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Swiss Insurance Case Abridge

Number of Words – 750

Referencing Style -Harvard


The questions you have to address for the Swiss Insurance case is:

  1. How is the Geneva branch performing?
  2. What is causing their problems?
  3. What do you recommend they do?

The report should be up to 3 pages of text and up to 5 pages of exhibits

Swiss Insurance – Geneva Office

It was a Monday morning in early September 2013. Anne Janotta had been at Swiss Insurance for a week, but already she was thinking that perhaps she should have taken a different job. She gazed at a note on her desk from Jean Lombard, her boss at the Geneva office: “I’m giving a speech at a conference 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 Laura Masini, Swiss Insurance’s senior Vice-President for underwriting operations:

To: Jean Lombard

From: Laura Masini

Subject: Second Quarter Performance

The performance figures on Property Insurance for the second quarter have just been completed, and the Geneva office is at the bottom of the list again. More important, LeMan Insurance 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 LeMan, and some of us are going to need new jobs.


Swiss Insurance LeMan
This Quarter This Quarter This Quarter
This Year Last Year (estimated)
New Policies 326 278 375
Endorsements 206 235 300
Renewals 1,063 1,253 1,400
Turnaround time (average) 6 days 5 days 2 days
Renewals late 44% 20% NA
Renewal loss rate 47% 33% 15%


Something has to be done about this. We’re getting lots of complaints from agents about your turnaround time, your percentage late figure is unacceptable, and we can’t afford to lose almost half of our renewal business every year.

Ever since we eliminated an underwriting team in 2011, you’ve been saying that you need more underwriters. But when we look at the volume of business you are handling; it looks as though there are more than enough people in your operations.

The Geneva office handles only property underwriting, and your branch typically receives about 22 requests for new insurance, endorsements, or price quotes a day, and handles another 17 or so renewals—let’s call it 40 total requests per day. Based on average processing times for each major task, the Geneva office should be able to handle that easily. My rough calculations are as follows:


Operating Activities

Review and Distribution
Underwriting Rating Policy Writing
Daily Activity 40 requests 40 requests 40 requests 40 requests
Average Time Required 40 min. each 30 min. each 70 min. each 55 min. each
40 requests 40 requests 40 requests 30 requests
= 26.7 hours = 20 hours = 46.7 hours (75% of daily requests)
= 27.5 hours
Capacity Available 4 clerks 3 teams 8 raters 5 writers
7.5 hrs/day 7.5 hrs/day 7.5 hrs/day 7.5 hrs/day
= 30 hours = 22.5 hours = 60 hours = 37.5 hours


Frankly, I don’t see where the problem is. If anything, it looks as if you might be overstaffed in rating and policy writing. In addition, I hear that a staff member’s workload is quite uneven over time: one day an underwriter might be stretched to the limit; a week later he may be idle. Whatever the problem is, we need a solution fast. I’ll expect a memo with concrete suggestions on my desk in two weeks.

After reading Laura Masini’s memo, Anne Janotta paused for a few minutes’ reflections and then decided to ask some questions about the scheduling of workflow at the Geneva office.

Organizational Structure

Swiss operated through a network of relatively autonomous branch offices in Zurich, Geneva, and Bern. It treated each branch as a separate profit center, with authority to underwrite insurance, collect premiums, and settle claims within its territory.

Like many insurance companies, Swiss Insurance did not deal directly with the public. Instead, its sales force consisted of about 2,000 independent agents who represented Swiss Insurance and other competing insurers. As a result, maintaining close and cooperative relations with the independent agents was a critical factor in building and sustaining market share and profitability.

When Swiss reorganized its underwriting staff in early 2011 along geographic lines, each originating agent was assigned a specific underwriting team (consisting of an underwriter and a technical assistant) to handle all of that agent’s property insurance needs; each team was also responsible for handling all of the insurance needs of the agents within its assigned territory. Depending on the location and the volume of business generated, a typical underwriting team served from 20 to 25 independent agents. The smallest Swiss Insurance office had two underwriting teams supporting about 40 agents, the largest had 14 teams and supported over 300 agents. The Geneva office had three underwriting teams supporting 76 agents in three geographic territories.

