OPERATIONS MANAGEMENT

CASE SUBMISSION
MANZANA INSURANCE: FRUITVALE BRANCH (ABRIDGED)

Group 12
Akanksha Kumari (P22003)

Shaswat (P22056)

Muskan Gupta (P22041)

Ashish Karush (P22009)

Kousik Biswas (P22036)

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Introduction:

In Sebastopol, California, Manzana Insurance was established. It began by specializing on

farm and orchard insurance. The business had an opportunity to expand its operations across
northern California in the wake of the 1906 San Francisco earthquake and fire. They acquired
the Santa Ana Underwriting, Casualty, and Escrow Company in 1994 following World War
II in anticipation of increased property ownership in southern California. They had developed
into California's second-largest residential and commercial property insurer by 1953.
Manzana managed its business through a network of largely independent branches
throughout the US states of California, Oregon, and Washington. Every branch was handled
as a distinct business with its own profit and loss.
In an effort to gain market share, a new rival named "Golden Gate Casualty" joined the home
insurance market in 1970, setting off a price war and intense competition. The company's
underwriting standards, regaining market share, and reducing operating costs were its top
concerns when Banque du Soleil acquired Manzana in 1989.

Underwriting:

Manzana process 4 types of policies -

RUNs (Request For Underwriting), A new commercial policy is created as a consequence of
a request that a distribution clerk gets from an originating agency. After being loaded into the
computer, data is sent to the other departments. The distribution team was in charge of the
data processing and dissemination responsibilities. After receiving each RUN, the
underwriting team was charged with evaluating, classifying, and proposing a price for it.
After receiving RUN, the Policy Writing Department actually typed, put together, and
distributed the final policies.

RERUNs (Request for Renewal), It entails re-evaluating and repricing the risks on a yearly
basis. On the anniversary of its release, the commercial policy was renewed. Renewals were
created automatically by a computer system and sent together with the current RUNs for
processing to the distribution clerks.

RAINs (Requests for Additional Insurance), A policy endorsement was needed to update the
existing policy's provisions for any tangible changes to the property. All other underwriting
processes were the same as they would be for a new policy; the only way it differed from
RUN was in how long it took the various departments to reprice the policy.

RAPs (Request for Price) The RAP is sent back to the distribution clerk, who is in charge of
providing the originating agent with the price estimate, following a similar procedure to the
RUN. If the quotation was approved, the RAP was converted to an RUN and sent directly to
the team in charge of creating the policy. If the quote was disputed, nothing was done.

Key Problems
The key problems faced by Manzana’s Fruitvale branch are declining market share and
profits, which are led by the followings -

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• It takes six days longer on average than its rival "Golden Gate," which has a turnaround
time of two days on average. However, they recently promised to reduce the turnaround time
to one day.
• In contrast to competitors, whose rates were just 15%, the renewal loss rate significantly
climbed from 33% to 47%.
• Late renewals have increased from 20% to 44%, more than doubling.
• Requests were not fulfilled in accordance with business policy using the FIFO mechanism.
In actuality, RAINs and RERUNs were given lower priority than RUNs and RAPs.

Operating Process Analysis

All the requests, whether its RUNs, RAPs, or RAINs initiated with the Originating agent,
RERUNs originated by computer and moves to their respective Underwriting Team. The
Underwriting team comprises three teams of 76 agents. After the analysis and categorization
by the Underwriting team, the process moves to Rating, for the calculation of premiums.
After completing this process, the policies are transferred for Policy Writing, which
assembles and distributes the final policy.

TABLE 1
Underwriting
Sector 1 14.63
OriginatingDistribution
agent Sector 2 13.15 Rating Policy Writing
40 40 Sector 3 11.23 40 27.25

The number of requests per day is 40. The number of requests received by each team will be:
(RAPs + RUNs + RERUNs + RAINs)/20*6 (referred from Ex. 7)
As the total number of working days is 20, and the number of months of data given is 6.
Territory 1: (761+162+636+196)/20*6= 14.63
Territory 2: (513+100+840+125)/20*6 = 13.15
Territory 3: (524+88+605+130)/20*6 = 11.23
Total number of RAPs (exhibit--7) = 1798 (given)
Number of RAPs per day= 1798/20*6=15(approx.)
15 % results new policy= 15% of 15 = 2.25
Total number of policy writing = 2.25+(40-15) = 27.25

