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Manzana Insurance - Operations Management

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Introduction

MANZANA INSURANCE OPERATIONS MANAGEMENT CASE 1 SUBMITTED TO PROF. T. S. NAGABHUSHANA BY TEAM 1 AMIT KUMAR GUPTA (0211079) HARPREET BINDRA (0211087) HIMANSHU MITRA (0211096) PRADYUMAN KAPOOR (0211113) ROHIT JOG (0211124) EXECUTIVE SUMMARY Fruitvale branch of Manzana, which handles only property underwriting, has been performing very badly for quite some time with very high turnaround time resulting in late renewals and increased renewal loss rate. This is further worsened by increased competition from Golden Gate, a new player in insurance industry. There are a couple of problems in the fruitvale including ineffective incentive system, incorrect prioritizing of requests, increase in shift to newer policies, bottlenecks in operation, pending work not considered on a territory basis and increased turn around time etc. These problems have resulted in loss of almost half of renewal business for Manzana-Fruitvale. Some of the recommendations by which the Fruitvale can be pulled up are pooling together of underwriting teams and catering to any requests received from any of the agents of the branch. Also RERUNS should not be discriminated against because they are actually more profitable both in terms of value and the time they take to be processed. Fruitvale has to streamline its processes and will have to compete on the basis of services in this highly competitive scenario where insurance rates and commission schedules are nearly identical among competitors. ...read more.

Middle

Accordingly, it will have a higher backlog also. 5. Increased losses may be due to shift in mix to newer policies * Adverse Selection: New policies may be initiated by clients "anticipating a loss" * To get PLUS bonus, the Underwriters may be too lenient in their assessment of risk * Due to poor service, Manzana may be getting only the new policies that other insurers don't want! 6. Bottleneck in operation flow: Underwriting of Territory 1 requests: Underwriting is done by each team on territory basis. Territory 1 has the highest capacity utilisation amongst all territories. This estimate is based on steady state of operations but in reality, due to fluctuations in requests, it will not be sufficient. The average variation in the requests per day is 16.7 (from the data in case exhibit 6), which the system will definitely not be able to handle. We also note that the renewal loss rate associated with territory 1 is the highest. Hence Territory 1 is a major source of bottleneck. SOLUTION ANALYSIS AND RECOMMENDATIONS The analysis of the case and the corresponding recommendations have been provided based on the following points which can be implemented without any compromise on the quality of the work: > The underwriting teams need to be pooled together and they will perform the requests received from any of the agents of the branch. ...read more.

Conclusion

(Refer Exhibit II) It can be observed that the two employees for the distribution activities need to be recruited and two employees from the rating activity should be transferred to comprise an underwriting team. As a result, the turnaround time for each activity will average around .625 days. This will not only lead to the efficient utilization of all the available resources but also result in reduction in the total turnaround to 2.49 days (Refer Exhibit II) > Our agents receive a commission of only 7% on RERUNS. This is substantially lower than the amount they receive for RUNS, and hence acts as an incentive for agents to divert this business to our competitor. An increase in the commission rate should be effective in tackling this problem. > We should not discriminate against RERUNS as a secondary priority, because they are actually more profitable both in terms of value and the time they take to be processed. We need to implement the policy of first in first out regardless of the policy that is being processed. > We have lost out on a large number of renewals to the fact that the policy reaches the holder for renewal only after the due date is over. It is recommended that the process of RERUN initiation should start at least one week before the due date. This would result in the policies reaching in time, and hence a significantly higher rate of renewal. Operations Management - Case 1 1 ...read more.

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