.00 8,352.00 8,892.00
% Change (w.r.t to Previous Qtr) 0.37% 0.40% 1.22% 6.47%
% Change (w.r.t to same Qtr 8.60%
of Previous Year)
In 1990, the Gross Premiums grew by 7.38% as compared to 1989.
However in 1991, the revenue decreased by 2.14% for first 2 Qtrs, as compared to 1990

H Segment wise Analysis

Exhibit 5 Contribution by Policy Types

(Amount in $) 1989 1990 1991 Trend
Gross Premiums
- New Policies 6,094.00 6,845.00 4,196.00 17,135.00
- Endorsements 414.00 523.00 291.00 1,228.00
- Renewals 26,501.00 28,076.00 12,913.00 67,490.00
Total 33,009.00 35,444.00 17,400.00 85,853.00
Gross Premiums %
- New Policies 18.46% 19.31% 24.11% Increasing
- Endorsements 1.25% 1.48% 1.67% Increasing
- Renewals 80.28% 79.21% 74.21% Decreasing
Total 100% 100% 100%

It is clear that New Policies are increasing, whereas the

Renewals are decreasing.

I Cost Analysis

Exhibit 5 Cost (as a percentage of Revenue)

(Amount in $) 1989 1990 1991 Trend
Gross Premiums 33,009.00 35,444.00 17,400.00 85,853.00

- Commissions 3,378.00 3,678.00 1,953.00 9,009.00

- Other Expenses 313.00 414.00 251.00 978.00
- Other Insured Losses 17,585.00 23,128.00 12,608.00 53,321.00
- Extraordinary Losses 108.00 212.00 - 320.00
- Operating Expenses 4,969.00 5,229.00 2,883.00 13,081.00
- Branch Profit / (Loss) 6,656.00 2,785.00 (295.00) 9,146.00
Costs as a % of Revenue
- Commissions 10.23% 10.38% 11.22% Increasing
- Other Expenses 0.95% 1.17% 1.44% Increasing
- Other Insured Losses 53.27% 65.25% 72.46% Increasing
- Extraordinary Losses 0.33% 0.60% 0.00% Decreasing
- Operating Expenses 15.05% 14.75% 16.57% Increasing
- Branch Profit / (Loss) 20.16% 7.86% -1.70% Decreasing

It is clear that Revenues are decreasing, whereas the

Costs are increasing.
 D Capacity Utlization (By Department)
Distribution Underwriting Rating Policy Writing
Average Daily request 39 39 39 26.25
Weighted Avg. Processing Time 41 28.4 70.4 54.8
in Mins (Exhibit 4)
Number of Employees (Page # 2) 4 3 8 5
Avg. Hrs per day (Page # 2) 7.5 7.5 7.5 7.5
No. of mins per hour 60 60 60 60
Total Capacity Available (Mins) 1800 1350 3600 2250
No. of Requests (Capacity avl) 43.90 47.54 51.14 41.06
Operating (As a % of capacity) 89% 82% 76% 64%
Max Utilization Potential to Improve

E Analysis by Time (Processing)

Processing Time (95% SCT)
Exhibit 3
RUNs RAPs RAINs RERUNs
Distribution 128.1 107.8 68.1 43.2
Underwriting 107.2 87.5 49.4 62.8
Rating 112.3 88.7 89.4 92.2
Policy Writing 89.3 72.1 67.00
Cycle Time (Time / # Employees)
Distribution 32.03 26.95 17.03 10.80
Underwriting 35.73 29.17 16.47 20.93
Rating 14.04 11.09 11.18 11.53
Policy Writing 17.86 0.00 14.42 13.40

Processing Time (Average Processing Time)

Exhibit 4
RUNs RAPs RAINs RERUNs
Distribution 68.5 50.0 43.5 28.0
Underwriting 43.6 38.0 22.6 18.7
Rating 75.5 64.7 65.5 75.5
Policy Writing 71.0 54.0 50.1
Cycle Time (Time / # Employees)
Distribution 17.13 12.50 10.88 7.00
Underwriting 14.53 12.67 7.53 6.23
Rating 9.44 8.09 8.19 9.44
Policy Writing 14.20 0.00 10.80 10.02

Bottleneck Operations (Maximum Time per Policy)

