Manzana insurance case study analysis.

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JANUARY 5 2020
Group -2-IIM INDORE
Operations
Management
Assignment

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Manzana Insurance: Fruitvale Branch (Abridged)

3
About the case
Manzana Insurance:
• Manzana Insurance is the second largest insurance company founded in California in 1902.
• They operated through a network of autonomous branch offices in California, Oregon and
Washington. Each branch is treated as a separate profit and loss centre.
• Manzana does not directly interact with public but instead has its 2000 agents who represents
Manzana.
• Fruitvale was one of the Manzana’s smaller branches, with 3 underwriting teams and 76 agents.
Our case concern is the falling performance and hence the profitability on Property Insurance for
this branch.
Underwriting Process of Manzana:
• The process of writing a new commercial policy began when a distribution clerk received a Request
for Underwriting (RUN) from an agent.
• DC distributes each RUN to the underwriting team responsible for handling that RUN request.
• After the RUN was passed it was assigned to underwriting team that evaluated, selected and
classified the policy and further send it to rating department.
• The rating team processed the policy for the premium generation (RAP). These policy quotes were
then sent to agents. Most quotes were accepted or rejected within 10 days. Once accepted RAP
becomes RUN. On average 15% of all quotes resulted in new policies.
• Policy renewal was done before the expiry of the policy if requested and unless the insurer cancels
the policy. These requests were called RERUNs.
• Policy endorsements (RAINs) were needed to amend the terms of the existing policy.

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1. Assess and comments on the performance of Manzana Insurance –
Fruitvale branch
Performance of Manzana Insurance - Fruitvale branch
Manzana Fruitvale branch is not performing well in most of the aspects. The issues
in the performance has resulted into decline in profitability of this branch and also
has contributed to the opportunity for competitor (Golden Gate) to capture the
market share. The most important performance related issues sighted in the case
are:
1. High and increasing turnaround time (TAT):
This is the total time taken to process the request. Currently Fruitvale branch’s Turnaround
time is around 6 days. Golden Gate, the competitor in Fruitvale territory have announced to
decrease the turnaround time to 1 day to all agents, this increases the threat of agents of
Fruitvale branch moving to Golden Gate.
2. Improper workload:
Some operational activities like rating and policies writing are overstaffed. Also, workload is quite
uneven over time, some days an underwriter might be stretched to limit and someday he may be
idle.

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3. Significant rise in late renewal:
The number of renewal policies that are processed/ renewed after their initial renewal effective
date is increasing. This is primarily because the computer-generated RERUN Policies (policies that
are required to be renewed) are released to the DCs only at the last day before their due date. This
also results in loss of business.
0
10
20
30
40
50
Reviewing and
distribution
Underwriting Rating Policy Writing
Operating Activities
Required Time for 40 Requests (hours) Extra Capacity Available (hours)

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4. Increase in Renewal Loss:
5. Inconsistency in the priorities of various departments:
The various departments of Fruitvale have different work priorities; this is contributing to
inefficiency of the branch.
The company policy is to use FIFO (First in First out) system however as the case fact suggests the
departments are not following this rule. Here new policy request is given priority over others. The
compensation policy of Manzana also supports new policy by commissioning 25% to agents.
6. Declining profitability:
All these factors cited above and their combination of operational inefficiency has resulted in bad
performance of Fruitvale branch. This has thereby impacted the profitability of the branch
tremendously.

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2. Perform the process or capacity analysis for Manzana Insurance –
Fruitvale branch and comment on your outcomes
➢ Variation Analysis:
• From Exhibit 4 we were able to perform variation analysis for individual department /team. Since
all processes are not same we have used Coefficient of variation instead of only Standard
deviation to compare the variation in process. (Coefficient of variation = Standard deviation /
Mean) .We have also used Range analysis for comparison .Analysis is given below .
Coefficient of Variation Analysis
RUNs RAPs RAINs RERUNs
Distribution Team 44.8% 49.8% 21.1% 22.1%
Underwriting Team 73.4% 64.5% 51.8% 105.9%
Rating Team 27.2% 21.0% 24.3% 12.8%
Policy Writing Team 14.5% NA 15.9% 19.0%
Range Analysis
RUNs RAPs RAINs RERUNs
Distribution Team 111.5 92.5 259 255.5
Underwriting Team 597.3 389.0 410.5 716.1
Rating Team 458.0 409.0 424.0 458.0
Policy Writing Team 331.5 NA 245.5 331.5

