Memorandum

Re:
The theoretical fow time of a RUN is 0.22days and a RERUNS = 0.1days !"##endi$
"%Ta&le 1'( which means that in one day Man)ana insurance could #rocess *.+ RUNS
and ,., RERUNS if they were dedicated to these re-uests( howe.er the turnaround
time is lon/er &ecause the calculation is &ased on the total #endin/ re-uests on the
system( and at the moment there are a si/ni0cant amount of RERUNS to &e
#rocessed1 thus resultin/ in a lon/ turnaround.
Resource Utilization
The initial calculation of Tom 2aco&s /enerates su3cient ca#acity time &ecause the
calculations are &ased on the wei/hted a.era/e times which then smooth the
.ariation of #rocessin/ time( this misleads into assumin/ that there is enou/h
ca#acity when in fact .aria&ility is #layin/ a 4ey role in determinin/ the ca#acity of
the fow time.
" &etter a##ro$imation of the real fow times is &y usin/ the 5+th #ercentile
standard com#letion times !5+6 S7T'( one e$am#le is the underwritin/ #rocessin/
times for RERUNs1 the 8ei/hted a.era/e times is 29.* minutes when in fact the
#rocess has a mean of 19., minutes and a standard de.iation of 15.9( therefore
:96 of the cases will ha.e a ma$imum time of 9.+ and 5+6 of the cases within
:2.9 minutes1 meanin/ that ta4in/ 29.* minutes is not the correct .alue due to
.aria&ility in the #rocess.
;f the 5+6 S7T times are ta4en as the #rocessin/ times1 then &ottlenec4 is the
Underwritin/ #rocess since is the lar/est a.era/e fow time with a mi$ of re-uests
!"##endi$ " < Ta&le 2'. 8ith the actual desi/n1 the system has a ca#acity of 1,.:0
re-uests on a.era/e #er day1 /i.en that the Underwritin/ ta4es 0.0+,days on
a.era/e #er re-uest !and is the hi/hest .alue of all the #rocesses'.
Utilization Improvement
7urrently the mar4et for =ruit.ale is di.ided into territories and a/ents re#ort
solely to their corres#ondin/ underwritin/ team. This is a #ro&lem since the a/ent is
not considerin/ the wor4load of the other underwritin/ teams. 7urrently U8 team1
is wor4in/ at a ca#acity utili)ation of 52.6 while U8 team2 and are wor4in/ at a
ca#acity utili)ation of 96 and ,0.96 res#ecti.ely !Ta&le '. ;t is clear that the wor4
load is not &alanced due to the .ariation of in#ut. >owe.er the U8 teams can &e
#ooled to/ether so that any team can acce#t the wor4 from any a/ent from
di?erent territories. ;f the U8 teams are #ooled1 the ca#acity utili)ation will &ecome
92.0*6.
The utili)ation at the moment is 9+6 for @71 1006 for UT1 *,6 RT and ,06 of A8.
Therefore a sim#le strate/y is to re%arran/e #eo#le from other de#artments into
underwritin/ de#artment.
Usin/ o#timi)ation models a new arran/e of #eo#le would &eB
@7 UT RT A8
: 9 + *
This will allow an increase in the a.era/e ca#acity from 1,.:0 to 2.*: re-uests #er
day.
RUNs vs. RERUNs
Ci.in/ #riority to RUNs and R"As o.er RERUNs is one of the main reason that
caused the di?erence in the theoretical and actual T"T. Since renewals are less
#ro0ta&le1 RERUNs are left &ehind until new re-uests are com#leted. This ha.e
caused an increase in late renewals. Not only this #olicy has increased the T"T1 it
has also made the &ranch incurred losses. Runs #rocessed increased 2.+6 -uarterly
while late RERUNs increased at 10.26 leadin/ to a renewal loss of 1.*6 E.en
thou/h the a/ent fee for RUNs is hi/her than for RERUNs1 it is still not #ro0ta&le to
/i.e #riority to RUNs o.er RERUNs.
