A CASE ANALYSIS ON

MANZANA INSURANCE
FRUITVALE BRANCH

COURSE: OPERATIONS MANAGEMENT

COURSE INSTRUCTOR: NISHANT KUMAR VERMA

SECTION B-GROUP 11

BOTCHA NAVEENA PALLAVI 1711091

K SAI SATYA ASHRITHA 1711102
NALIN YADAV 1711111
RICHA KUMARI 1711126
SANGEETHA DESINGU 1711132
 Table of Contents
INTRODUCTION ................................................................................................................................................... 3
1. WHAT ARE THE CONCERNS THAT MANZANA'S FRUITVALE BRANCH FACES AND WHAT IS CAUSING THEM? .... 4
2. IDENTIFY THE PROBLEMS IN THE WAY MANZANA IS CALCULATING TURNAROUND TIME IN EXHIBIT 3. .......... 4
3. RECOMMENDATIONS ................................................................................................................................... 5
4. APPENDICES ................................................................................................................................................ 6
 Introduction
Manzana Insurance is one of the largest Insurance companies in California. Its major competitor is Golden
Gate Casualty, a relatively new entrant in home insurance market.
The profits of the Fruitvale branch of Manzana Insurance are at stake. Additionally, the Fruitvale branch has
observed a steady increase in the last two years in their Turnaround time (TAT) for processing insurance
policies. The increasing backlog of late renewals combined with the high TAT is resulting in stagnation of
revenue. Old policies are being dropped by consumers at renewal point and new policies lose out to Golden
Gate due to its 1-day processing time promise. At this point, Manzana’s Senior VP feels that increasing
capacity and staff is not the solution since his calculations show that utilization is in control.
Golden Gate, Manzana’s competitor has been performing very well and acts as a very potent threat to
Manzana’s existing businesses. Golden Gate has a higher number of new policies and a lower turnaround
rate. The renewal loss of Golden Gate is much lower than Manzana. Even though renewals are the least
profitable policy option for them, Manzana are losing 47% of their captured customer base, which poses a
major problem. Golden Gate wins over Manzana-Fruitvale in most performance metrics as given in Tom
Jacobs’ note.
If we do a brief overview of the insurance industry, we see that the difference in insurance packages is very
less and also customers are offered at similar rates. Therefore, the company that provides ease to work-with
for the agent and for the customer will be highly preferred in the market and consequently be the most
profitable and gain market advantage. Thus, the inefficiencies within the workplace in the Manzana situation
need to be addressed in order to perform well in this highly competitive industry.
The four main policies handled by Fruitvale:
Manzana Insurance processes four different types of policies –
1. RUN (Request for Underwriting): RUN is the request for new underwriting. It starts when a
distribution clerk receives the request from the agent. RUNs contribute 13.6% to the total requests
handled by Fruitvale; in terms of revenue, they contribute 24.4% to the total revenue (Exhibit 6).
2. RAP (Request for Price): RAP is a price quote, that involves evaluation & pricing of a risk. On
acceptance, it converts to a RUN. RAPs form 39.1% of the total requests received by the company.
3. RAIN (Request for Additional Insurance): RAIN is policy endorsement, which amends the terms of
the existing policy. It essentially accounts for increase in the insurance amount of the existing policy.
It forms a meagre 1.36% of Manzana’s revenue.
4. RERUN (Requests for Renewal): It is the request for renewal of the existing policy. It accounts for the
larger chunk of revenue (74.1%) to the Manzana Insurance (Exhibit 6).
In the following pages, we have analyzed the case and provided our answers to the three questions
below:
1. What are the concerns that Manzana's Fruitvale branch faces and what is causing them?
2. Identify the problems in the way Manzana is calculating turnaround time in Exhibit 3.
3. What should the Fruitvale branch (Bill Pippen's recommendations) do?
 1. What are the concerns that Manzana's Fruitvale branch faces and what is
causing them?
As mentioned during the starting of the case that the company has performed the worst in the past quarter
list of Property Insurance companies. The current issues faced and the probable causes are as follows:

