Criteria for Evaluation
In considering the various options to deal with the problem, some of the criteria for evaluating them are:
- Reduction in the Turnaround Time
- The turnaround time is a critical indicator of how long it takes to process the average request from start to end. Current TAT is around 6 days on an average, which is also one of the reasons for the backlog. The solution should be able to reduce this value.
- Reduction of Backlog of RERUNs
- There has been an accumulation of work caused by the slow process, most of which have been RERUNS. As RERUNS represent the existing customers, they represent a guaranteed source of income, which the company is actually losing out on because most of these requests are completed late. This is resulting in customers who are unsatisfied and switching to other insurance companies.
- Balance of Workload across employees
- Currently there is in an imbalance of the workload for the different roles and units, resulting in some roles being very busy for some time and completely free during other times. Thus the work load must be distributed and optimized so that no team is extremely burdened or idle at any given time.
- The improvement in Profitability
- The proposed solution must not incur large costs in the long term, and must actually reduce the costs in the long run if possible.
Option Generation
One of the options to reduce the percentage lateness in processing new and backlogged requests is to increase the average man power involved in processing.
- Hire more people into those departments which pose a bottleneck.
- Increase the man hours per day by necessitating overtime
- Redistribute Man power across departments from the underutilized teams to the highly stretched teams.
- Pool the Underwriting teams to handle the agents from different territories to reduce imbalance in workloads of the team.
- Reduce Turnaround time.
To consider the problems of RERUN’s, backlogs have to be cut down to an extent that it no longer adds to the total turnaround time considerably. Several options to increase the renewal rate is
- Re-Priorities the RERUNs and set their priority such that the existing backlog of the requests are cleared
- Switch back to the FIFO model of processing the requests in the order in which they come without any priority
- Start with a higher priority for the RERUNS until backlog clears and then switch back to the FIFO method
- Release the computer generated RERUNS ample number of days earlier to the policy expiry date.
Evaluation of options
A) Increase resources at Bottlenecks
The mean processing time and the cycle time of the different stages of handling a request are calculated.
If we consider the maximum possible time taken Refer Exhibit 4 the underwriting department becomes a major bottleneck which has the greatest potential to stall the rest of the requests behind it. Therefore, the ideal solution to this would be to pool the underwriting teams, so that even if one of the teams is occupied, the other teams can address the incoming requests as soon as they are free.
B) Pooling of Underwriting teams from different territories
The current scenario has the market for Fruitvale branch divided into 3 territories, whose agents report to their corresponding underwriting team. Therefore, an agent is only assigned one particular underwriting team without any consideration of the work load of the underwriting team concerned.
Consider the current scenario where (see Exhibit 5) underwriting team for territory 1 is working at a capacity utilization of 93.86% (given the 7.5 hour work day). In comparison, underwriting teams 2 and 3 are operating at a utilization of 78.49% and 70.37% respectively. Here, underwriting team 2 and 3 are underutilized, while the underwriting team 1 is close to full capacity. Thus team 1 would be over burdened, which reduces its efficiency and satisfaction of the employees.
Therefore, it is proposed that the underwriting teams be pooled together so that any of the teams can handle any of the agents. In this way, the capacity utilization will be brought down to an average of 81.91%, which is well within an optimal range of 75-85% as expected in operations.
C) Optimize capacity Utilization – Exhibit 6 represents the capacity utilization measure in terms of man hours for each of the four stages. There is a variation in utilization in terms of resources. For E.g: Rating and policy writing are underutilized compared to Runs and Raps. Although the thing to be noticed is that due to pooling of all the underwriting teams together we have enhanced the utilization of capacity in the underwriting teams.
D) Hire more people -
This option is valid as long as the existing capacity of employees is not sufficient to meet the daily demand even after reshuffling is done. As per the given data we know that the daily demand is 39 requests and the existing capacity is nearly handling 44 requests per day. If implemented, this option would also increase the cost due to additional employee salaries. Also it would not be supported by the Main Manager who feels that Fruitvale branch has enough people to meet everyday demands. Hence it would not be a viable solution.
E) Implement Overtime until backlog is cleared
The need for overtime would arise from the fact that there is significant backlog of the Rerun requests. Given the fact that they have been already delayed and no further delay should be added to their processing, these should be processed first along with the daily requests.
F) De-Prioritize the RERUNs and set their priority such that the existing backlog of the requests are cleared - Among the daily requests, RERUNs have a higher share than the others and hence tend to contribute much more to the backlog if given lower priority. Hence take care of handling these backlogs first and also make provisions for any backlogs from this operation in future.
G) Mandate FIFO for all processes
Currently, though it is company policy to process all orders in FIFO order, most teams operate based on prioritizing the RUNs, followed by the RAPs, then RAINs, and finally the RERUNs. This is leading to the RERUNs being kept in the backlog, resulting in late renewals. If FIFO is mandated for all processes including policy writing (which orders tasks according to their complexity or required time for processing), then RERUNs would also have a fair chance of being completed without being left in the backlog.
Total Turnaround Time: We see that the SCT reflects that in only 5% of the requests do the processing times exceed the SCT, it says nothing about the measure of dispersion among the values. Hence we consider mean processing time to calculate our Total turnaround time. Refer Exhibit 7. Also remember that 95% SCT time does not quantify how worst the 100th percentile value would be. In case the 100th percentile value is 5-10 time greater than the 95th percentile one, then the backlogs would increase significantly.
System Capacity: Using the weighted average processing time per request we can calculate the actual system capacity for each department. This would effectively give us the idea of which of the departments would actually be the bottleneck if the demand shoots up more than the 41. In this case the bottleneck is Policy writing with a capacity limit of 41.06. Notice that when the average demand in this department is 26.3 it can manage servicing it and is actually underutilized. But the same department becomes the bottleneck when demand shoots up above 41.
We can further increase the capacity of the system by shifting one employee from rating (which has a capacity of 51.14) to policy writing. This would enhance the capacity of policy writing from 41.06 to 49.27 and thus shift the bottleneck to Distribution i.e. 43.90. (Refer Exhibit 9)
Plan of Action
- Implement FIFO for all requests regardless of their origin, so that each request is processed as it comes without assigning any biased priority.
- Pool the Underwriting teams to handle agents from any territory to balance the workload better.
- Reshuffle the employees from the overstaffed departments (Rating) to Understaffed (Policy Writing) ones to maximize capacity utilization.
- It will be economic to train employees to handle the whole range of jobs so that in case of overloading of the staff with RAP requests, policy writers can help distribution clerks and raters.
Conclusion
By following the basic recommendations of shifting the resources at the identified bottlenecks and restructuring the implemented policies of the priorities, the objectives of reducing the turnaround time and increased customer satisfaction can be achieved. At the same time the Reruns would be served better, reducing the unnecessary backlogs and percentage late figure. Hence the existing customers would be retained. These improvements would also lead to further inclination of the agents towards the company. The result of the improvements would in turn boil down to betterment in the revenue figures.
APPENDIX
Exhibit 1- Work flow process
Exhibit 2 – Operating Activities
Exhibit 3- Annualized premiums
Exhibit 4 : Cycle Time for each process
Exhibit 5 : Capacity Utilization
Exhibit 6- Redistribution and Pooling of territorial data
Exhibit 7 : Calculation of TAT with mean processing time.
Exhibit 8 – Total System Capacity
Exhibit 9 – System Capacity after the Shifting Process
