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Systems Analysis and Design Project

Stage 2
Logical Dataflow Diagrams:
Existing and Proposed Workflow

Based on Harvard Business School case 9-692-015


Manzana Insurance – Fruitvale Branch

Presented to
Professor Michael Palley
MGT 772 SB
Analysis and Development of Information Systems

By Team 3:
xxxxx xxxxx
xxxxx xxxxx
xxxxx xxxxx
xxxxx xxxxx

February 23, 2004


TEAM 3 MGT 772SB
Systems Analysis and Design Project – STAGE 2 Analysis and Development of Information Systems
Submission date: 2/23/2004 Professor Michael Palley

Table of Contents

SYSTEM OVERVIEW............................................................................................................................................... 4
DESCRIPTION........................................................................................................................................................... 4
POLICY REQUEST TYPES ......................................................................................................................................... 4
BACKGROUND ......................................................................................................................................................... 4
CURRENT ORGANIZATIONAL PROBLEMS AND GOALS FOR THE NEW SYSTEM ......................................................... 4
EXISTING SYSTEM ................................................................................................................................................. 6
DATAFLOW DIAGRAMS ........................................................................................................................................... 6
Existing System: Context Diagram – Insurance Request Processing System .................................................... 6
Existing System: Parent Diagram – Insurance Request Processing System....................................................... 7
Existing System: Diagram 1 – Prepare Request ................................................................................................ 8
Existing System: Diagram 2 – Underwrite Request........................................................................................... 9
Existing System: Diagram 3 – Rate Request ................................................................................................... 10
Existing System: Diagram 4 – Issue Policy ..................................................................................................... 11
PROPOSED SYSTEM ............................................................................................................................................. 12
DATAFLOW DIAGRAMS ......................................................................................................................................... 12
Proposed System: Context Diagram - Insurance Request Processing System ................................................. 12
Proposed System: Parent Diagram – Insurance Request Processing System................................................... 13
Proposed System: Diagram 1 – Prepare Request............................................................................................. 14
Proposed System: Diagram 2 – Underwrite Request ....................................................................................... 15
Proposed System: Diagram 3 – Rate Request.................................................................................................. 16
Proposed System: Diagram 4 – Issue Policy ................................................................................................... 17
DATA DICTIONARY ............................................................................................................................................... 18
Proposed System: Accepted-Price-Quote Dataflow .......................................................................... 18
Proposed System: Assembled-Policy-Writing-Request Dataflow .................................................. 19
Proposed System: Written-Request Dataflow ..................................................................................... 20
Proposed System: Prioritized-Underwriting-Request Dataflow...................................................... 21
Proposed System: Standard-Completion-Times Dataflow............................................................... 22
Proposed System: Assign Request Priority Process.......................................................................... 23
Proposed System: Analyze Pricing Data Process ............................................................................... 24
Proposed System: Calculate Due Date Process................................................................................... 25
Proposed System: Branch Policy Archive File File........................................................................... 26
Proposed System: Active Processing File File .................................................................................. 28
Proposed System: Request History File File ...................................................................................... 30
PROPOSED SYSTEM CHANGES.......................................................................................................................... 31
OVERVIEW ............................................................................................................................................................ 31
CHANGES IN PROCESS 1 - PREPARE REQUEST ....................................................................................................... 31
CHANGES IN PROCESS 2 - UNDERWRITE REQUEST ................................................................................................ 32
CHANGES IN PROCESS 3 - RATE REQUEST............................................................................................................. 32
CHANGES IN PROCESS 4 - ISSUE POLICY ............................................................................................................... 33
TEAM LEADER’S ATTENDANCE/CONTRIBUTION REPORT. ....................................................................... 34

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APPENDIX A: EXHIBITS....................................................................................................................................... 35
EXHIBIT 1: UNDERWRITING TEAM PRODUCTIVITY ................................................................................................ 35
EXHIBIT 2: DEPARTMENT PRODUCTIVITY ............................................................................................................. 36
EXHIBIT 3: PROCESSING TIME ............................................................................................................................... 36
EXHIBIT 4: ORDINARY LOSSES .............................................................................................................................. 37
EXHIBIT 5: COMPARISON OF BRANCH PROFITS TO RUN AND RERUN PREMIUMS ............................................... 37

