Manzana Insurance

Harvard Business School

9-692-015
Rev. January 30, 1997

Manzana Insurance - Fruitvale Branch (Abridged)
It was a Monday morning in early September 1991. Bill Pippin had been at Manzana for only a week, but already he was thinking that perhaps he should have taken a different job. He gazed at a note on his desk from John Lombard, his boss at the Fruitvale branch: "I'm giving a speech at aconference on property insurance, so I'll be out of the office until next week. Please give this some thought while I'm gone." The note was attached to a memo from Tom Jacobs, Manzana's senior vice president for underwriting operations: To: John Lombard From: Tom Jacobs Subject: Second Quarter Performance The performance figures on Property Insurance for the second quarter have just beencompleted, and Fruitvale is at the bottom of the list again. More important, Golden Gate is killing us in your territory, and they have just announced a promise of one-day turnaround time to all agents. If something isn't done immediately to improve your operating performance, a lot of our agents are going to defect to Golden Gate, and some of us are going to need new jobs. Here are some of the numbers:Manzana-Fruitvale This Quarter This Year New policies Endorsements Renewals Turnaround time (average) Renewals late Renewal loss rate 326 206 1,063 6 days 44% 47% This Quarter Last Year 278 235 1,253 5 days 20% 33% Golden Gate This Quarter (estimated) 375 300 1,400 2 days NA 15%

Something has got to be done about this. We're getting lots of complaints from agents about your turnaround time, yourpercentage late figure is unacceptable, and we can't afford to lose almost half of our renewal business every year. John, ever since we eliminated an underwriting team in 1990, you've been saying that you need more underwriters. But when we look at the volume of
Christopher Loch and David Paul Grant prepared the original version of this case (S-DS-87, Revised 5/90) under the direction ofProfessor Michael J. Harrison, Stanford University. It is based on an earlier case by Karlyn Carnahan. Professor Steven C. Wheelwright, Harvard University, prepared the abridged case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1991 by the President and Fellows of Harvard College and by the Board ofTrustees of the Leland Stanford Junior University. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, orotherwise—without the permis sion of Harvard Business School.

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Manzana Insurance - Fruitvale Branch (Abridged)

business you are handling, it looks as though there's more than enough people in your operations. Fruitvale handles only property underwriting, and your branch typically receives about 22 requests for new insurance, endorsements, or price quotes a day, and handles another 17or so renewals—let's call it 40 total requests per day. Based on average processing times for each major task, Fruitvale should be able to handle that easily. My rough calculations are as follows: Operating Activities
Review and Distribution Daily Activity Average Time Required 40 requests 40 min. each 40 requests = 26.7 hours Underwriting 40 requests 30 min. each 40 requests = 20 hours Rating 40requests 70 min. each 40 requests = 46.7 hours Policy Writing 40 requests 55 min. each 30 requests (75% of daily requests) =27.5 hours 5 writers 7.5 hrs/day = 37.5 hours

Capacity Available

4 clerks 7.5 hrs/day = 30 hours

3 teams 7.5 hrs/day = 22.5 hours

8 raters 7.5 hrs/day = 60 hours

Frankly, I don't see where the problem is. If anything, it looks as if you might be overstaffed...