Manzana Fruitvale Case Study
The main problem of Manzana Fruitvale is a significant loss in profits. It originates in operating performance failures characterized by a total throughput time of 8.2 days. This situation can be improved through structural changes in the underwriting process, reorganization of the incentive structure and redefinition of priorities concerning renewal policies. The total turnaround time (TAT) then decreases to 0.7 days.
Manzana Insurance is a leading player in the Californian commercial insurance space. The Fruitvale Branch is positioned in property insurance only. In the 1970s Golden Gate Casualty enters the market putting Manzana with fierce price competition and intensive marketing activities under pressure. The …show more content…
Thus RERUNs are clearly undervalued. Also, they make up roughly 74% of gross premiums. Though RAPs are overvalued in monetary terms RUNs originating as RAPs constitute 43,9% of total RUNs processed. Therefore, neglecting RAPs could lead to significant decrease in the number of RUNs processed. Thus we advise Fruitvale to run a modified FIFO with a prioritization on RUNs, RERUNs and RAPs first and RAINs second.
Secondly, we have to reconsider the incentive structures in place. Agents are given a 25% commission on new policies and a 7% commission on renewals. As shown, RERUNs make up for a significant amount of revenues, while their handling constitutes a key flaw in lost policies. Thus it is sensible to increase incentives for RERUNs. We therefore propose an incentive scheme granting a flat commission of 11,4%.
In terms of internal incentives, changes in the underwriting process are to be considered. RT and PW have become increasingly mechanical. Thus incentives could keep the pace of work on a high level and eradicate backlogs. We also propose to extend the salary plus scheme to all divisions and to every type of insurance in order to make processing RERUNs attractive.
Additionally we would advise to bring RERUNs into the process earlier in order to make sure that they arrive with the agents in time. This would decrease backlog and also decrease the probability that the agents receive policies late and lure away