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Case basis: Manzana Insurance - Fruitvale Branch (Harvard Business School case 9-692-015)

System Overview

Description

The system being studied encompasses the operations workflow and processing of property
insurance policies at the Fruitvale branch of Manzana Insurance. The system processes four types
of policy requests and relies on the distribution of work among various departments within the
branch. Proposed changes to the existing system will attempt to create operational efficiencies
and streamline the processing workflow.

Policy Request Types


• RUN – Request for underwriting – processing of a new policy
• RERUN – Request for renewal – processing of a policy renewal
• RAIN – Request for additional insurance – processing of a policy endorsement
• RAP – Request for a price – processing of a price quote

Background

The Fruitvale branch has become Manzana’s worst performing branch, and Manzana is being
severely outperformed by a competitor, Golden Gate Casualty, in Fruitvale’s territory. The
turnaround time (TAT) for processing a request has grown to exceed five days at a time when
Golden Gate began guaranteeing one day TAT. This important measure of service could be a
large factor in Fruitvale’s loss of business. Improving the system would result in operational
efficiencies, improved service, and hopefully an increase in business.

Current Organizational Problems and Goals for the New System

The organizational problems and goals were derived from a study of the facts provided in the
case and supported by an organizational and financial analysis submitted during stage 1. They are
presented here in rank order.

Problem 1: Average turnaround time (TAT) is too lengthy.


Turnaround time is an important indicator of service quality used by originating agents
to help customers choose an insurance company. Fruitvale’s average TAT for processing
a request had grown to six days when Golden Gate began guaranteeing one day TAT.

Goal: Modify system to decrease turnaround time.


The new system will automate and streamline certain tasks and track the processing
status of requests. These changes should create efficiencies that will lead to shortened
turnaround time.

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Problem 2: Large number of late renewals.


RERUNs are currently held until the last day before their due date. Agents expect a
renewed contract offer before the expiration of the old policy. Late renewals result in a
large renewal loss rate, representing a significant loss of business.

Goal: Modify system to decrease the number of late renewals.


The new system will deliver RERUNs to the originating agents with sufficient time
before expiration. Processing will be monitored so that alerts are generated when
processing falls behind schedule.

Problem 3: Large backlog of policies.


An inconsistent priority system among departments causes downstream problems. For
example, the Rating Department is unable to address its backlog because of consistently
late RERUNs from the Underwriting Department.

Goal: Modify system to decrease backlog of policies.


The new system will automatically calculate processing due dates and assign
processing priorities to each request that enters the system. A new computerized
workflow will help standardize and enforce prioritization.

Problem 4: Organization structure and operations workflow are not optimal.


The current inefficient workflow is based on a non-optimal distribution of staff.

Goal: Align staffing with needs of the new system.


A structural reorganization will facilitate implementation of the new system.

Problem 5: Departments do not adhere to documented procedures.


Different departments seem to follow their own interpretation of procedures and
company policies.

Goal: Document and standardize procedures.


Updated procedures will be developed along with the new system. In order for
efficiencies to be realized, the procedures must be observed and maintained.

Problem 6: Salaries and bonuses are not aligned with profitability.


The "Salary Plus" program rewards senior underwriters and division managers for each
new policy written. As a result, certain employees place increased emphasis on new
policies and price quotes at the expense of renewals.

Goal: Provide management with profitability analysis of new and renewal policies.
A profitability analysis report will show that a new compensation structure should be
developed to place emphasis on profitability rather than on a specific type of policy.