Agents were paid a 25% commission for each new policy sold on behalf of Swiss Insurance. In addition, they could earn an annual bonus based on the volume of business they placed with Swiss Insurance and the loss history of their insurance sales; this was known as their “book of business.” Agents also received a 7% commission for each policy that was renewed.

Employees in the branches were designated as hourly, salary, or “salary/plus” employees. The latter term referred to those receiving an annual salary plus an incentive payment for each new policy written above their established quota. Swiss Insurance instituted salary/plus in 2011 in an attempt to retain its most senior underwriters (those with more than 10 years’ experience), who were being intensively courted by LeMan Insurance. In 2012, all of Geneva’s underwriters and Jean Lombard, the office manager, were compensated under the salary/plus program.

Swiss Insurance specialized in commercial insurance, with property insurance, in 2013, making up 65% of its revenues, liability insurance 20%, and investment income and miscellaneous specialty lines constituting the remainder.


Underwriting was the technical term for the entire process of insuring risk. At the Geneva office, three teams handled underwriting. They served 76 independent agents and were supported by a number of distribution clerks, raters, policy writers, and miscellaneous office personnel.

The process of writing a new commercial policy usually began when a distribution clerk received a written Request for Underwriting (referred to as a RUN) from an agent (called the originating agent). The distribution clerk logged in all incoming requests, entered data into the computer for transfer to other departments and for future retrieval, and distributed each RUN to the underwriting team responsible for handling that RUN’s originating agent. Distribution was also responsible for analyzing and disseminating data published each month by the state insurance commissioner, researching and verifying insurance rates quoted by local competitors, and overseeing the rating operations.

After each RUN was passed to its assigned underwriting team, that team took responsibility for evaluating, selecting, classifying, and pricing it. After review and classification by the underwriting team, the RUN went to the Rating Department, where policy premiums (the prices to be charged) were calculated based on the team’s instructions. Although the rating position had once required significant computational and technical skills, the advent of desktop computers made the job almost purely mechanical.

From the Rating Department, a RUN was transferred to the Policy Writing Department Policy writing encompassed the actual typing, assembly, and distribution of completed policies, although the computer had altered the nature of this function as well. Few policies in 2013 required actual typing.

Instead, the emphasis was on selecting the appropriate pages for each individual policy from a computer data file of standard pages, as specified by the underwriting team, and printing and assembling them into a finished package. As a result, the time required to process an average policy in this department had decreased significantly during the late decade. Once printed and assembled, each policy was sent to the insured party; a duplicate was sent to the originating agent, and a copy was retained in branch records.

Issuing new commercial policies was considered the most profitable aspect of an insurance company’s work because new policies commanded the highest premiums. On average, a new property insurance policy written by the Geneva office during the first six months of 2013 generated annualized premium revenues of CHF 6,724. The corresponding figure for new policies in 2011 was CHF 5,706, and in 2012 it was CHF 6,101. However, the office was also responsible for servicing policy renewals, policy ratings, policy endorsements, and price quotes.

A policy renewal involved the annual reevaluation and, if necessary, the repricing of the risks insured by a commercial policy. The renewal was done on the anniversary of the original commercial policy’s issuance unless the policy had been canceled by the insurer or not renewed by the insured. Requests for Renewal were called RERUNs. Generated automatically by a computerized “tickler” system at each branch, they were transmitted to the distribution clerks for processing along with current RUNs. As risks aged, the costs of insuring them tended to decrease, and thus insurance companies generally charged lower premiums on older policies. The average policy renewal was expected to generate annualized premiums of CHF 6,205 in 2013, compared with CHF 5,130 in 2011 and CHF 5,630 in 2012.