When using the 95% SCT, the bottleneck for RUN, RAP and RERUN - it is Underwriting
When using the Average Processing Time, the bottleneck for RUN and RAIN - it is Distribution

F Analysis Underwriting Bottleneck

Exhibit 7 Underwriting (Average Requests)

(1st 6 Months of 1991) Team 1 Team 2 Team 3 Total
Average Request per day 14.63 13.15 11.23 39.00
Weighted Avg Process Time (mins) 28.4 28.4 28.4
per Request (Exhibit 4)
Capacity Available (Hrs / Day) 7.5 7.5 7.5
Capacity Available 15.85 15.85 15.85
Capacity Utilization / Day (O50/O53) 92% 83% 71%
Clear Potential to improve Utilization

1990 1991
Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2
 8,889.00 8,795.00 8,868.00 8,499.00 8,901.00
-0.03% -1.06% 0.83% -4.16% 4.73%
8.17% 6.59% 6.18% -4.42% 0.13%

as compared to 1990

J Net Revenue by Policy Type

Year 1991 By Policy Type

(Amount in $) Avg. Revenue Commission Net Revenue
Policy Types
- New Policies (Page 5 / 25% Commission) 6,724.00 1,681.00 5,043.00
(Less) Senior Underwriter Commission (150.00)
Net Contribution New Policies 4,893.00
- Endorsements (Page 5) 645.00 - 645.00
- Renewals (Page 5 / 7% Commission) 6,205.00 434.35 5,770.65

It canbe seen that the Renewals is giving more Net Revenue than
the New Policies business by $ 877.65
Need to re-align the company incentive policy accordingly.

K Variability across Processes

Exhibit 4 Processing Time (Average Processing Time)

(Operating Steps) RUNs RAPs RAINs RERUNs
Distribution
Min 30.5 31.5 27.0 20.5
Max 142.0 124.0 286.0 276.0
Mean 68.5 50.0 43.5 28.0
Standard Deviation 30.7 24.9 9.2 6.2
Variability (Coefficient of Variation) 0.45 0.50 0.21 0.22
(Std Dev / Mean)
Underwriting (Highest Variability)
Min 1.7 6.0 0.5 4.2
Max 599.0 395.0 411.0 720.3
Mean 43.6 38.0 22.6 18.7
Standard Deviation 32 24.5 11.7 19.8
Variability (Coefficient of Variation) 0.73 0.64 0.52 1.06
(Std Dev / Mean)
Rating
Min 7.0 8.0 15.0 7.0
Max 465.0 417.0 439.0 465.0
Mean 75.5 64.7 65.5 75.5
Standard Deviation 20.5 13.6 15.9 9.7
Variability (Coefficient of Variation) 0.27 0.21 0.24 0.13
(Std Dev / Mean)
Policy Writing
Min 39.5 --- 30.0 39.0
Max 371.0 --- 275.5 370.5
Mean 71.0 --- 54.0 50.1
Standard Deviation 10.3 --- 8.6 9.5
Variability (Coefficient of Variation) 0.15 --- 0.16 0.19
(Std Dev / Mean)

(1) Reduce the Variability of the Underwriters, will help to reduce the backlog….
CT)
No. of Emp.
4
3
8
5

ssing Time)
No. of Emp.
4
3
8
5

ime per Policy)

1A Reasons for Decline in Profitability

In 1991, Renewals contribute 74% of Revenue.

Also, refer to Point (J), it can be seen that Renewals are contributing more per Request than New Policies (unlike the view prevailing in the com

Exhibit 7 Renewals Lost

(Amount in $) 1989 1990 1991 Trend
Renewals Lost 849 1717 926 3492
RERUNs 5166 4987 2081 12234
% of Renewals lost for RERUNs 16% 34% 44% 29%
Increase in Renewals Lost

(1) It can be seen that RERUNs are given 1 day prior to Renewals. This should be given to the Distribution Clerks atleast
(2) We can look at automation for this to be achieved.
(3) Also, we can look at FIFO method, which will solve this problem of Renewals lost and bring a control on this losing streak.

