Why have profits been deteriorating over the past several quarters?

The Fruitvale branch of Manzana actually handles property-liability insurance cases

out of which 65% of business is with Property cases and 20% deals with liability
case and rest is attributed to miscellaneous specialty lines. It had come under the
scanner because of declining profitability. Basically it was struggling with the poor
late percentage figure and a turnaround time of almost 6 days whereas its
competitor Golden Gate has a turnaround time of 2 days.
The main concern of the Manzana Insurance was the declining market share and
profit and the reasons for the same could be accounted majorly by the following 3
points:
a) Manzana was struggling with the High Turnaround Time though it had
sufficient staff, even it was overstaffed in Policy Writing and Rating
department.
b) Its backlog of policies had increased since 1989, and the number of new
policies and endorsements appeared to be stagnating whereas others
reported a moderate growth.
c) The renewal loss rate was increasing uncontrollably because of the high
number of late renewals and this was becoming a really pain to the agents.
The other factors/procedure which were contributing to the deterioration of the
company are listed below:
Faulty company procedure:
Though the company policy was to use FIFO system, due to prioritization for RUNs
and RAPs, RAINs and RERUNs were given very low importance and the number of
late RERUNs is increasing consistently over the quarters during the year 1989-1991
as shown in the exhibit 6.
Poor capacity utilization
Very poor capacity utilization of Rating and Underwriting team and the calculation
showing only 76.27% and 82.04% which are contributing to the late processing.
Uneven workload among underwriting team
Among underwriting team there is uneven distribution of workload with Territory 1
UT with capacity utilization of 92.30% and Territory 3 UT with a capacity utilization
of 70.84% and the workload here can be distributed properly.
Increasing TAT:
The number of lost renewals increasing and correspondingly increasing the TAT from
4.7 in 1989 to 6.2 in 1991(Turnaround time) as shown in exhibit 6.

Loss of business: Apparently this caused agents to recommend other insurance

firms based on TAT since the products offered by them is not differentiated and this
causing customers to easily switch from one firm to another. This causes Fruitvale to
lose the business.
Increasing Insured losses:
Increasing Insured losses over the years from 1989-1991 as in exhibit 5 is another
reason for its branch profit to change from $1765 in 1 st quarter 1989 to post a loss
of $121 in the 2nd quarter 1991.