Manzana Insurance

•  Financial performance
– Increased gross premium from new policies
– Decreased gross premium from renewals
– Increased ordinary insured losses (riskier policies)
•  Late & Lost Renewals
– Lateness increased from 20% in 1990 to 45% in 1991
– Lost increased from 33% in 1990 to 47% in 1991
– Golden Gate: 15% loss rate
•  Long TAT (Actual, not Estimated)
– Increased from 5 days in 1990 to 6 in 1991
– Golden Gate: 2 days to be decreased to 1 day!

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 2

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 •  What caused late/lost renewals?
–  Late release of RERUNs to the system
–  RUN, RAP prioritized over RAIN, RERUN
–  What are the motivations to do so?
•  TAT time for new policies is important
•  Impression that new policies are more
profitable than renewals
–  What is the key problem—late release or
prioritization?

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 3

•  What caused long TAT?

–  Are there adequate capacity to handle the
total workload?
•  Process flow chart
•  Where are bottlenecks?

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 4

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 2.3 **
14.6 * UT#1
39 39 Rating 24 Writing 26.3
Dist (4) 13.2 UT#2
(8) (5)
11.2 UT#3

Assume 20 days/month, 7.5 hrs = 450 min./day

Total in 6 months in 1991 (Exhibit 7)

= 350 RUN + 1798 RAP + 451 RAIN + 2081 RERUN
=4680 or 4680/120 = 39 requests per day

* Exhibit 7: 1755/120 = 14.6

** Exhibit 7: 1798/120 = 17 RAPs per day out of which only
274/120 = 2.3 were accepted
Prof. Vernon Hsu, CUHK Manzana Insurance, Page 5

Dist UT #1 UT #2 UT #3 Rating Policy

writing

Daily 39 14.6 13.2 11.2 39 26.3

Requests

Ave. Pro- 41 28.4 28.4 28.4 70.4 54.8

cess Time
(Exhibit 4)

Total time 1599 414.64 374.88 318.08 2745.6 1441.24

required

Total time 450*4 450 450 450 450*8 450*5

available

Utilization 89% 92% 83% 71% 76% 64%

rate

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 6

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 •  What caused long TAT?
–  Uneven workloads among 3 UTs
•  What were the motivations to have such
division?
•  UT #1 has heaviest workload and largest
late/lost of renewals
•  The next heavy load is at Distribution

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 7

•  Marketing problems
– Quotation of long estimated TAT
– Incentives for agents

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 8

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 •  Operational changes
– Pool the three UTs – the utilization rate after pooling is 82%
– Automating Distribution step or moving staff from Policy
Writing to Distribution
– Release RERUNs early and use them to smooth the variability
of the requests
– Correct methods for estimating TAT
– Priority in handling RUNs and RERUNs?
– Create dedicated cells to handle RUNs?
•  Policy changes
– Change incentive structures (internal and external)

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 9