1. Decline in profitability: The profit of the firm was continuously on decline for past 10 quarters. As
can be seen from Exhibit 5, though the revenue from policies has increased by 8.71% from $8188 to
$8901 but ordinary insured losses have increased by whooping 54.53% from $4176 to $6453 and
commissions & expenses have also increased.
Possible Cause: We can see in Exhibit 7, that the number of renewals lost is roughly about 31% of the
total RERUNS. Though the premiums on RERUNs decrease as policies get older, RERUNs make for
74% of the total revenue. The loss of Renewals is a major contributor to the dwindling profits.
2. Poor turnaround time(TAT): The TAT of Manzana is 4 days more than that of Golden Gate that is,
Manzana takes 6 days to complete the same task that Golden Gate completes in 2 days and now
proposes to complete in 1 day.
Possible Cause: The actual TAT is 6 days in 1991 as compared to 5 days last year. Calculation of TAT
based on the existing process results is 4.7 days which is still significantly high compared to expected
TAT of 2.10 days(=82 requests/39 requests per day). This suggests bottleneck and inefficiency in the
system design. We have observed the Distribution to be a major bottleneck with a capacity utilisation
of 89% (refer to Appendix 2.2.1).
3. Large number of late renewals and backlog of policies: Requests for renewals of policies(RERUNs)
are currently held until last date. But, the agents expect offer for contract renewal before the old
policy expires. Also, the backlog of policies has increased since 1989 due to the high number of late
renewals. This leads to agent dissatisfaction and large loss of rate for renewals.
Possible Cause: Current prioritization of policies. The RUN and RAP have been prioritised above the
RERUN and RAIN. RERUN contributes to 74% of total revenue. Also, RERUN requests take only about
half the time compared to RUN policies(Appendix 2.6). But, since they have been prioritised low, they
get queued up waiting for the RUN and RAP to be processed first, ultimately leading to the large loss
rate.
4. Uneven workload: Workers of Manzana experienced uneven work conditions with tighter schedules
at times and idle time for extended periods. Besides, Manzana has been reported to be overstaffed
in rating and policy writing.
Possible Cause: Surprisingly, the 4.7 day TAT has not led to capacity utilisation of 100% in any of the
section, which shows that scheduling and system design is the problem.

2. Identify the problems in the way Manzana is calculating turnaround time in

Exhibit 3.
Manzana is currently calculating the Throughput time based on the 95% SCT, which leads to over
capacity utilisation(See appendix 2.5) greater than 100% at all steps. Exhibit 3 thus indicates over-
estimation of time taken per process. We should ideally use mean processing time for each process.
Below is the correct TAT calculation:
 TAT (Total
Total Total hours/number of
RUN RAP RAIN RERUN minutes hours working hours)
Total at DCs 1 3 1 11
To be processed 1 3 1 11
Distribution Average per DC 0.25 0.75 0.25 2.75
Mean processing time 68.5 50 43.5 28
Total minutes 17.13 37.50 10.88 77.00 142.50 2.38 0.32

Total at DCs 1 3 1 11
Total at Uts 3 7 6 36
To be processed 4 10 7 47
Underwriting
Average per UT 1.33 3.33 2.33 15.67
Mean processing time 43.6 38 22.60 18.70
Total minutes 57.99 126.67 52.73 292.97 530.35 8.84 1.18

Total at DCs 1 3 1 11
Total at Uts 3 7 6 36
Total at RTs 1 2 1 7
Rating To be processed 5 12 8 54
Average per RT 0.625 1.5 1 6.75
Mean processing time 75.5 64.7 65.5 75.5
Total minutes 47.19 97.05 65.50 509.63 719.36 11.99 1.60

Total at DCs 1 3 1 11
Total at Uts 3 7 6 36
Total at RTs 1 2 1 7
Policy Total at PWs 0 0 1 2
Writing To be processed 5 12 9 56
Average per PW 1 2.4 1.8 11.2
Mean processing time 71 0 54 50.1
Total minutes 71.00 0.00 97.20 561.12 729.32 12.16 1.62
Total TAT 4.71
Figure 1 TAT using mean time instead of 95% SCT

3. Recommendations
1. Scheduling strategies: The current prioritisation allow for large losses in renewals as discussed
earlier. The RUN and RERUN are the major contributors to revenue and hence they should be given
the first priority. RAP, although is an avenue for Manzana to get new requests for Underwriting, it
only results in a conversion rate of about 15%, which is meagre compared to the priority currently
being given to this policy. Hence, it must be prioritised lower than RUN and RERUN. RAIN results in
an increased amount of premium, but it only contributes to 1.36% of Manzana's revenue. Hence, it
needs to be prioritised last. This will significantly help solve the loss of renewals leading to decrease
in profitability.