If there was a physical change in the property being insured, a policy endorsement was needed to amend the terms of the existing policy. Most endorsements did not significantly affect the nature of the risk being insured but did increase the amount of insurance or the premium charged because of some unique characteristic of the property involved. Processing a policy endorsement, referred to as a Request for Additional Insurance (RAIN), differed from processing a RUN only in the time required for the various departments to reprice the policy; all other aspects of the underwriting process remained the same as those for a new policy. The average endorsement in 2013 was expected to generate additional premiums of CHF 645, an increase from the CHF 533 and CHF 587 earned in 2011 and 2012, respectively.

Finally, price quotes involved the evaluation and pricing of a risk, in the anticipation that a new commercial policy would be issued. A Request for Price (called a RAP) was identical to and required the same handling as, a RUN, except that the transfer of a RAP to the Policy Writing Department was not automatic. After rating, the RAP was returned to a distribution clerk, who was responsible for sending a price quote to the originating agent. Most quotes were accepted or rejected within 10 days. If the quote was accepted, the RAP became a RUN (both for processing and accounting purposes) and was transferred directly to policy writing, where the issuing process continued. If the quote was rejected, no further action was taken. On average, only 15% of all quotes resulted in new policies.

Standards and Due Dates

During an average day, an employee handled dozens of RAPs, RUNs, RERUNs, and RAINs (collectively referred to as requests). For each commercial policy, a computer automatically generated a RERUN 30 days before the anniversary date of the policy, and the anniversary date became the due date for that RERUN. All other requests (RAPs, RUNs, and RAINs) were assigned due dates based on the total number of requests then being handled by the office, as follows:

Each Monday morning, the office manager compiled a report of the number of RAPs, RUNs, RERUNs, and RAINs on the desks of each distribution clerk, underwriting team, rater, and policy writer. Using these figures, the manager calculated the total time required to complete the processing of the requests. The calculations were made by multiplying the number of each type of request at each desk by a standard completion time (SCT). By adding these figures together, the manager determined the expected turnaround time (TAT) for each new request entering the system during the coming week. (See Exhibit 1).

Then, as each RAP, RUN, or RAIN was received by a distribution clerk (DC), the TAT was used to establish the due date quoted to the requesting agent. For example, if January 1st was a Monday, and the TAT calculated by the manager on that date was 10 working days, then a RAP received on January 5th was assigned a due date of January 19th (10 working days later).

The SCT for each processing step was based on a companywide study, completed in 2010, which had surveyed the time required to process different types of requests by distribution clerks, underwriters, raters, and policy writers. Based on those figures, standard completion times sufficient to handle 95% of all requests had been assigned to each processing step; that is, it was expected that only 5% of the requests received would take more than the allotted 95% SCT. (See Exhibit 2.) A study by the Geneva office suggested that its processing times did not differ substantially from those shown in Exhibit 2.

Operating Procedures

Anne Janotta had been told that company policy was to use a first-in-first-out (FIFO) system at each stage of the underwriting process. All requests were supposed to be processed in the order in which they arrived. In practice, she found that RUNs and RAPs were given priority over RAINs and RERUNs, but requests were processed on a FIFO basis within each of these two priority classes. The practice had arisen because renewals were considered less profitable than new policies and were, therefore, not allowed to interfere with the progress of new requests (RUNs and RAPs) through the system.

For example, most underwriters began each day by sorting through their in-baskets looking for RUNs and RAPs to work on first; only when all of those had been processed would they begin to

work on RAINs and RERUNs. When Anne Janotta asked the supervisor of underwriting, about this practice, he explained:

“Everyone knows that new policies are the most profitable ones for the company, so naturally we process RUNs and RAPs first. As for RERUNs, we’ve got plenty of advance notice, and customers usually renew their policies anyway. As we say in underwriting: it’s better to RUN than RAP; it’s better to RAP than RAIN, and RERUNs will take care of themselves. The FIFO system works fine, as long as you keep your priorities straight.”

Processing a RERUN involved appraising the general claim history of the risk category and of the individual insured risk. In order to base the appraisal on the most up-to-date information, the computer-generated RERUNs were not released to the DCs until the last day before the due date. The rated renewal policy was then faxed to the independent agent, avoiding any further delay. For the time between the expiration of the old policy and start of the new (or cancellation, respectively), the client was fully covered by a mandatory “contingent binder” clause and thus protected in the event of late renewal.