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Existing System

Dataflow Diagrams

Existing System: Context Diagram – Insurance Request Processing System

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Existing System: Parent Diagram – Insurance Request Processing System

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Existing System: Diagram 1 – Prepare Request

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Existing System: Diagram 2 – Underwrite Request

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Existing System: Diagram 3 – Rate Request

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Existing System: Diagram 4 – Issue Policy

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Proposed System

Dataflow Diagrams

Proposed System: Context Diagram - Insurance Request Processing System

Note: Modifications from the


existing dataflow diagrams
are highlighted in bold on the
proposed dataflow diagrams.

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Proposed System: Parent Diagram – Insurance Request Processing System

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Proposed System: Diagram 1 – Prepare Request

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Proposed System: Diagram 2 – Underwrite Request

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Proposed System: Diagram 3 – Rate Request

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Proposed System: Diagram 4 – Issue Policy

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Data Dictionary

Proposed System: Accepted-Price-Quote Dataflow

Description:
Insurance request resumed when an Originating Agent accepts a Price-Quote.

Alias:
Accepted RAP

Composition:
[System Data]
Processing Status + Request ID + Customer ID + Agent ID + Request Type +
Description + Due Date + Priority + Underwriter ID + Underwriter Specification
+ Rater ID + Calculated Premium

Notes:
Accepted-Price-Quotes have already gone through the underwriting and rating
processes and are sent directly to policy writing where they are processed on a
FIFO basis. This resumes the processing of a request that was placed on hold
when a Price-Quote was issued.

Location:
Insurance Request Processing System (Parent)
Source: Originating Agent (External Entity)
Dest: Issue Policy (Process)
Issue Policy (4)
Source: Originating Agent (External Entity)
Dest: Assemble Standard Policy (Process)

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Proposed System: Assembled-Policy-Writing-Request Dataflow

Description:
Computerized version of all standard policy pages required for a specific policy.

Alias:
Boiler-Plate-Policy

Composition:
[System Data]
Processing Status + Request ID + Customer ID + Agent ID + Request Type +
Description + Due Date + Priority + Underwriter ID + Underwriter Specification
+ Rater ID + Calculated Premium + Boiler-Plate
[Customer Data]
Client Name + Client Address + Property Address + Property Owner + Property
Age + Individual Property Size + Total Property Size + Property Type + Client
Business Legal Entity + Industry Category + Business Description + Ownership
Status (Own/Lease) + No. Full Time Employees + No. Part Time Employees +
No. Subcontractors + Current Insurance Status + Current Insurance Company +
Current Insurance Expiration + Current Annual Premium + Coverage Amount
Requested + Deductible Requested
[Property Data]
Sprinkler System + Smoke Detector + Burglary Alarm + Security Guard + Fire
Alarm + Exterior Lighting + Barred Windows + Circuit Breakers + Fuses

Notes:
Compilation of standard insurance language for the type of risk insured.

Location:
Issue Policy (4)
Source: Assemble Standard Policy (Process)
Dest: Customize Policy (Process)

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Proposed System: Written-Request Dataflow

Description:
Hardcopy written request for insurance.

Alias:
RUN, RAP, RAIN

Composition:
[System Data]
Processing Status + Request ID + Customer ID + Agent ID + Request Type +
Description
[Customer Data]
Client Name + Client Address + Property Address + Property Owner + Property
Age + Individual Property Size + Total Property Size + Property Type + Client
Business Legal Entity + Industry Category + Business Description + Ownership
Status (Own/Lease) + No. Full Time Employees + No. Part Time Employees +
No. Subcontractors + Current Insurance Status + Current Insurance Company +
Current Insurance Expiration + Current Annual Premium + Coverage Amount
Requested + Deductible Requested
[Property Data]
Sprinkler System + Smoke Detector + Burglary Alarm + Security Guard + Fire
Alarm + Exterior Lighting + Barred Windows + Circuit Breakers + Fuses

Notes:
Mailed or faxed from an Originating Agent.

