Manzana Insurance Fruitvale Branch

Case Analysis: Manzana Insurance Fruitvale Branch

Gabriel Benko, gbenko@calstatela.edu

MGMT 306

7/22/2015

1. There are quite a few problems that the Fruitvale branch is facing. The main source of the problem is the fact that the different departments are doing the work load in a different order instead of following the “first in and first out” method. Since each department is taking a different approach the branch is receiving backlogs which are causing agents to recommend renewals elsewhere because it’s expected to receive the renewed contract on or before the expiration date. Late renewals are far too high and needs to be fixed. The turnaround time grew to six days while their main competitor, Golden Gate, is only one day.  Another problem is the fact that agents are defecting to A Golden Gate. There is no doubt though that all of these issues stem from the fact that the amount of late renewals is way too high. I would like to be in Bill Pippin’s position because I feel that I can address these issues and make changes for the company in a positive manner.
2. First, a consumer is someone who uses products while a customer is someone who buys them. With that definition in mind we can say that the customers in this scenario are anyone who wants to purchase property-liability insurance. Since Fruitvale is a smaller branch they focused entirely on property insurance. A customer would be anyone who needed property insurance. A consumer would be the agents and employees of Fruitvale. Note that the customers can also be consumers in this case based off of the definition. Agents typically suggest to the customers which insurance carrier to go along with. We know this to be the case because it was stated when Fruitvale would take too long with the renewed contracts, the agents would recommend another carrier.
3. In exhibit 7 it shows that the number of policies decreased but the gross premium has also decreased. The gross premiums did not remain relatively constant.
4. Tom Jacobs believes that the amount of time it takes for each task are as follows:

Review and Distribution:

40 requests

40 min each request

 = 40min x 40 requests = 1600 / 60 = 26 hours and 40 min.

4 clerks at 7.5 hours = 30 hours’ work time

Underwriting:

40 requests

30 min each request

= 30 min x 40 requests = 1200 / 60 = 20 hours.

3 teams at 7.5 hours = 22.5 hours

Rating:

40 requests

70 min each

= 70 min x 40 requests = 2800 / 60 = 46 hours and 40 min.

8 raters at 7.5 hours = 60 hours

Policy Writing:

40 requests

55 min each

55 min x 40 requests = (2200 x .75) / 60 = 27 hours and 30 min.

5 writers at 7.5 hours = 37.5 hours

If we use this average we can see that during the distribution step we have a total of 16 requests to be processed. So, 16 requests x 40 min = 640 / 60 = 10 hours and 40 min to complete all of the requests. We have four clerks working for 7.5 hours which gives us 30 hours total. If we take 10.4 hours / by 30 hours we get 0.3467 which is about 34.67%. This means that if we take the 7.5 hour work day and multiply that by 34.67% we get about 2.6 hours to complete it all.

Next, we will review the underwriting step. We have the 16 that is processed by the clerks and an additional 52 from the backlogs which gives us a total of 68 requests. 68 requests x 30 min each = 2040 / 60 = 34 hours. We have 3 teams at 7.5 hours which gives us 22.5 hours. So, let’s take the 34 hours / 22.5 hours and we get 1.51 which is 151%. If we take the 7.5 hour work day and multiply it by 151% we get 11.325 hours to complete it all. Throughput days will be 1.51 days.

Next, we will take a look at the Rating step. We have 16 from the clerks that day, plus 52 from the underwriters, and another 11 from backlogs which gives us a total of 79 requests. We know it takes 70 min per requests which means that the total work is 5530 min / 60 = 92.1667 hours. We have 8 raters which work for 7.5 hours which means a total of 60 hours of work time. So, if we take 92.1667 divided by 60 hours we get 1.53 or 153%. This means that 7.5 x 153% = 11.475 hours for every 7.5 hour shift to complete it all. Throughput days will be 1.53 days.

Lastly, we will look at the policy writing. We have 16 from clerks that day, 52 from the underwriters, 11 from the raters, and 3 for the policy writers which give us a total of 82 for that day. 82 x 55 min each = 4510 min / 60 = 75.1667 hours. X .75 because Tom Jacobs said that they receive 75% of the daily requests which gives us a total of 56.375 hours. We have 5 writers at 7.5 hours which gives a total work time of 37.5 hours 56.375 / 37.5 = 1.5 or 150%. So, if we multiply the 7.5 hours by 1.5 we get 11.25 hours to complete it or we can say that the total throughput days will be 1.5.