2. System design changes: Pooling the territories together. As per our calculations (refer to Appendix
2.2.1, 2.2.2, 2.2.3), capacity utilisation of territory 1 is about 97% and that of territories 2 and 3 are
78.5% and 70% respectively. Keeping the territories separately based on geographies is making
territory 1 the bottleneck in the whole process. Pooling the territories together reduced the capacity
utilisation significantly to 82%, which removes the bottleneck from the process significantly. This
change in system will help bring down the TAT of the entire process.

3. Capacity restructuring: We have seen that Distribution is the bottleneck in the overall process with
capacity utilisation equalling 89%. Whereas, comparatively, Policy Writing have lesser capacity
utilisation (64%). Removal of a person each from Policy Writing team will not hurt the capacity
utilisation of the team much (80% approximately respectively). This extra person can be put to use
in the Distribution team (capacity utilisation becomes 71%). We cannot switch one person from a
particular team to another team, because we have to consider the specific skillset required in each
team. This will help in bringing down the TAT as well as ensuring equitable utilisation of resources as
we have achieved roughly similar capacity utilisation of around 70-80% in all the processes.
4. Cleaning up current backlog: Overall, we see that all the processes have a capacity utilisation of
around 80% after the proposed system changes. So, none of them are 100% utilised. We can use the
free time each day for clearing up the pending policies and move towards a backlog-free system.
Once we reach this, we can ensure maximum efficiency using the proposed changes.

4. Appendices
Appendix 1: Process flow

All numbers inside oval box represent average requests received per day for last two quarters.
 Average requests per day=Sum of (RUNs + RAPs + RAINs + RERUNs)/ No. of working days
350+1798+451+2081
 Average requests per day(Exhibit 7)= = 39 𝑟𝑒𝑞𝑢𝑒𝑠𝑡𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦
6∗20
1798
 No. of RAPs per day(Quarter 1,2 -1991) = = 14.98~15 𝑟𝑒𝑞𝑢𝑒𝑠𝑡𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦
120
162+761+196+636
 Average requests processed by Team 1= = 14.625 𝑟𝑒𝑞𝑢𝑒𝑠𝑡𝑠 𝑝𝑒𝑟 𝑑𝑎𝑦
120

Appendix 2: Capacity utilisation

2.1.1 Distribution (current)

DISTRIBUTION RUN RAP RAIN RERUN Overall
No. of policies 1 3 1 11 16.00
Avg. Processing time 68.5 50 43.5 28
Total minutes 17.125 37.5 10.875 77 142.50
Max capacity (No. of policies per day) 26.27737 36 41.37931 64.28571 167.94
Actual Requests - 1991 350 1798 451 2081 4680.00
Actual Rate per day 2.916667 14.98333 3.758333 17.34167
Utilisation % 11.09954 41.62037 9.082639 26.97593 88.78%

2.1.2 Distribution (after proposed change of adding 1 additional resource)

DISTRIBUTION RUN RAP RAIN RERUN Overall
No. of policies 1 3 1 11 16.00
Avg. Processing time 68.5 50 43.5 28
Total minutes 13.7 30 8.7 61.6 114.00
Max capacity (No. of policies per day) 32.84672 45 51.72414 80.35714 209.93
Actual Requests - 1991 350 1798 451 2081 4680.00
Actual Rate per day 2.916667 14.98333 3.758333 17.34167
Utilisation % 8.87963 33.2963 7.266111 21.58074 71.02%

2.2.1 Underwriting – territory 1

UNDERWRITING - TERRITORY 1 RUN RAP RAIN RERUN Overall
No. of policies 4.00 10.00 7.00 47.00 68.00
Avg. Processing time 43.60 38.00 22.60 18.70
Total minutes 58.13 126.67 52.73 292.97 530.50
Max capacity (No. of policies per day) 30.96 35.53 59.73 72.19 198.42
Actual Requests - 1991 162.00 761.00 196.00 636.00 1755.00
Actual Rate per day 1.35 6.34 1.63 5.30
Utilisation % 4.36 17.85 2.73 7.34 96.87%