Location:
Insurance Request Processing System (Context)
Source: Originating Agent (External Entity)
Dest: Insurance Request Processing System (System)
Insurance Request Processing System (Parent)
Source: Originating Agent (External Entity)
Dest: Prepare Request (Process)
Prepare Request (1)
Source: Originating Agent (External Entity)
Dest: Log Request (Process)

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Proposed System: Prioritized-Underwriting-Request Dataflow

Description:
Complete set of all information required for the initiation of underwriting a
request.

Alias:
RUN, RAP, RAIN, RERUN

Composition:
[System Data]
Processing Status + Request ID + Customer ID + Agent ID + Request Type +
Description + Due Date + Priority
[Customer Data]
Client Name + Client Address + Property Address + Property Owner + Property
Age + Individual Property Size + Total Property Size + Property Type + Client
Business Legal Entity + Industry Category + Business Description + Ownership
Status (Own/Lease) + No. Full Time Employees + No. Part Time Employees +
No. Subcontractors + Current Insurance Status + Current Insurance Company +
Current Insurance Expiration + Current Annual Premium + Coverage Amount
Requested + Deductible Requested
[Property Data]
Sprinkler System + Smoke Detector + Burglary Alarm + Security Guard + Fire
Alarm + Exterior Lighting + Barred Windows + Circuit Breakers + Fuses

Notes:
Pulled from the Active Processing File based on priority.

Location:
Insurance Request Processing System (Parent)
Source: Active Processing File (File)
Dest: Underwrite Request (Process)
Underwrite Request (2)
Source: Active Processing File (File)
Dest: Evaluate Request (Process)

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Proposed System: Standard-Completion-Times Dataflow

Description:
Average time required to process specific types of insurance request.

Alias:
SCT

Composition:
Standard Completion Times

Notes:
Based on a companywide study completed in 1986. Indicates standard completion
times sufficient to handle 95% of all requests. Processing times at the Fruitvale
branch are similar to those from the study.

Location:
Insurance Request Processing System (Parent)
Source: SCT File (File)
Dest: Prepare Request (Process)
Perpare Request (1)
Source: SCT File (File)
Dest: Calculate Due Date (Process)

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Proposed System: Assign Request Priority Process

Description:
Assigns processing priority to insurance policy requests.

Process Number: 1.5

Process Description:
Automatically retrieves prepared requests from the Active Processing File after
the due date has been determined. Assigns processing priority based on a modified
first-in-first-out (FIFO) system. An algorithm considering the date, time, type and
size of requests is used to calculate a unique priority for each new request. The
Branch Manager is able to assign a prioritization override to any request. The
prioritized prepared request in then fed back into the Active Processing File.

Notes:
Priority is used to control the order in which work is performed by various
processes throughout the system.

Location:
Prepare Requests (1)
Input Flows:
Prepared-Request
Prioritization-Override
Output Flows:
Prioritized-Prepared-Request

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Proposed System: Analyze Pricing Data Process

Description:
Analyze insurance pricing data from disparate sources.

Process Number: 3.1

Process Description:
Prioritized Rating Requests are pulled from the Active Processing File. Current
insurance rates are researched and verified by compiling pricing information from
Historical-Pricing-Data extracted from the Branch Policy Archive File, Published-
Insurance-Data obtained from the State Insurance Commissioner, and Sample-
Insurance-Quotes gathered from competitors. An Analyzed-Rating-Request is
then submitted for premium calculation.

Notes:
Performed on a continual basis when Prioritized-Rating-Requests are available.

Location:
Rate Request (3)
Input Flows:
Prioritized-Rating-Request
Historical-Pricing-Data
Published-Insurance-Data
Sample-Insurance-Quotes
Output Flows:
Analyzed-Rating-Request

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Proposed System: Calculate Due Date Process

Description:
Calculates processing due date for active requests.

Process Number: 1.4

Process Description:
Immediately after a request is entered into the Active Processing File, the
Recorded-Request and Current-Workload Statistics are pulled from the same file.
This data is combined with Standard-Completion-Times from the SCT File and
used to calculate the current average turnaround time (TAT). The TAT is then
added to the current date to set the processing due date for a request. The Due-
Date is transferred into the Active Processing File. The Quoted-Due-Date is sent
back to the Originating Agent for all requests except renewals.

