Manzana Case Assignment

Guruprakash Thirumalaisamy (9310) Dinesh Tawker Venkatesan (0801)

Praveenkumar Kanagaraj (5140) Jagadeesh Chidambaram Kumar (8143)

I. PROBLEM DEFINITION :

The Fruitvale branch of the Manzana Insurance Company is at the bottom of the list in the

performance figures on Property Insurance for the second quarter and its high turnaround time of

6 days resulting in the loss of policy renewals is playing a big part in it. Turnaround time is the

time it takes for the company to complete an Insurance policy and send the proposal to agents.

The reduction of turnaround time is very important as a high turnaround time will result in loss

of renewals, loss of agents and customers thereby loss of business. The renewal loss rate is 47%

and is very high when compared to that of Golden Gate Insurance Company’s 15%. As a result, a

lot of agents are suggesting Golden Gate’s Insurance to the customers. This has resulted in loss

of market shares to Golden Gate. This high turnaround time and high renewal loss rate seems to

be due to unbalanced work power as a staff member’s workload might be stretched to the limit in

one week and a week later he may be idle. This variation in the workload and also in the priority

of carrying out processes like RUN, RERUN, RAP and RAIN is resulting in high turnaround

time as one cannot follow a standard process flow. For example, most underwriters’ process

RUNs and RAPs first before working on RERUNs and RAINs eventhough Company policy was

to use a first-in-first-out (FIFO) system. This has resulted in high turnaround time for renewals

resulting loss of renewal policies. This turnaround time can be reduced by eliminating the

variations in the workload and priority in carrying out the processes. It would be prudent to use

RUN-1, RERUN-1, RAIN-2 and RAP-3, priority system in carrying out the processes as the

turnaround time reduces to less than 1 day (0.62 days). The appendices attached shows how this

priority system and uniform workload reduces the high turnaround time.
 II. ANALYSIS :

The model was developed using Extend and was analysed. Based on the analysis the results were

tabulated and the important objective of reducing the TAT was achieved. Different scenarios

were envisaged and their utilization and TAT was recored.

The base case model returned a result of TAT as 5.78 days with a seed value of 3439339. The

bottleneck was the Underwriting process. In spite of using different queing principles, the TAT

was still above the required target of 1 day (competetior’s promise) so extra underwriting team

was added so that the TAT reduced to 0.90 for the optimal case.

The variation in the priority of carrying out processes and workload is the primary cause for the

high turnaround time which is shown by loss in renewal rate of policies and market shares.

Hence, turnaround time is the most important factor which has to be addressed in order to make

profit. The turnaround time can be reduced by eliminating the variations in the process priority.

After carrying out simulations, we suggest that the processes should be carried out in the

following priority rule order: RUN-1, RERUN-1, RAIN-2 and RAP-3. In addition to this one

worker each from Rating and Policy writing team are removed as they are overstaffed which can

be found from the appendix 2 and an extra Underwriting team is placed for territory three. This

speeds up the process and it results in the reduction of turnaround time to about 0.9 days. This

prioritization of processes and work force distribution is very important as it affects the

turnaround time considerably. For example, a FIFO priority system yields a turnaround time of 1

day. After considering various combinations of process prioritization, the above said

combination yields the lowest turnaround time. From the analysis it is revealed that the

bottleneck operation is the Underwriting process. Another interesting fact is that if the workers
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are removed from Rating and Policy writing department and an extra Underwriting team is

added to the base case the turnaround time gets reduced from 6 days to about 1.4 days.

III. CONCLUSION & RECOMMENDATIONS :

To decrease the Turn Around Time (TAT ~ 6 days) and to decrease the renewal loss rate (~47%), we make

the following recommendations to improve the present system.

1. The existing priority rule in which the policy is processed in the system should be changed to

decrease the total turnaround time (TAT) and reduce the Renewal loss rate. We have decided to

use the following priority rule RUN – 1, RERUN – 1, RAIN – 2, RAP – 3 which has decreased

the turnaround time to 0.90 days. Various other combinations of priority rule were simulated and

it was found that the best possible priority rule was the above said.

2. The work force distribution in the system should be balanced at different process to improve the

efficiency of operations at each process. We have decided to remove one manpower from Policy

writing process and one from Rating, train them in Underwriting process and dedicate them as a

new Underwriting team along with exisiting team in territory 3 to eliminate the backlog in the

process.

3. The renewal loss rate was a direct consequence of long TAT. The decrease in TAT will result in

drastic reduction of renewal loss rate, since all the proposals are processed within a day and final

policy/quote was sent to the agent.

4. The renewals lost(942) presented an oppurtunity of generating revenue worth $ 5,845(in

thousands of dollars), of which the agents commission amounted to $ 409(in thousands of

dollars),which means the company would have posted a profit of $5435(in thousands of dollars).

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 With
no With
change Extra
in Underwri
workfo ting
rce Team
Base Opti Optim Base
Utilizations Case FIFO mal FIFO al Case
1 Underwriting 1 0.99 0.99 0.99 0.49 0.49 0.49
2 Underwriting 2 0.88 0.88 0.88 0.88 0.88 0.88
3 Underwriting 3 0.75 0.75 0.75 0.75 0.75 0.75
4 Rating 5 0.97 0.96 0.96 0.97 0.97 0.97
5 Rating 4 0.86 0.94 0.96 0.95 0.96 0.88
6 Rating 6 0.90 0.96 0.95 0.96 0.96 0.91
7 Distribution 2 0.96 0.96 0.96 0.96 0.96 0.96
8 Distribution 1 0.97 0.97 0.97 0.97 0.97 0.97
9 Distribution 3 0.95 0.95 0.95 0.95 0.95 0.95
10 Rating 3 0.93 0.95 0.95 0.95 0.95 0.94
11 Distribution 4 0.93 0.93 0.93 0.93 0.93 0.93
12 Rating 7 0.95 0.87 0.93 0.88 0.94 0.95
New
13 Underwriting NA NA NA 0.51 0.51 0.50
14 Rating 2 0.97 0.91 0.91 0.92 0.91 0.97
15 Rating 1 0.96 0.93 0.87 0.94 0.88 0.96
16 Writing 1 0.92 0.91 0.91 0.91 0.91 0.92
17 Writing 2 0.88 0.89 0.89 0.89 0.89 0.89
18 Writing 3 0.84 0.85 0.85 0.85 0.85 0.85
19 Writing 4 0.79 0.78 0.79 0.79 0.80 0.79
TAT 5.78 4.07 3.38 0.97 0.90 1.32

units in
Days

Appendix 2

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