(4) New Policy above established quota for Underwriters are incentivized resulting in concentration on RUNs.
But the revenue loss is mainly due to the RENEWALS LOST (RERUNs).
(5) Hence, there is recommendation to incentivize the Timely Renewals (or) penalize in case of non-Renewals

1B High Turnaround Time (TAT)

(1) Refer to the Point E (Analyzing by Time), wherein it can be seen that 95% SCT is an inappropriate way to calculate the timelines.
(2) By switching over to Average Processing Time instead of 95% SCT, it is clear that Distribution is the bottleneck for RUNs and RAINs

Processing Time (95% SCT)

Exhibit 3
RUNs RAPs RAINs RERUNs
Cycle Time (Time / # Employees)
Distribution 32.03 26.95 17.03 10.80
Underwriting 35.73 29.17 16.47 20.93
Rating 14.04 11.09 11.18 11.53
Policy Writing 17.86 0.00 14.42 13.40
Processing Time (Average Processing Time)
Exhibit 3
RUNs RAPs RAINs RERUNs
Cycle Time (Time / # Employees)
Distribution 17.13 12.50 10.88 7.00
Underwriting 14.53 12.67 7.53 6.23
Rating 9.44 8.09 8.19 9.44
Policy Writing 14.20 0.00 10.80 10.02
Bottleneck Operations (Maximum Time per Policy)

(3) It can be clearly seen that the Cycle Time per Employee is significantly lower with a potential to handle higher volume of requests
(4) For Golden Gate, they can also counter with 2 days of TAT, with the Average Processing time as the basis for activities.

1C Clear the Backlog at the earliest possible time

- Realignment of 1 Clerk from Policy Writing department to Distribution Department (assuming that 80% is the Industry best Utilization rate
- Also use the Weighted Average Processing Time for the request processing

Distribution Underwriting Rating Policy Writing

Average Daily request 39 39 39 26.25
Weighted Avg. Processing Time 41 28.4 70.4 54.8
in Mins (Exhibit 4)
Number of Employees (Page # 2) 4 3 8 5
Number of Employees (New Alignment) 5 3 8 4
Avg. Hrs per day (Page # 2) 7.5 7.5 7.5 7.5
No. of mins per hour 60 60 60 60
Total Capacity Available (Mins) 2250 1350 3600 1800
No. of Requests (Capacity avl) 54.88 47.54 51.14 32.85
 Operating (As a % of capacity) 71% 82% 76% 80%
More Streamlines across Departments

(1) From the long Term perspective, Fruitvale branch should look at handling 50 Requests on average on daily basis
with an utilization percentage of 80%

1D Uneven Workload (Clubbing all Underwriting Team)

- Today Underwriting Team is assigned by Territory. There is a possibility to club the Underwriting Team and look at
distribution in a proper manner. This will increase the Capacity Utilization improving the number of requests handled.

Combining the Entire Underwriting Team

Exhibit 7 & Exhibit 4
RUNs RAPs RAINs RERUNs
All Territory (Combined) 350 1798 451 2081
Mean Processing Time (Mins) for TEAM 43.6 38.0 22.6 18.7
No. of Employees 3 3 3 3
Mean Processing Time (Mins) for MEMBER 14.53 12.67 7.53 6.23
Total Time (Mins) for Requests (F46 x F49) 5086.67 22774.67 3397.53 12971.57
Weighted Avg Time (Mins) / Request (J50 / J46)
Avg Requests per day
Avg. Time Utilized (Mins) / Day
Total Capacity Available (7.5 hrs x 60 Mins / Hr)
Capacity Utilization (when combined)

(1) It is clear that when the Underwriting Teams are combined together, the capacity Utilization up to 82%
as compared by individual territory (Refer to Point F - Analyzing the Underwriting Bottleneck)
(2) This point also collaborates with Point 1C above, wherein the excess capacity in Policy Writing can be shifted to
Distribution Team, where it distributes the capacity utilization through cross-skilling
 unlike the view prevailing in the company)

Clerks atleast 3 days before.

n this losing streak.

to calculate the timelines.

bottleneck for RUNs and RAINs

T)
No. of Emp.

4
3
8
5
sing Time)
No. of Emp.

4
3
8
5

e higher volume of requests

sis for activities.

% is the Industry best Utilization rate) (Refer to Point K)

quests handled.

ing Team
Total
4680

44230.43333
9.45
39
368.59
450.00
82%