Notes:
This process is performed on a real-time basis

Location:
Prepare Request (1)
Input Flows:
Recorded-Request
Current-Workload-Statistics
Standard-Completion-Times
Output Flows:
Due-Date
Quoted-Due-Date

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Proposed System: Branch Policy Archive File File

Description:
Contains historical information about issued policies and calculated premiums.

Composition:
[System Data]
Request ID + Customer ID + Agent ID + Description + Underwriter ID + Rater ID
+ Premium + Boiler-Plate + Policy Customizations + Policy ID + Issue Date +
Expiration Date
[Customer Data]
Client Name + Client Address + Property Address + Property Owner + Property
Age + Individual Property Size + Total Property Size + Property Type + Client
Business Legal Entity + Industry Category + Business Description + Ownership
Status (Own/Lease) + No. Full Time Employees + No. Part Time Employees +
No. Subcontractors + Current Insurance Status + Current Insurance Company +
Current Insurance Expiration + Current Annual Premium + Coverage Amount
Requested + Deductible Requested
[Property Data]
Sprinkler System + Smoke Detector + Burglary Alarm + Security Guard + Fire
Alarm + Exterior Lighting + Barred Windows + Circuit Breakers + Fuses

Notes:

Location:
Insurance Request Processing System (Context)
Input Flows:
Issued-Archival-Policy
Output Flows:
Historical-Pricing-Data
Insurance Request Processing System (Parent)
Input Flows:
Calculated-Premium
Issued-Archival-Policy
Output Flows:
Historical-Pricing-Data
Underwrite Request (2)
Output Flows:
Historical-Pricing-Data

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Rate Request (3)


Input Flows:
Calculated-Premium
Output Flows:
Historical-Pricing-Data
Issue Policy (4)
Input Flows:
Issued-Archival-Policy

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Proposed System: Active Processing File File

Description:
Contains all active requests in the system.

Composition:
[System Data]
Processing Status + Request ID + Customer ID + Agent ID + Request Type +
Description + Due Date + Priority + Underwriter ID + Underwriter Specification
+ Rater ID + Calculated Premium + Boiler-Plate + Policy Customizations
[Customer Data]
Client Name + Client Address + Property Address + Property Owner + Property
Age + Individual Property Size + Total Property Size + Property Type + Client
Business Legal Entity + Industry Category + Business Description + Ownership
Status (Own/Lease) + No. Full Time Employees + No. Part Time Employees +
No. Subcontractors + Current Insurance Status + Current Insurance Company +
Current Insurance Expiration + Current Annual Premium + Coverage Amount
Requested + Deductible Requested
[Property Data]
Sprinkler System + Smoke Detector + Burglary Alarm + Security Guard + Fire
Alarm + Exterior Lighting + Barred Windows + Circuit Breakers + Fuses

Notes:
Process 1: The computerized system stores request information in the Active
Processing File. The system will then update the file with a due date, assign a
priority level, and distribute the request to the next available underwriting team.

Process 2 : The system submits Prioritized-Underwriting-Requests to be evaluated


and upon the completion of selecting, classifying, and pricing requests, the system
will send Underwritten-Request to the Active Processing File.

Process 3: Prioritized-Rating-Request is submitted for price data analysis. The


system will subsequently calculate premiums. The Rated-Request is then
transferred to the Active Processing File.

Process 4: The system submits Prioritized-Policy-Writing-Requests to be


assembled. Assembled-Policy-Writing-Requests are then customized and printed.
The system will provide a Completion-Status-Update to the Active Processing
File. This is an indication to the system that the request has been completed and a
policy has been issued.

