Manzana Insurance case report
1.How is the Fruitvale Branch doing? How the branch is doing according to key external performance measures-financial performance, turnaround times, late renewals, and renewal rates.
Fruitvale encounters a significant loss of business due to late renewals, and long lead times on new policies and quotes. From the following perspectives, we can have a better view of what Fruitvale Branch's problems are:Financial performance: Profitability is declining. It suffered a loss of $174 and $121 in 1st and 2nd quarter of year 1991. (Exhibit 5)While premiums went up about 10%, ordinary insured losses went up about 50% from 1st quarter of 1989 to 2nd of 1991. Also, Operation expenses went up about 15%. (Exhibit 5)Turnaround times: Increasing quarterly. Since 2nd quarter of 1990 to 2nd quarter of 1991, the weighted average TAT has increased from 5.1 days to 6.2 days. (Exhibit 6)On the other hand, Golden Gate's average turnaround time is estimated 2 days. (Tom's memo) Actually, Golden Gate announced a guaranteed turnaround time of one working day. Fruitavale Branch is behind in term of turnaround times.
Late renewals: Also increasing quarterly, from 201 in 4th quarter of 1989 to 471 in 2nd quarter of 1991. (Exhibit 6) From the memo, we notice that the renewals late rate has go up significantly from 20% to 44% in one year. Especially, operations for RERUNs are terrible. RERUNs occupy most of total number of late. (Exhibit 6)Renewal rates: Going down. In 1989, rate was 5166/(5166+849)=85.9%; while in 1990, dropping to 4987/(4987+1717)=74.4%; and the first half year of 1991 was not so good either, 2081/(2081+926)=69.2%. (Exhibit 7) Also, Tom's memo shows that their renewal loss rate went up from 33% in this quarter last year to 47% in this quarter this year. For Golden Gate, their estimated renewal loss rate is 15% which is much smaller than Fruitavale Branch.
2.What are the causes of these problems? Be more specific on operational and incentive problems.
1)The categories of
Fruitvale encounters a significant loss of business due to late renewals, and long lead times on new policies and quotes. From the following perspectives, we can have a better view of what Fruitvale Branch's problems are:Financial performance: Profitability is declining. It suffered a loss of $174 and $121 in 1st and 2nd quarter of year 1991. (Exhibit 5)While premiums went up about 10%, ordinary insured losses went up about 50% from 1st quarter of 1989 to 2nd of 1991. Also, Operation expenses went up about 15%. (Exhibit 5)Turnaround times: Increasing quarterly. Since 2nd quarter of 1990 to 2nd quarter of 1991, the weighted average TAT has increased from 5.1 days to 6.2 days. (Exhibit 6)On the other hand, Golden Gate's average turnaround time is estimated 2 days. (Tom's memo) Actually, Golden Gate announced a guaranteed turnaround time of one working day. Fruitavale Branch is behind in term of turnaround times.
Late renewals: Also increasing quarterly, from 201 in 4th quarter of 1989 to 471 in 2nd quarter of 1991. (Exhibit 6) From the memo, we notice that the renewals late rate has go up significantly from 20% to 44% in one year. Especially, operations for RERUNs are terrible. RERUNs occupy most of total number of late. (Exhibit 6)Renewal rates: Going down. In 1989, rate was 5166/(5166+849)=85.9%; while in 1990, dropping to 4987/(4987+1717)=74.4%; and the first half year of 1991 was not so good either, 2081/(2081+926)=69.2%. (Exhibit 7) Also, Tom's memo shows that their renewal loss rate went up from 33% in this quarter last year to 47% in this quarter this year. For Golden Gate, their estimated renewal loss rate is 15% which is much smaller than Fruitavale Branch.
2.What are the causes of these problems? Be more specific on operational and incentive problems.
1)The categories of