2.2.2 Underwriting – territory 2

UNDERWRITING - TERRITORY 2 RUN RAP RAIN RERUN Overall
No. of policies 4.00 10.00 7.00 47.00 68.00
Avg. Processing time 43.60 38.00 22.60 18.70
Total minutes 58.13 126.67 52.73 292.97 530.50
Max capacity (No. of policies per day) 30.96 35.53 59.73 72.19 198.42
Actual Requests - 1991 100.00 513.00 125.00 840.00 1578.00
Actual Rate per day 0.83 4.28 1.04 7.00
Utilisation % 2.69 12.03 1.74 9.70 78.50%

2.2.3 Underwriting – territory 3

UNDERWRITING - TERRITORY 3 RUN RAP RAIN RERUN Overall
No. of policies 4.00 10.00 7.00 47.00 68.00
Avg. Processing time 43.60 38.00 22.60 18.70
Total minutes 58.13 126.67 52.73 292.97 530.50
Max capacity (No. of policies per day) 30.96 35.53 59.73 72.19 198.42
Actual Requests - 1991 88.00 524.00 130.00 605.00 1347.00
Actual Rate per day 0.73 4.37 1.08 5.04
Utilisation % 2.37 12.29 1.81 6.98 70.38%

2.2.4 Underwriting (after proposed change of pooled territories)

UNDERWRITING - POOLED RUN RAP RAIN RERUN Overall
No. of policies 4 10 7 47 68.00
Avg. Processing time 43.6 38 22.6 18.7
Total minutes 58.13333 126.6667 52.73333 292.9667 530.50
Max capacity (No. of policies per day) 30.9633 35.52632 59.73451 72.19251 198.42
Actual Requests - 1991 350 1798 451 2081 4680.00
Actual Rate per day 2.916667 14.98333 3.758333 17.34167
Utilisation % 9.419753 42.17531 6.291728 24.02142 81.91%

2.3 Rating (current)

RATING RUN RAP RAIN RERUN Overall
No. of policies 5 12 8 54 79.00
Avg. Processing time 75.5 64.7 65.5 75.5
Total minutes 47.1875 97.05 65.5 509.625 719.36
Max capacity (No. of policies per day) 47.68212 55.64142 54.96183 47.68212 205.97
Actual Requests - 1991 350 1798 451 2081 4680.00
Actual Rate per day 2.916667 14.98333 3.758333 17.34167
Utilisation % 6.116898 26.92838 6.838079 36.36933 76.25%
2.4.1 Policy Writing (current)
POLICY WRITING RUN RAP RAIN RERUN Overall
No. of policies 5 0 9 56 70.00
Avg. Processing time 71 0 54 50.1
Total minutes 71 0 97.2 561.12 729.32
Max capacity (No. of policies per day) 31.69014 0 41.66667 44.91018 118.27
Actual Requests - 1991 624 0 451 2081 3156.00
Actual Rate per day 5.2 0 3.758333 17.34167
Utilisation % 16.40889 0 9.02 38.61411 64.04%

2.4.2 Policy Writing (after proposed change of removing 1 resource)

POLICY WRITING RUN RAP RAIN RERUN Overall
No. of policies 5 0 9 56 70.00
Avg. Processing time 71 0 54 50.1
Total minutes 88.75 0 121.5 701.4 911.65
Max capacity (No. of policies per day) 25.35211 0 33.33333 35.92814 94.61
Actual Requests - 1991 624 0 451 2081 3156.00
Actual Rate per day 5.2 0 3.758333 17.34167
Utilisation % 20.51111 0 11.275 48.26764 80.05%

2.5 Flawed distribution

UNDERWRITING - TERRITORY 1 RUN RAP RAIN RERUN Overall
No. of policies 4.00 10.00 7.00 47.00 68.00
95% SCT 107.20 87.50 49.40 62.80
Total minutes 142.93 291.67 115.27 983.87 1533.73
Max capacity (No. of policies per day) 12.59 15.43 27.33 21.50 76.85
Actual Requests - 1991 162.00 761.00 196.00 636.00 1755.00
Actual Rate per day 1.35 6.34 1.63 5.30
Utilisation % 10.72 41.10 5.98 24.65 247.39%

2.6 Comparison between time taken by RUNs and RERUNs

Time minutes Distribution Underwriting Rating Policy Writing
RUN 68.5 43.6 75.5 71
RERUN 28 18.7 75.5 50.1