When Anne Janotta asked the manager of the Rating Department about the priority system, she got a new perspective:

“We give priority to RUNs and RAPs because we’re told to, but if you ask me, we should just switch the whole shop over to straight FIFO without priorities. Then we wouldn’t have the problem of getting RERUNs so late that there is no way for us to get them done on time. The UTs seem to think that RERUNs handle themselves, but they take just as much work as any other policy. If we keep getting them late, there is no way we’re ever going to clean up the backlog of requests in our department.”

As far as Janotta could tell, policy writers used the same basic scheduling rules as did UTs and RTs, with some adaptations. The manager of the department told her:

“FIFO works fine. If what you want to do is be fair to all customers and give them all equally good service, processing requests in the order that they come in to make a lot of sense. The only thing we do that is slightly different is that after we sort all of our work by priority and arrival date, we usually try to handle the simple jobs before tackling the longer or more difficult requests. That way, we get rid of some of our backlog and reduce the sheer physical volume of paper on our desks.

Recent Performance

As Janotta examined the quarterly financial and operations summaries for 2012 and 2013 (Exhibits 3 and 4), she could see why Laura Masini was so concerned. On every measure of performance, the Geneva office seemed to be falling apart. Profitability was declining. The backlog of policies had increased since 2011, and the number of new policies and endorsements appeared to be stagnating, whereas the rest of the industry (LeMan Insurance, in particular) reported moderate growth rates. The number of late renewals (those completed after their due dates) was at an all-time high, causing a dramatic rise in the renewal loss rate. Agents expected a renewed contract offer from Swiss Insurance on or before the expiration date of the old policy, and they were more likely to recommend other carriers to their customers when contract renewals were late. The renewal losses represented a significant loss of business and an overall reduction in the number of policies in force.

In addition, turnaround time had jumped from about three days to more than five days. Janotta knew that this increase could be an important factor in Geneva’s loss of business. As competition in the insurance business had increased, insurance rates and commission schedules had become nearly identical among competitors. As a result, agents had begun to steer their clients to particular insurers on the basis of service, one measure of which was a company’s TAT, or the number of days between the receipt of a RUN and the issuance of a final policy. It was not uncommon for an agent to call an insurer for an estimate of that company’s TAT and then refer business elsewhere if issuing a new policy would take too long.

And LeMan Insurance had announced a guaranteed turnaround time of one working day (exclusive of transit time) on new policies, price quotes, and policy endorsements, with a 10% premium discount in the event of a delay. Jean Lombard had expressed dismay over this move the previous Friday:

“There’s no way LeMan can live up to that promise—it’s just impossible. They’ll end up paying the discount to too many agents, and even though their mother company has deep pockets, top management won’t be able to stand the losses for more than a few months. In the meantime, they lure agents away from other carriers, and everybody loses in the end.”

The one thing Anne Janotta knew for sure was that if LeMan Insurance could deliver on the one-day turnaround guarantee, a lot of agents would be defecting from Swiss Insurance. The Geneva branch was having a hard time just maintaining past performance, and pressure from the outside was mounting. She wondered what, if anything, she should recommend helping improve the performance of the Geneva office.

Exhibit 1: Backlog and Turnaround Time Calculations for the first Week of September 2013


    Requests to be processed Throughput
Operating Steps RUNs RAPs RAINs RERUNs Days
1 – Distribution (4 clerks)
To be processed1 1 3 1 11
Average per DC 0.25 0.75 0.25 2.75
95% SCT per request 128.1 107.8 68.1 43.2
Total Minutes 32 80.9 17 118.8 0.6
2 – Underwriting (3 teams)
To be processed1 4 10 7 47
Average per UT 1.33 3.33 2.33 15.67
95% SCT per request 107.2 87.5 49.4 62.8
Total Minutes 142.9 291.7 115.3 983.9 3.4
3 – Rating (8 raters)
To be processed1 5 12 8 54
Average per RT 0.63 1.5 1 6.75
95% SCT per request 112.3 88.7 89.4 92.2
Total Minutes 70.2 133.1 89.4 622.4 2
4 – Policy Writing (5 Writers)
To be processed1 5 9 56
Average per PW 1 1.8 11.2
95% SCT per request 89.3 72.1 67
Total Minutes 89.3 129.8 750.4 2.2
Total Backlog 82 Requests In Process
Total TAT 8.2 Days (0.6 + 3.4 + 2.0 + 2.2)