1. The production line approach is each department specializing in in what they do and once completing it, passing it off to the next department. It works like a conveyor belt at a factor.
2. Yes the team’s actual performance is measuring up to the standard. The problem is the backlogs because of the various priorities that each department has set for processing renewals.
3. The renewals are late because each department is setting different priorities. For example, when Bill Pippin asked Bob Melrose who was the supervisor of underwriting, Melrose said, “Everyone knows that RUNS and RAPS are most profitable thus those will be processed first above all others. When Bill spoke to Rick Ramirez who was the manager of the rating department, Ramirez said, “We give priority to RUN and RAPS because we are told to… The UTs seem to think that RERUNS handle themselves but they take as much time as any other policy.” Finally, when Bill spoke to Phyllis Chen, she said, “we usually try to handle the simple jobs first before tackling longer and more difficult requests.” So, we can see that each department does have their own agenda which is causing all sorts of chaos and causing such a high percentage of late renewals.
4. As a result from late renewals, and the fact that the agents are independent, the agents tend to recommends customers elsewhere when Fruitvale doesn’t give the renewals contracts on or before the expiration dates. Thus, their renewals losses have grown substantially.
5. The turnaround time is not the result of inadequate capacity. It stems from the fact that each department should process requests in the FIFO method, which is first in, first out. This would help solve a lot of the issues that the branch is facing.
6. I believe that Manzana’s system of dedicating underwriting teams to particular agents is a good idea because the branch employees and the agent can build a relationship and each of them will begin to learn what’s expected of each other. The main problem stems from the fact that the renewals contracts are late so the agents are recommending the customers elsewhere.
7. First, we know that the amount the company has to pay for losses has increased noticeably. Next, the plus program is detrimental to the company. They fear that agents are defecting to Golden Gate and they are trying very hard to entice them to stay loyal to them but the company cannot financially support the plus program. This is the main culprit as to why the company has net losses.
8.  The ordinary insured losses keep increasing because of the late renewals and agents referring their customers elsewhere because of how Fruitvale has been conducting its business.
9. The salary plus program is designed to give incentive to Fruitvale’s more experienced writers who have 10 or more years of experience. This program gives them their salary plus a bonus based on each new policy written above their quota. The program was created to retain their senior writers because Golden Gate was putting forth heavy pressure. They were trying to recruit experienced writers. The plan makes sense but not from a financial stand point. The company cannot afford to pay for the program.

1. Underwriters began sorting through their work to find the RUNS and RAPS first to work on because they generated the most premiums. They also believe that RERUNS can be delayed because they have plenty of advance notice.
2. The raters believe that they should follow a FIFO system but are told to handle RUNS and RAPS first. They are unhappy about the RERUNS because the UT believes they handle themselves but the backlog is growing out of control.
3. The Policy Writers believe that the simple jobs should be taken care of first before tackling on more difficult work. Things are prioritized based on priority and arrival date which means that RAPS and RUNS will be taken care of first most of the time.

1.  Agents received a 25% commission on each new policy and 7% commission on each policy that was renewed. I feel as though this amount works appropriately and doesn’t impact the branch’s expense too much. If they were to lower the rates most of the agents would certainly be dissatisfied because they are already receiving the renewals incredibly late. Nearly 50% of renewals will be late. The amount of commission agents receive has to stay constant at this point because I believe if it was lowered it would be a death blow and the agents would support Golden Gate rather than Fruitvale. Again, increasing it is also not plausible because the branch cannot support it.
2.  The company would need to higher an additional employee who would act as a “floater.” This if one department becomes overwhelmed with the workload then this floater will help alleviate some of the pressure. This is of course, after the backlog has been cleared. First and foremost, the company needs to actually implement the FIFO system and keep to it strictly once the backlog has been purged. This will stop the absurdly high percentage of late renewals and more agents will refer customers to Fruitvale because of their timely and businesslike conduct.