Analysis of Utilisation of Resources considering 95% SCT

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TABLE 2

Capacity utilisation of resources considering 95% SCT

Distribution stage Underwriting stage Rating stage Policy Writing stage
Average daily requests 40 40 40 27.25
Wtd. Avg processing time 41 28.4 70.4 54.8
Available Capacity 43.90 47.54 51.14 41.06
Utilising 91.11 84.15 78.22 66.37

We calculated the average daily requests in Table 1. Exhibit 4 provides the weighted average
processing time. Calculating the available capacity according to weighted average processing
time:
Distribution: Available capacity = (4*60*7.5)/41 =43.90
Number of employees = 4
Converting available hours into minutes = 60*7.5
Similarly for Underwriting:
Observation: The distribution team is utilizing the most of its capacity, and policy
writing and Rating are least utilized.

Analyzing and Identifying the Problems

Taking 95% SCT into consideration Cycle Duration

Processes RUNs RAPs RAINs RERUNs No. of employees RUNs RAPs RAINs RERUNs
Distribution stage 128.1 107.8 68.1 43.2 4 32.025 26.95 17.025 10.8
Underwriting stage 107.2 87.5 49.4 62.8 3 35.73333 29.16667 16.46667 20.93333
Rating stage 112.3 88.7 89.4 92.2 8 14.0375 11.0875 11.175 11.525
Policy Writing stage 89.3 72.1 67 5 17.86 14.42 13.4

Considering 95% SCT (Standard completion time), Cycle time for all processes (Distribution,
Underwriting, Rating, Policy Writing) when analyzed, we found underwriting is becoming
the bottleneck for RUNs, RAPs, and RERUNs. For RAINs, distribution is the bottleneck.
Also, of all these processes, the undertaking is taking maximum time for RUNs.
Taking mean processing time into consideration Cycle Duration
Processes RUNs RAPs RAINs RERUNs No. of employees RUNs RAPs RAINs RERUNs
Distribution stage 68.5 50 43.5 28 4 17.125 12.5 10.875 7
Underwriting stage 43.6 38 22.6 18.7 3 14.53333 12.66667 7.533333 6.233333
Rating stage 75.5 64.7 65.5 75.5 8 9.4375 8.0875 8.1875 9.4375
Policy Writing stage 71 54 50.1 5 14.2 10.8 10.02

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When mean processing time was considered, distribution became the bottleneck for RUNs,
RAINs, and RERUNs. Also, underwriting becomes the bottleneck for RAPs.

As the major bottleneck is Underwriting. We have analyzed the Underwriting team

further.

Analysis of Underwriting Team:

Underwriting team analysis
Underwriting team Sector 1 Sector 2 Sector 3
Weighted avg. processing time 28.4 28.4 28.4
Requests per day 14.63 13.15 11.23
Available Capacity 15.85 15.85 15.85
Utilising 92.33156 82.99111 70.87378

The underwriting team is divided into three geographical territories. The weighted average
processing time is given as 28.4 in Exhibit 4. We calculated the daily requests for each of the
territories in Table 1.
Available Capacity = 7.5*60/28.4 = 15.85
The utilization of Territory 1 is 92.33%, Territory 2 is 83%, and Territory 3 is 70.9%. We can
clearly see that Territory 1 is utilizing the best of its capacity, followed by Territory 2 and
Territory 3, respectively which shows the inefficiency of Territory 2 and Territory 3.

Possible Solution:
As we can see from the table of underwriting team analysis, even though weighted average
processing time and Available capacity are the same, utilization at different territories is
different, and Territory 2 and Territory 3 are inefficient.
So instead of dividing the underwriting team into geographical territories, we have decided to
club it together in order to increase efficiency and decrease the Turnaround Time. It will also
enhance customer satisfaction as the agents can interact with the customers better.
Calculating the utilization of all the territories clubbing together came out to be 82.04%, i.e.,
(92.33+ 83+70.9)/3.
EXCEL SHEET

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