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Location:
Insurance Request Processing System (Context)
Input Flows:
Prioritized-Prepared-Request
Insurance Request Processing System (Parent)
Input Flows:
Request-Details
Due-Date
Prioritized-Prepared-Request
Underwritten-Request
Rated-Request
Completion-Status-Update
Output Flows:
Recorded-Request
Current-Workload-Statistics
Prepared-Request
Prioritized-Underwriting-Request
Prioritized-Rating-Request
Prioritized-Policy-Writing-Request
Prepare-Request (1)
Input Flows:
Request-Details
Due-Date
Prioritized-Prepared-Request
Output Flows:
Recorded-Request
Current-Workload-Statistics
Prepared-Request
Underwrite Request (2)
Input Flows:
Underwritten-Request
Output Flows:
Prioritized-Underwriting-Request
Rate Request (3)
Input Flows:
Rated-Request
Output Flows:
Prioritized-Rating-Request
Issue Policy (4)
Input Flows:
Completion-Status-Update
Output Flows:
Prioritized-Policy-Writing-Request

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Proposed System: Request History File File

Description:
Log file of all requests received into the system.

Composition:
Request ID + Customer ID + Agent ID + Request Type + Description + Date
Received + Time Received

Notes:
Contains a record of summary information from every insurance request. Requests
are logged even if they are rejected. The file is used for auditing and reporting
purposes.

Location:
Insurance Request Processing System (Parent)
Input Flows:
Request-Summary
Prepare Request (1)
Input Flows:
Request-Summary

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Proposed System Changes

Overview

Changes to the existing system have been proposed within all major processes and can be seen in
the context dataflow diagram, parent dataflow diagram, and all four child dataflow diagrams. The
description and discussion below will focus on changes as they are reflected in the child dataflow
diagrams.

One of the most significant changes that can be seen throughout the system is the move from a
paper-based workflow to a computer-based workflow. Although the existing system does make
use of computers, requests pass between departments in hardcopy form. The proposed system
makes use of the Active Processing File to store data as it flows throughout the system.

Another hallmark of the proposed system is the implementation of standardized prioritization


rules. When a request enters the system, not only is a due date dynamically determined, but a
priority is also assigned. This priority is used to control the order in which work is performed by
various processes throughout the system. The ultimate intent of this modification is to
standardize request processing and, hopefully, shorten average turnaround time and reduce the
backlog of policies.

Changes in Process 1 - Prepare Request

The scope of process 1.3 has increased from "Input Request Data" to "Input and Prepare Request
Data." The notable difference in the proposed process is that the Tickler System now sends
renewal requests into process 1.3 rather than into process 1.1 ("Log Request"). Within this
proposed process, distribution clerks manually enter written requests into the Active Processing
File, and renewal requests are automatically transferred into the same file.

The Request Data File in the existing system has been replaced by the Active Processing File in
the proposed system. The Active Processing File is an enhanced file that stores customer data
along with system data. Specifically, system data is any data necessary for the ongoing
processing of a request within the system. Underwriting specification is an example of system
data, as its contents include processing instructions for rating and policy writing. The existing
Request Data File is primarily used to store customer data for future retrieval and for transfer to
other departments, but is unable to capture system information. This shortcoming is one large
reason for the reliance on paper in the existing system.

Immediately after a request is entered into the Active Processing File, process 1.4 ("Calculate
Due Date") pulls the recorded request and the current workload statistics. This data is combined
with standard completion times from the SCT File to calculate the average turnaround time. This
figure is then used to set the processing due date for a request, which is entered into the Active
Processing File as system data. The due date is also quoted back to the Originating Agent for all
requests except renewals. The existing system relies on the Branch Manager Weekly Report File

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for expected turnaround time to be used in the calculation. The key benefit in the proposed
system is a dynamic means of determining turnaround time.

Process 1.5, "Assign Request Priority," is an automated process that retrieves prepared requests
from the Active Processing File and assigns processing priority based on a modified first-in-first-
out (FIFO) system. An algorithm considering the date, time, type and size of requests is used to
calculate a unique priority for each new request. The Branch Manager is able to assign a
prioritization override to any request. The prioritized prepared request in then fed back into the
Active Processing File to await underwriting. Requests are later pulled from the Active
Processing File based on priority. In contrast, the existing system relies on distribution clerks to
print each request and assign it to the correct underwriting team.

