Manzana Case Assignment

Manzana Case Assignment Guruprakash Thirumalaisamy (9310) Praveenkumar Kanagaraj (5140) I.

Dinesh Tawker Venkatesan (0801) Jagadeesh Chidambaram Kumar (8143)

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 2

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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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Utilizations Underwriting 1 Underwriting 2 Underwriting 3 Rating 5 Rating 4 Rating 6 Distribution 2 Distribution 1 Distribution 3 Rating 3 Distribution 4 Rating 7 New Underwriting Rating 2 Rating 1 Writing 1 Writing 2 Writing 3 Writing 4 TAT

With no change in workfo rce Base Case 0.99 0.88 0.75 0.97 0.86 0.90 0.96 0.97 0.95 0.93 0.93 0.95

FIFO 0.99 0.88 0.75 0.96 0.94 0.96 0.96 0.97 0.95 0.95 0.93 0.87

Opti mal 0.99 0.88 0.75 0.96 0.96 0.95 0.96 0.97 0.95 0.95 0.93 0.93

FIFO 0.49 0.88 0.75 0.97 0.95 0.96 0.96 0.97 0.95 0.95 0.93 0.88

Optim al 0.49 0.88 0.75 0.97 0.96 0.96 0.96 0.97 0.95 0.95 0.93 0.94

Base Case 0.49 0.88 0.75 0.97 0.88 0.91 0.96 0.97 0.95 0.94 0.93 0.95

NA 0.97 0.96 0.92 0.88 0.84 0.79 5.78

NA 0.91 0.93 0.91 0.89 0.85 0.78 4.07

NA 0.91 0.87 0.91 0.89 0.85 0.79 3.38

0.51 0.92 0.94 0.91 0.89 0.85 0.79 0.97

0.51 0.91 0.88 0.91 0.89 0.85 0.80 0.90

0.50 0.97 0.96 0.92 0.89 0.85 0.79 1.32

With Extra Underwri ting Team

units in Days Appendix 2

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