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Executive Summary
Manzana’s Fruitvale branch is suffering from declining profitability. The main issues
resulting in this phenomenon are its falling renewal rate and rising turnaround time.
There are systemic issues with the process for handling requests that have led to this
distribution of workload amongst its three underwriting teams. There are also
idle capacity in the Rating and Policy Writing teams. To compound matters, the
these underlying issues is key to Manzana’s ability to compete with Golden Gate,
whose quicker guaranteed turnaround time will generate loyalty among independent
agents and result in further loss of business for Manzana. To prevent this, the
(ii)the reward system for employees should be reviewed and aligned to support
(iii) RERUNs should be sent to Distribution Clerks at least three days prior to the
(iv) The workload among the three underwriting teams should be better balanced;
(v)The SCT for the rating and policy writing teams need to be reviewed as they
are possibly based on outdated figures. This can lead to redeployment of some staff in
and
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
The most alarming issue facing the Fruitvale branch is the sharp increase in renewal
loss rate, from 33% to 47% in the last year. As renewals represent roughly three
quarters of the company’s revenue, this is a crucial area to improve. The primary
cause of this increase is the fact that renewals are often not processed internally
before they expire, causing agents to recommend other insurers to their customers.
This links to the second major issue that needs addressing. The turnaround time (TAT)
for insurance requests is far longer than Manzana’s main competitor Golden Gate, and
is still increasing. Improving this is key to attracting new business and retaining
existing business as agents will go elsewhere if Manzana’s TAT is not reduced and
Golden Gate is able to deliver on its guaranteed TAT of 1 working day. These two
Renewals, or RERUNs, are not issued to the distribution clerks (DCs) until the day
before they are due. This would be fine if the DC’s were idle or if RERUNs were a
top priority from there, but employees systematically deprioritise RERUNs in favour
of securing new business through RUNs and RAPs, as their salary bonuses are linked
to these. As a result, the percentage of late RERUNs has more than doubled this year.
A simple solution would be to enforce the company’s official FIFO policy and not
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
have any prioritisation rules, and to support this the bonus salary structure should be
reviewed and revised so that a more aligned target, such as turnaround time or profit
is rewarded. In addition, the one day notice for DCs should be increased to three days
to ensure sufficient time for a renewed contract offer to reach the agents on or before
the expiration date of the old policy . Although this may not be based on the most up
to date information, it will not be far off and is vastly preferable to losing the business
Insufficient Capacity
Fruitvale branch has enough employees to cover the workload, or as John Lombard
insists, they need more staff. Of the three examples given, the Fruitvale branch has
the highest agent to underwriter ratio of approximately 25, compared to 20 for the
largest and smallest Manzana branches. However, Tom Jacobs’ “rough calculations”
indicate that the team is still working within its capacity. The utilization rates based
on Tom Jacob’s calculations and exact utilization rates (based on 39 requests per
Tom Jacobs states that the Fruitvale branch is overstaffed. However, the current
utilization rates suggest that there is insufficient reserve capacity in the system to
handle variability in demand as the utilization rates are relatively close to 100%. A
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
the premises, the Fruitvale branch is understaffed in both the Distribution and
calculations do not even take into account the other responsibilities performed by that
department such as analysing and disseminating industry data every month, verifying
insurance competitor’s quotes and overseeing the ratings operations. This could cause
Another factor to consider is that the above calculation is for average utilization,
using the average number of requests per day. This may be hiding the fact, highlighted
by Tom Jacobs, that staff are overworked at times and idle at others. This is
particularly likely to happen in the Underwriting team, who are only allocated jobs
from specific agents. This can result in an uneven volume of work for each territorial
team. If the same utilization analysis is used for each territory, it shows that this is in
It is clear that territory 1 is running close to its peak capacity, which is unsustainable,
and no doubt results in substantial delays for some requests, especially RERUNs and
RAINs which are down the priority order. Even territory 2 is being stretched at an
the underwriters are indeed the bottleneck in the process, with Exhibit 3 confirming
that there are more requests at this stage than everywhere else put together, even more
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
so for RAINs and RERUNs, and that this is the most time-consuming step at 3.4 days.
To improve this situation Manzana needs to balance the territorial workloads. The
company could do away with the territory system altogether, and simply allocate
incoming requests to the first team available on a FIFO basis, smoothing the
utilization across the teams with each of them at an average of 87%. However, this is
still higher than the optimum value of 80%, suggesting that John Lombard’s request
The drawback of this model is that it would reduce the effect of personal relationships
held between agents and underwriters, which were deemed a “critical factor in
building and sustaining market share and profitability” for Manzana. If this is still the
case, and relationships are more important than simply reducing turnaround time, the
company should not switch to FIFO with respect to allocation of requests to its
underwriting teams. Instead it may consider redefining the territories so that territory
3 takes on some of territory 1’s agents (assuming the first half of 1991 is consistent
with future expectations). It should also consider using the Review and Distribution
prior knowledge, and which are more mechanical and can be done by any available
underwriting team. This will add some time to an already overloaded Distribution
team, but will help balance the underwriters workload and therefore ease the primary
increasing its Distribution and Underwriting resources and hiring new staff in this
area.