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• We can see very high variability in the Underwriting team. High variation is observed in all types
of policies .ie. RUN, RAP, RAIN, and RERUN.
• Even if we compare the ranges of each department, we can see a huge difference in ranges. This
high difference in ranges leads to uneven distribution of the number of requests in each
department.
➢ Analysis of Capacity Utilization of Underwriting teams:
• From exhibit 7 we can find out the capacity utilization of the underwriting team. A detailed
analysis is given below. We can see the Territory 1 team is being utilized almost 100%
whereas the territory 3 team is being utilized only 70%. This suggests a very uneven job
distribution or policy distribution for underwriting teams.
• Overall branch UT teams’ utilization rate is 82%
96.86%
78.49%
70.37%
81.91%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Territory 1 Territory 2 Territory 3 Branch Total
Capacity Utilization of Under Writing team

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RUNs RAPs RAINs RERUNs Total
Policies
Requests processed (Ex7) 162 761 196 636 1755
no of days 120 120 120 120 120
Per day request 1.4 6.3 1.6 5.3 14.6
mean time (ex4) 43.6 38 22.6 18.7 122.9
Total time 7063.2 28918 4429.6 11893.2 52304
average time per request 29.80
Time utilization/day 435.87
capacity utilization 96.86%
Policies
no of days 120 120 120 120 120
Per day request 0.8 4.3 1.0 7.0 13.2
mean time (ex4) 43.6 38 22.6 18.7 122.9
Total time 4360 19494 2825 15708 42387
Policies
no of days 120 120 120 120 120
Per day request 0.7 4.4 1.1 5.0 11.2
mean time (ex4) 43.6 38 22.6 18.7 122.9
Total time 3836.8 19912 2938 11313.5 38000.3
Policies
Requests processed (Ex7) 350 1,798 451 2,081 4680
no of days 360 360 360 360 360
Per day request 1.0 5.0 1.3 5.8 13.0
mean time (ex4) 43.6 38 22.6 18.7 122.9
Total time 15260 68324 10192.6 38914.7 132691.3
Total RAPs processed 1798
total RAP per day 15.0
15% of RAP policy 2.2475
total policy for writing/dar 26.3
Capacity utilization for underwriting (6 months 1991)
Territory 1 (Number)
Given in the case that only 15 % of RAPs
convert to RUNs
Branch total

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➢ Analysis of Capacity Utilization of different teams :
• As per the exhibit, we can calculate the current capacity utilization of different teams. We can see the
Distribution team is being utilized almost 90% whereas the Policy Writing team is being utilized only
64%. This also suggests that within different teams there is high variation in job loads.
88.83%
82.04%
76.27%
63.97%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Distribution Underwriting Rating Policy writing
Capacity Utilization of 4 teams
Average request per day 39 39 39 26.3
weighted average
processing time (ex - 4) 41 28.4 70.4 54.8
staff 4 3 8 5
Total Capacity 43.90 47.54 51.14 41.06
utilization 88.83% 82.04% 76.27% 63.97%
Capacity utilization department wise

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3. Make a detailed analysis of the performance of Manzana to identify
potential causes for deteriorating profits
Premium Growth:
Growth in premium of the firm has decreased consistently YOY basis. The growth rate in Q2 of 1991 is
slightly better though not as encouraging as the case earlier.
The contribution of RUNs in total premium has increased in the last two quarters while premium
contribution of RERUNs has decreased over the same period.
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
1st
Quarter
2nd
Quarter
Premium $8,188 $8,218 $8,251 $8,352 $8,892 $8,889 $8,797 $8,868 $8,499 $8,901
Premium Growth YOY 8.60% 8.17% 6.62% 6.18% -4.42% 0.13%
Premium Growth QOQ 0.37% 0.40% 1.22% 6.47% -0.03% -1.03% 0.81% -4.16% 4.73%
RUNs $1,485 $1,523 $1,540 $1,546 $1,635 $1,684 $1,763 $1,763 $2,024 $2,172
RAINs 96 113 109 96 117 138 134 134 158 133
RERUNs 6,607 6,582 6,602 6,710 7,140 7,067 6,898 6,971 6,317 6,596
Premium contribution of RUNs 18.14% 18.53% 18.66% 18.51% 18.39% 18.94% 20.04% 19.88% 23.81% 24.40%
Premium contribution of RAINs 1.17% 1.38% 1.32% 1.15% 1.32% 1.55% 1.52% 1.51% 1.86% 1.49%
Premium contribution of RERUNs 80.69% 80.09% 80.01% 80.34% 80.30% 79.50% 78.41% 78.61% 74.33% 74.10%
1990 19911989

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Product mix:
Above graph depicts that contribution of RUNs has increased in the last two quarters while the
contribution of RERUNs has decreased over the same period. RUNs attract a larger proportion of
commission to the agents as compared to RERUNs. This has also contributed to southward profitability.
Operating expenses:
Operating expenses of the firm has increased on mainly two fronts- salaries and branch allocation which
in turn has reduced profitability.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1 2 3 4 5 6 7 8 9 10
Change in Product Mix
Premium contribution of RUNs Premium contribution of RAINs Premium contribution of RERUNs
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1
1 2 3 4 5 6 7 8 9 10
Premium growth YOY & QOQ
Premium Growth YOY Premium Growth QOQ