Company policy mandates use of a first-in-first-out prioritization system. In the existing system,
however, each department prioritizes requests based on its own needs, with a particular emphasis
on new business (RUNs and RAPs). This has contributed to processing delays and a backlog of
requests. It should be noted that processing time for a RUN is 33% longer than that for a RERUN
(Exhibit 3). Historically, new policies generate higher ordinary losses compared to renewal
business (Exhibit 4), and are less profitable than renewal business (Exhibit 5). By assigning
request priorities, the proposed system eliminates the ability of different departments to
implement their own prioritization rules.

Changes in Process 2 - Underwrite Request

Process 2.1, "Evaluate Request," begins when an underwriting team pulls a prioritized
underwriting request from the Active Processing File. In the existing system, each underwriting
team is assigned to the Originating Agents within a particular territory. This approach to
workload distribution proved unsuccessful. In the proposed system, teams pull requests based
strictly on priority, without any consideration of geographic territory. This change should
eliminate the problem where a particular underwriting team may be overworked one day and idle
a week later. Exhibit 1 shows that the average workload between teams is disproportionate. Team
1 processed 11% more policies than Team 2, and 30% more than Team 3. In addition, they were
more productive than the other two teams. In the proposed system, the workload is distributed
evenly among the underwriting teams to prevent bottlenecks.

As a request flows through the "Underwrite Request" process, it picks up system information
needed for later processes. Grouped together, this information is referred to as the underwriting
specification, and is transferred into the Active Processing File as an underwritten request.

Changes in Process 3 - Rate Request

Process 3.1, "Analyze Pricing Data," begins when a prioritized rating request is pulled from the
Active Processing File. Data from the State Insurance Commissioner and Competitors is
identical in the existing system, but historical pricing data is now pulled from the Branch Policy
Archive File. In the existing system, the historical pricing data is pulled from the Policy Premium
File, which is no longer necessary in the proposed system.

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It is important to note that the analysis of pricing data (3.1) and calculation of premiums (3.2) are
mostly automated in the proposed system. This change is warranted because the Rating
Department has the second lowest productivity level of all departments (Exhibit 2). By
automating a task that is noted to be almost purely mechanical, the proposed enhancement will
help reduce turnaround time for the rating process. The raters will be primarily responsible for
approving computer-generated premiums. At the completion of process 3.3, "Approve Rated
Request," the calculated premium is fed into the Branch Policy Archive File. This allows the
premium to be used for historical information even if the request is a price quote that never
becomes an issued policy. To complete the "Rate Request" process, a price quote is sent back to
the Originating Agent, or a rated request is transferred into the Active Processing File.

Changes in Process 4 - Issue Policy

Process 4.1, "Assemble Standard Policy," begins with a prioritized policy writing request from
the Active Processing File, or with an accepted price quote from an Originating Agent. All policy
writing information necessary to complete processing is pulled from the Active Processing File.
In the existing system, the requisite information is passed directly from the rating department
after the premium is calculated.

One big change in the proposed system is that the policies are electronically assembled (4.1) and
customized (4.2) automatically. This is possible because all information necessary to complete
these processes is available as system data in the computerized request. In contrast, the existing
system contains much of the same data in hardcopy format, therefore requiring the manual effort
of policy writers to complete the work. Currently, the Policy Writing Department has the lowest
productivity level of all departments (Exhibit 2). The proposed automation enhancement will
help reduce the turnaround time and increase productivity.

In the proposed system, policy writers will be responsible for approving the computer-generated
customized policies (4.3) before the required number of copies are printed (4.4). Process 4.4,
"Print Policies," obviates the need for a "Duplicate Policy" process to be performed by a copy
clerk.

Finally, after policies are filed and issued (4.5), the Active Processing File is updated with a
completion status update for the current request. A future system enhancement will replace
standard completion times from the SCT file with actual average completion times from the
Branch Policy Archive File.