A further area that could be improved to reduce the turnaround time is the rating and
policy writing stages. These can both be largely automated thanks to the development
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
of computers in the late 80’s, making the SCT inaccurate. The Fruitvale branch
spends 2/3 of the processing time on these two stages, suggesting they have not
Gate until they do. There is a chance that staff freed-up in this area can develop the
skills needed in the bottleneck stages outlined above, therefore maintaining the
current headcount and reducing any need for expensive and time-consuming
There are four main issues with the current system/methodology used by the branch to
compute TAT.
Firstly, based on the current system the manager calculates TAT assuming that various
activities wait for earlier activities to complete before commencing. For example,
from Exhibit 3, the Underwriting team starts work after 0.6 days within which
Distribution clerks clears its backlog. Further, it assumes that policies move from one
activity to another in batches equal to the total number of policies with the
department. The TAT as computed for the week ending 6th September 1991 as set out
in Exhibit 3 is incorrect as the assumptions that the calculations are based on are
fallacious. A more accurate calculation of the TAT for that week is set out at Appendix
B.
Secondly, the current measurement system for turnaround time is based on the SCTs
calculated in 1986, before the development of computerized rating and policy writing,
the liability crisis and subsequent takeover of Manzana by Banque du Soleil and the
switch of focus to property insurance only for the Fruitvale branch. In the premises, it
is likely that the SCTs set out in Exhibit 3 and used to compute TAT are outdated and
overstated.
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
Thirdly, the use of the 95% SCT itself is misleading, as it ignores the 5% of requests
that are most time consuming. Taking underwriting RERUNs as the worst case
example, the maximum time used for one request exceeded the 95% SCT by eleven
inaccurate expectations for team performance. This figure is only calculated once a
week, and then used for that entire week to predict turnarounds times. The workload
can change significantly in that time, so agents may be given inaccurate due dates.
Lastly, the processing times used have the staff’s unofficial prioritization process
inherent within them. They do not therefore accurately reflect the processing times
required for the requests if the official FIFO method were employed.
Recommendations
To address the two major issues of dropping renewals and increasing turnaround
The first is to enforce the FIFO policy on all requests, ensuring that RERUNs are not
deprioritised and protecting Manzana’s largest revenue stream. This will involve
changing the salary plus bonus scheme so that not only new policies are rewarded.
The RERUNs should be sent to the DCs three days before they are due to ensure they
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
maintain these relationships – possibly giving them a point of difference over Golden
Gate’s model – they should balance the expected workloads and investigate which
However, the company may still need to recruit in this area to successfully compete
computerization of the Rating and Policy Writing stages. This may free up staff to be
Lastly, the system and the methodology for computing TAT needs to be reviewed
based on an updated SCT and employing the methodology set out above.
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
c) Total requests
per day (22 +17) 39 39 39 29 (75%)
Capacity Utilization
(c/b) 89% 82% 76% 70%
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
Appendix B: Proper calculation of TAT for week ending 6th September 1991
DC
no of requests 1.0 3.0 1.0 11.0
team
request per person 0.3 0.8 0.3 2.8 4.0 members
95% SCT 128.1 107.8 68.1 43.2
Time required 32.0 80.9 17.0 118.8 0.6 days
UW backlog
no of requests 3.0 7.0 6.0 36.0
team
request per team 1.0 2.3 2.0 12.0 3.0 members
95% SCT 107.2 87.5 49.4 62.8
Time required 107.2 204.2 98.8 753.6 2.6 days
UW new
no of requests 1.0 3.0 1.0 11.0
team
request per team 0.3 1.0 0.3 3.7 3.0 members
95% SCT 107.2 87.5 49.4 62.8
Time required 35.7 87.5 16.5 230.3 0.8 days
Rating backlog
no of requests 1.0 2.0 1.0 7.0
team
request per person 0.1 0.3 0.1 0.9 8.0 members
95% SCT 112.3 88.7 89.4 92.2
Time required 14.0 22.2 11.2 80.7 0.3 days
Rating new
no of requests 4.0 10.0 7.0 47.0
team
request per person 0.5 1.3 0.9 5.9 8.0 members
95% SCT 112.3 88.7 89.4 92.2
Time required 56.2 110.9 78.2 541.7 1.7 days
PW backlog
no of requests 0.0 0.0 1.0 2.0
team
request per person 0.0 0.0 0.2 0.4 5.0 members
95% SCT 89.3 0.0 72.1 67.0
Time required 0.0 0.0 14.4 26.8 0.1 days
PW new
no of requests 5.0 0.0 8.0 54.0
team
request per person 1.0 0.0 1.6 10.8 5.0 members
95% SCT 89.3 0.0 72.1 67.0
Time required 89.3 0.0 115.4 723.6 2.1 days
PW last
no of requests 1.0 1.0 1.0 1.0
team
request per person 0.2 0.2 0.2 0.2 5.0 members
95% SCT 89.3 0.0 72.1 67.0
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OM Manzana Case Study - Team 2 (Rishi, Geoff, Vimalan, Rose, and Jonathan)
4.4 days
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