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Potential causes for deteriorating profits:
1. High turnaround time (TAT):
Presently TAT of the Manzana Fruitvale branch is around 6 days while the TAT of its competitor is
2 days. High TAT is driving the agents away from Manzana.
2. Irregular resource utilization:
Some operational activities like rating and policies writing are overstaffed. Also, the workload is
quite uneven over time, some days an underwriter might be stretched to limit and someday he
may be idle. This is contributing to high TAT and subsequent loss of business.
3. Significant rise in late renewal:
The number of renewal policies that are processed/ renewed after their initial renewal effective
date is increasing. This is primarily because the computer-generated RERUN Policies (policies that
are required to be renewed) are released to the DCs only at the last day before their due date. This
also results in loss of business.
4. Increase in Renewal Lost:
There has been a consistent rise in the number of renewals lost which is also affecting
profitability adversely.

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5. Inconsistent priorities of various departments:
The various departments of Fruitvale have different work priorities which is resulting into the
inefficiency of the branch. The company policy is to use FIFO (First in First out) system however as
the case fact suggests the departments are not following this rule. Here new policy request is given
priority over others. The compensation policy of Manzana also supports new policy by
commissioning 25% to agents.
6. Usage of older Standard Completion time:
Manzana team is using older Standard Time (SCT). As per this timing the completion times are
higher than the actual current completion times. So fore casting the TAT management is mistakenly
giving higher TAT figures to the agents. After seeing the higher TAT value agents refer the policies
of others business to the customers. So, this can be one of the reasons of poor performance of
Manzana.
7. Others probable Causes:
Although not clearly mentioned in the case we can assume that lack of automation in some
processes may be one of reasons of higher TAT.

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4. What are your recommendations for managerial action based on
your analysis? In particular, how should Manzana respond to Golden
Gate’s new policy of one-day service? Justify your recommendations
with data or analysis or proper reference.
RECOMMENDATIONS
1. Revision in calculation method of TAT
• Instead of taking 95% SCTs for calculation of TAT, Fruitvale should use Mean time for calculation of
total throughput. With this calculation Manzana will be able to show TAT of only 4.7 days to their
Agents so that agents are more interested into Manzana’s policies .
• On the other hand, Golden Gate has announced TAT without RERUN of 1 day only. As per the case
Golden gate is showing TAT for only on New Policies, Price Quotes and Policy endorsements. Based
on this calculation, the TAT (95% SCT) without RERUN is 2.6 days. However, when the TAT without
RERUN is calculated based on mean time, it further reduces to 1.5 days only. Accordingly, Manzana
team also need to market their TAT to it’s agents and customers.
Detailed Calculation of TAT for various methods is shown in the table in
the following page.

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Total
Throughput
Days
(Calculation
with 95% SCT )
Total
Throughput
Days without
RERUN
(Calculation
With 95%
SCT)
Total
Throughput
Days
(Calculation
with Average
processing
time)
Total Throughput
Days
Without RERUN
(Calculation with
Average
processing time)
Operating Steps RUNs RAPs RAINs RERUNs
1-Distribution (4 clerks)
Total at DCs 1.0 3.0 1.0 11.0
To be processeda 1.0 3.0 1.0 11.0
Average per DC 0.25 0.75 0.25 2.75
95% SCT per request 128.1 107.8 68.1 43.2
Total minutes 32.0 80.9 17.0 118.8 0.6 0.3 0.3 0.1
mean 68.5 50.0 43.5 28.0
Total minutes 17.1 37.5 10.9 77.0
2-Underwriting (3 teams)
Total at DCs 1.0 3.0 1.0 11.0
Total at UTs 3.0 7.0 6.0 36.0
Average per UT 1.33 3.33 2.33 15.67
95% SCT per request 107.2 87.5 49.4 62.8
Total minutes 142.6 291.4 115.1 984.1 3.4 1.2 1.2 0.5
mean 43.6 38.0 22.6 18.7
Total minutes 58.0 126.5 52.7 293.0
3-Rating (8 raters)
Total at DCs 1.0 3.0 1.0 11.0
Total at UTs 3.0 7.0 6.0 36.0
Total at RTs 1.0 2.0 1.0 7.0
Average per RT 0.625 1.5 1.0 6.75
95% SCT per request 112.3 88.7 89.4 92.2
Total minutes 70.2 133.1 89.4 622.4 2.0 0.7 1.6 0.5
mean 75.5 64.7 65.5 75.5
Total minutes 47.2 97.1 65.5 509.6
4-Policy Writing (5 writers)
Total at DCs 1.0 3.0 1.0 11.0
Total at UTs 3.0 7.0 6.0 36.0
Total at RTs 1.0 2.0 1.0 7.0
Total at PWs 0.0 NA 1.0 2.0
To be processeda 5.0 9.0 56.0
Average per PW 1.0 1.8 11.2
95% SCT per request 89.3 72.1 67.0
Total minutes 89.3 129.8 750.4 2.2 0.5 1.6 0.4
mean 71.0 NA 54.0 50.1
Total minutes 71.0 0.0 97.2 561.1
Summary
Total backlog 82.0
Total TAT 8.2 2.6 4.7 1.58.2 Days (0.6 + 3.4 + 2.0 + 2.2)
Number of Requests to be Processed
Requests-in-Process

