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Manzana Insurance: - Financial Performance

Manzana Insurance experienced increased losses and decreased renewals in 1991 compared to 1990. This was due to late and lost renewals, which increased from 20-33% in 1990 to 45-47% in 1991. The long turnaround times, averaging 6 days in 1991, were caused by bottlenecks in the underwriting process and uneven workloads between the three underwriting teams. Operational changes like pooling staff and automating processes, as well as policy changes to incentives, could help address these issues and improve performance.

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Ammar Ali
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61 views5 pages

Manzana Insurance: - Financial Performance

Manzana Insurance experienced increased losses and decreased renewals in 1991 compared to 1990. This was due to late and lost renewals, which increased from 20-33% in 1990 to 45-47% in 1991. The long turnaround times, averaging 6 days in 1991, were caused by bottlenecks in the underwriting process and uneven workloads between the three underwriting teams. Operational changes like pooling staff and automating processes, as well as policy changes to incentives, could help address these issues and improve performance.

Uploaded by

Ammar Ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Manzana Insurance

•  Financial performance
– Increased gross premium from new policies
– Decreased gross premium from renewals
– Increased ordinary insured losses (riskier policies)
•  Late & Lost Renewals
– Lateness increased from 20% in 1990 to 45% in 1991
– Lost increased from 33% in 1990 to 47% in 1991
– Golden Gate: 15% loss rate
•  Long TAT (Actual, not Estimated)
– Increased from 5 days in 1990 to 6 in 1991
– Golden Gate: 2 days to be decreased to 1 day!

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 2

1
•  What caused late/lost renewals?
–  Late release of RERUNs to the system
–  RUN, RAP prioritized over RAIN, RERUN
–  What are the motivations to do so?
•  TAT time for new policies is important
•  Impression that new policies are more
profitable than renewals
–  What is the key problem—late release or
prioritization?

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 3

•  What caused long TAT?


–  Are there adequate capacity to handle the
total workload?
•  Process flow chart
•  Where are bottlenecks?

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 4

2
2.3 **
14.6 * UT#1
39 39 Rating 24 Writing 26.3
Dist (4) 13.2 UT#2
(8) (5)
11.2 UT#3

Assume 20 days/month, 7.5 hrs = 450 min./day

Total in 6 months in 1991 (Exhibit 7)


= 350 RUN + 1798 RAP + 451 RAIN + 2081 RERUN
=4680 or 4680/120 = 39 requests per day

* Exhibit 7: 1755/120 = 14.6


** Exhibit 7: 1798/120 = 17 RAPs per day out of which only
274/120 = 2.3 were accepted
Prof. Vernon Hsu, CUHK Manzana Insurance, Page 5

Dist UT #1 UT #2 UT #3 Rating Policy


writing

Daily 39 14.6 13.2 11.2 39 26.3


Requests

Ave. Pro- 41 28.4 28.4 28.4 70.4 54.8


cess Time
(Exhibit 4)

Total time 1599 414.64 374.88 318.08 2745.6 1441.24


required

Total time 450*4 450 450 450 450*8 450*5


available

Utilization 89% 92% 83% 71% 76% 64%


rate

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 6

3
•  What caused long TAT?
–  Uneven workloads among 3 UTs
•  What were the motivations to have such
division?
•  UT #1 has heaviest workload and largest
late/lost of renewals
•  The next heavy load is at Distribution

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 7

•  Marketing problems
– Quotation of long estimated TAT
– Incentives for agents

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 8

4
•  Operational changes
– Pool the three UTs – the utilization rate after pooling is 82%
– Automating Distribution step or moving staff from Policy
Writing to Distribution
– Release RERUNs early and use them to smooth the variability
of the requests
– Correct methods for estimating TAT
– Priority in handling RUNs and RERUNs?
– Create dedicated cells to handle RUNs?
•  Policy changes
– Change incentive structures (internal and external)

Prof. Vernon Hsu, CUHK Manzana Insurance, Page 9

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