Essay about Manzana Case

Answer 1:
There are multiple reasons for the dropping profits over the past few quarters. 1. The first reason that the profits have dropped so dramatically is because of the fact that the company’s renewal loss rate has gone up from 33% to 47%, as opposed to a meager 15% for the competitor. This is an increase of more than 110% from 1989 to 1991 (exhibit 7). This is primarily because of the fact that the company RERUN late rate has increased from 20% to 44%, as opposed to a 0% renewal late rate for the competitor. The reasons for the same are twofold: a. Priority setting in operations put renewals on the last priority with a view that the renewals look after themselves (which is inherently wrong, late renewals suffer in renewal loss) b. Delayed release of renewals to DC (one day before due date) to have them appraised at the most updated information, which coupled with a TAT time of 6 days resulting in further late renewals.
The delayed renewals result in the agents suggesting the customers to switch service to other insurers. 2. Also, the company RUNs are increasing at a very small rate of 2.5% per quarter (nearly stagnating), whereas the renewal loss rate is 13.34% (exhibit 6). It is of importance to notice here that the renewals make up for more than 4 times the gross premium than RUNs, RAPs and RAINS put together (Exhibit 5) and therefore need more attention. 3. The increased TAT time is taken as a measure of service, prompting agents to ask customers to go for insurers with low TAT times, thus reducing RUNs. 4. The commission for renewals to agent is just 7% as against 25% for a new policy, which makes him lose focus on this big gross premium generator. 5. The number of agents has dropped off from 79 in 1989 to 76 in 1991 (Exhibit 7), which might be a factor a very slow increase in policies in force. 6. Only 15% of the RAPs are converted to RUNs, which on the face of it looks like a very small figure.
Answer 2:
Fruitvale is currently prioritizing the policies based on the gross premium that they generate, with the added view that renewals will be automatic, thus putting renewals in the last place. This is against the company policy of FIFO. There are a number of things that are not right with the way that the operations are assigned and the priorities are set, these are: 1. RERUNs are the largest generators of gross premiums, and a lot of renewal loss is being incurred due to late renewals, therefore the policy of putting the renewals on the last priority is not correct. 2. The queuing policy currently has the largest time consuming reports being given first priority over smaller time consumers (RUNs take more time than RAPs, and RAPs take more time than RAINs and RAINs take more time than RERUNs, however, this is also the respective order of priorities), thus increasing the wait times for all the preceding reports, thus increasing the TAT time. 3. The calculation of TAT time is not correct, as the TAT time is being calculated in exhibit 3 on the basis of SCT instead of mean time. The correct TAT is 4.72 days and not 8.2 days, (the correct calculation is shown in the appendix). 4. Because of incorrect calculation of TAT time, incorrect due dates are issued to process owners. 5. The allocation of under writers to territory wise is not a great idea, as the load is imbalanced, territory one team is 97% utilized, while territory 2 and 3 teams are 78% and 70% utilized only. (See appendix) 6. The utilization between different processes is also not balanced, with rating and policy writing only utilized 76% and 71% respectively, as against 89% and 82% for distribution clerks and under writers. (See appendix) 7. Underwriters, who are already highly utilized, waste a lot of their time sorting their work according to the priority queuing system.
Answer 3:
Pippen should recommend the following: 1. Eliminate the priority queuing system, and move to a FIFO

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