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2. Man-power reallocation in departments :
Based on the current team allocation, Policy writing is the bottle neck. The capacity utilization of
Distribution team is highest at 95.67% if the average request per day is 42. Therefore, if the
number of team members is rearranged with 5 members in Distribution and 4 in Policy writing,
then the capacity utilization of the four teams is more optimized.
Average request per day 42 42 42 29.3
weighted average
processing time (ex - 4) 41 28.4 70.4 54.8
staff 4 3 8 5
Total Capacity 43.90 47.54 51.14 41.06
utilization 95.67% 88.36% 82.13% 71.27%
recommended staff count 5 3 8 4
total capacity 54.88 47.54 51.14 32.85
utilization 76.53% 88.36% 82.13% 89.09%
Capacity utilization department wise
3. Centralization of underwriting team:
Since we have seen territory wise work load is not uniform. It varies from 90% to 71% .SO to
avoid any unnecessary delay in processing requests or to avoid any idle times of the underwriters
or to avoid overloading for few underwriters Manzana need to centralize their underwriting team
.We have seen overall branch utilization of Underwriting team is 82% which can be considered as
industry standard.
4. Prioritization of RERUNS
The RERUNs should not be kept waiting for processing on the last day. The Distribution
department should release the RERUNs at least 15 days before the expiration date. Computer
generated trigger of one day should be changed to 15 days .Increased backlog of RERUNs has led
to considerable renewal loss.
5. Proper implementation OF FIFO
Based on the below calculations, it can be concluded that Revenue lost due to de-prioritization of
renewals over these three years is considerably huge: $55,32,826.80.
Therefore, Fruitvale should focus more on following FIFO methodology and increase the
processing of Renewals because the commission to agents in case of RUN is 25% compared to

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Renewal, which is 7% only. Therefore, revenue earned by Fruitvale is actually more if Renewal is
processed.
6. Automation and implementation of six sigma project
Fruitvale should focus also on automating the Rating and Policy Writing department work as this
will increase efficiency of these teams by taking care of the redundant work. As a result of this,
Fruitvale could consider moving some of the team members from these teams to other
departments in future.
Also based on our variation analysis, it was established that there is high variability in
underwriting team. Therefore, implementation of six-sigma will help in reducing the variability in
service delivery and in formalizing the process across all departments.
7. Change in marketing strategy
In order to attract more agents and customer Manzana should market their TAT without
considering RERUN, the way Golden Gate is using. Moreover, with the above mentioned
recommendations it is expected to reduce the TAT below 1 day for RUN, RAP and RAINs.
Processed RUNs Volume Processed Revenue
1989 1068 6094008
1990 1122 6845322
1991(First 6 Months) 624 4195776
17135106
Revenue to Fruitvale 12851329.5
Renewals lost Volume Lost Revenue lost
1989 849 4355370
1990 1717 9666710
1991(First 6 Months) 926 5745830
19767910
Revenue lost 18384156.3

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5. Write four bullet points to differentiate the challenges required to
manage the Manzana Insurance as compared to the operations system
of the Executive Shirt Inc., and How are the challenges be different?
Provide your responses based on only case facts.
1) Process flow –
a. Whereas the executive shirt company was a batch manufacturing process, it followed a
certain process flow where each step was completed either mechanically or by a person,
which could be increased by using parallel machinery or more labours.
b. Manzana insurance is a Service industry, although it does follow a certain fixed process
flow, the flow could not be changed and were dependant oh precursors.
2) Customer –
a. Whereas the executive shirt company , initially had a fixed batch with a predefined design
, and there was little to no customer contact after placing the order.
b. The Manzana insurance had a customised policy for each individual , and customer
contact is high and required multiple iterations to finalise the policy.
3) Variation –
a. Whereas the Executive shirt company had little to no variation in the process flow, cycle
times and final output, as the designs were pre-defined
b. The Manzana insurance had a lot of variation in the process output, and lead times,
owing to varying inputs from the customer.
4) Inventories –
a. Whereas the executive shirt company could handle and store the inventory, as a work in
progress or a buffer, thereby creating a continuous batch operation .
b. There is no inventory that could be stored, it also depended on the varied input levels of
customer demand.

Manzana insurance case study analysis.

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