Turnaround Time (TAT)
Turnaround time is the num&er of days &etween recei.in/ a new #olicy and the
issuance of a 0nal #olicy1 which determined &y the mana/er. This is a 4ey metric
used &y the re-uestin/ a/ent to esta&lish a due date. ;nsurance a/ents /et #aid
mostly commission &ased. Dow turnaround time means the a/ents will /et their
commission sooner and sell more #olicies. Therefore1 the a/ents steer their client to
the com#any with the lowest turnaround time1 which in this case is Man)anaEs
com#etitor1 Colden Cates. F;t is not uncommon for an a/ent to call an insurer for an
estimate of that com#anyEs T"T and then refer &usiness elsewhere if issuin/ a new
#olicy would ta4e too lon/.G
The T"T is the sum of total throu/h#ut days for the four o#eratin/ ste#s1
distri&ution1 underwritin/1 ratin/ and #olicy writin/. The total T"T calculated and
shown in e$hi&it is 9.2 days1 which is much hi/her than the actual wei/hted
a.era/e T"T of :.2 days shown in e$hi&it :. The calculatin/ does not ma4e sense
since it assumes that the current #olicies mo.e from one o#eratin/ ste# to the other
ste# as a &atch. =or e$am#le1 the underwritin/ ste#s has #olicies1 it was assumed
that all three #olicies need to &e 0nished and then all three #olicies are #assed
down to the ratin/ ste# to/ether. >owe.er1 the underwritin/ ste# could 0nish one
#olicy1 #ass down to the ratin/ ste#. 8hile the ratin/ de#artment is wor4in/ on this
0rst #olicy1 the underwritin/ de#artment can wor4 on the second #olicy. Therefore1
the assum#tion cause some o.erla# &etween the throu/h#ut days of di?erent
o#eratin/ ste#s and result a hi/her T"T. Moreo.er the T"T is calculated usin/ 5+6
S7T #er re-uest1 a much hi/her metric1 instead of a.era/e #rocessin/ time.
"lthou/h1 this will /uarantee the 5+6 of the actual T"T for the #olicies will &e less or
e-ual to the estimation1 the added time for each ste# increased the estimated T"T
and resulted a/ents ta4in/ their &usiness to other com#etitors.
Recommendation
To deal with the two maHor issues of increasin/ late renewals and turnaround
time. =ruit.ale should 0rst enforce the =;=I #olicy on all re-uests. This way the
num&er of late RERUNs will decrease and reduce the #ro0t losses incurred &y late
#olicies. They should focus on RUNs =irst1 then RERUNs1 and lastly R";Ns and
R"As. ;n order to do so1 the salary #lus &onus system has to &e altered so that
there are incenti.e to start RERUNs as much as RUNs. ;n addition1 the RERUNS
should &e sent to the @istri&ution 7ler4s at least &usiness days &efore they are
due to ensure they can &e #rocessed in time.
The num&er of wor4ers for the distri&ution and underwritin/ de#artment needs to
&e increased since they ha.e a utili)ation rate of 906J and thus not a&le to deal
with the .aria&ility in demand.
The &ranch should #ool the underwritin/ teams to/ether so the a/ents can &e
handled &y any of the three teams. This will &rin/ the ca#acity utili)ation to &e
within an o#timal ran/e of ,+ < 9+6.
Ky im#lementin/ technolo/y for com#uteri)ation of ratin/ and #olicy writin/
sta/es1 the sta? to &e rede#loyed in distri&ution and underwritin/ #rocess can &e
free u#.
=inally1 the method of usin/ 5+6 S7T to estimated T"T should &e re.iewed and
modi0ed. ;nstead of usin/ 5+6 S7T1 the mana/er could consider usin/ the
a.era/e #rocessin/ time. This will /i.e a much shorter T"T1 &e more attracti.e to
insurance a/ents and thus increase the re.enue for the 0rm.
"AEN@;L " % Arocessin/ Times
Table 1 Actual Flow Times per Request, assuming a day of 7.5 ours
Table ! "rocessing times, TAT and capacity wit actual resources and pending requests
Table # $apacity utili%ation of &nderwriting teams for eac territory
&nder'riting Territory 1 Territory ! Territory #
'eigted a(erage
processingtime per
request
!).* !).* !).*
Total capacity + 1,t - ./
-capacity
15.)* requests 15.)* requests 15.)* requests
Total request per day 1*..!5 1#.15 11.!!5
$apacity utili%ation 0!.#1 )#1 7/.)1