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TEAM 3 Systems Analysis and Design Project – STAGE 2 MGT 772SB

Team Leader’s Attendance/Contribution Report.

All team members attended all scheduled meetings and contributed equally to the project.

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TEAM 3 Systems Analysis and Design Project – STAGE 2 MGT 772SB

Appendix A: Exhibits

Exhibit 1: Underwriting Team Productivity

RUN's RAP's RAIN's RERUN's Total

Potential Polices Processed


Min 31,764.7 9,000.0 108,000.0 12,857.1
Max 90.2 136.7 131.4 75.0
Mean 1,238.5 1,421.1 2,389.4 2,887.7 7,936.7

Team1 162 761 196 636 1,755

Percent Processed
Min 1% 8% 0% 5% 14%
Max 180% 557% 149% 848% 1734%
Mean 13% 54% 8% 22% 97%
Policies Processed per day 1.35 6.34 1.63 5.30 14.63

Team 2 100 513 125 840 1,578

Percent Processed
Min 0% 6% 0% 7% 13%
Max 111% 375% 95% 1120% 1702%
Mean 8% 36% 5% 29% 78%
Policies Processed per day 0.83 4.28 1.04 7.00 13.15

Team 3 88 524 130 605 1,347

Percent Processed
Min 0% 6% 0% 5% 11%
Max 98% 383% 99% 807% 1387%
Mean 7% 37% 5% 21% 70%
Policies Processed per day 0.73 4.37 1.08 5.04 11.23

Total

Percent Processed
Min 0% 7% 0% 5% 13%
Max 129% 438% 114% 925% 1608%
Mean 9% 42% 6% 24% 82%
Policies Processed per day 2.92 14.98 3.76 17.34 39.00

Based on processing result in the first 6 months of 1991.

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TEAM 3 Systems Analysis and Design Project – STAGE 2 MGT 772SB

Exhibit 2: Department Productivity

Productivity
RUN RAP RAIN RERUN Total

Department

Distribution (4 staff) 11% 42% 9% 27% 89%

Underwriting Team - 1 (2 staff per team) 13% 54% 8% 22% 97%


Underwriting Team - 2 (2 staff per team) 8% 36% 5% 29% 78%
Underwriting Team - 3 (2 staff per team) 7% 37% 5% 21% 70%
Total Underwriting 9% 42% 6% 24% 82%

Rating (8 Staff) 6% 27% 7% 36% 76%

Policy Writing (5 staff) 16% n/a 9% 39% 64%

Note: The "Mean" processing time was used to calculate dept. productivity.
Based on polices processed in the first half of 1991.

Exhibit 3: Processing Time

Processing Time
Distribution Underwriting Rating Writing Total

Run 68.5 43.6 75.5 71 258.6

RERUN 28 18.7 75.5 50.1 172.3

Difference 86.3

A new Policy takes 1/3 longer to process and is less profitable! 33%

Change strategy to focus on Renewal business

Page 36 of 37
TEAM 3 Systems Analysis and Design Project – STAGE 2 MGT 772SB

Exhibit 4: Ordinary Losses

Insured Losses and New Premium Revenue


(In thousands)
$7,000 $2,500
$6,000
$2,000
$5,000
$4,000 $1,500 Ordinary Losses
$3,000 $1,000 RUN Premiums
$2,000
$500
$1,000
$0 $0
Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun
'89 '89 '89 '89 '90 '90 '90 '90 '91 '91

Exhibit 5: Comparison of Branch Profits to RUN and RERUN Premiums

Comparison of Branch Profits to Gross Premiums


(in thousands)

$2,500 $7,400

$2,000 $7,200

$7,000
$1,500
$6,800 Branch Profit
$1,000 RUN Premiums
$6,600 RERUN Premiums
$500
$6,400

$0 $6,200
9 9 9 9 0 0 0 0 1 1
r ' 8 un '8 ep '8 e c '8 ar ' 9 un '9 ep '9 e c '9 ar ' 9 un '9
Ma
($500) J S D M J S D M J $6,000

Page 37 of 37

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