DC =                        Distribution Clerk

95% SCT =             95th percentile of the Standard Completion Time

TAT =                      Turnaround Time for a new request

UT =                        Underwriting Team

RT =                        Rater

PW =                       Policy Writer

RUN =                     Request for Underwriting

RAP =                      Request for Price

RAIN =                    Request for Additional Insurance

RERUN =                Request for Renewal

1 To be processed includes Requests-in-Process at this step and at upstream steps

Exhibit 2: Policy Processing Times (in minutes) by Department (2010)

Operating Steps RUNs RAPs RAINs RERUNs
1 – Distribution
Min 30.5 31.5 27 20.5
Max 142 124 286 276
Mean 68.5 50 43.5 28
Standard Deviation 30.7 24.9 9.2 6.2
95% SCT 128.1 107.8 68.1 43.2
Weighted average processing time per request 41
2 – Underwritinga
Min 1.7 6 0.5 4.2
Max 599 395 411 720.3
Mean 43.6 38 22.6 18.7
Standard Deviation 32 24.5 11.7 19.8
95% SCT 107.2 87.5 49.4 62.8
Weighted average processing time per request 28.4
3 – Rating
Min 7 8 15 7
Max 465 417 439 465
Mean 75.5 64.7 65.5 75.5
Standard Deviation 20.5 13.6 15.9 9.7
95% SCT 112.3 88.7 89.4 92.2
Weighted average processing time per request 70.4
4 – Policy Writing
Min 39.5 NA 30 39
Max 371 NA 275.5 370.5
Mean 71 NA 54 50.1
Standard Deviation 10.3 NA 8.6 9.5
95% SCT 89.3 NA 72.1 67
Weighted average processing time per request 54.8

Exhibit 3: Financial Summary, Geneva office (in thousands Swiss Francs)

2012 2013
Q1 Q2 Q3 Q4 Q1 Q2
Gross Premiums
New Policies 1,635 1,684 1,763 1,763 2,024 2,172
Endorsements 117 138 134 134 158 133
Renewals 7,140 7,067 6,898 6.971 6,317 6,596
8,892 8,889 8,797 8.868 8,499 8,901
Commissions 909 916 924 929 948 1,005
Other Expenses 87 99 132 96 130 121
Net Underwriting Revenue 7,896 7,874 7,741 7,843 7,421 7,775
Ordinary Insured Losses 5,602 5,778 5,718 6,030 6,155 6,453
Extraordinary Losses - - - 612 - -
Less: Branch Protectiona - - - 400 - -
5,602 5,778 5,718 6,242 6,155 6,453
Gross Underwriting Results 2,294 2,096 2,023 1,601 1,266 1,322
Operating Expenses 1,304 1,310 1,309 1,306 1,440 1,443
Branch Profit (Loss) 990 786 714 295 -174 -121


Exhibit 4: Number of Policies Processed, by Quarter (Geneva Branch)a


2012     2013  
  Q1 Q2 Q3 Q4 Q1 Q2
Requests Processed (RUNs originating as RUNs) 157 165 178 178 164 186
Requests Processed (RUNs originating as RAPs) 109 113 112 110 134 140
Total RUN Requests Processed 266 278 290 288 298 326
Late 0 0 0 0 0 0
RAPs (Total, including RAPs completed as RUNs)
Requests Processed 681 748 819 831 862 936
Late 0 0 0 0 0 0
Requests Processed 199 235 232 229 245 206
Late 2 0 0 0 0 3
Requests Processed 1,268 1,253 1,228 1,238 1,018 1,063
Late 225 248 310 387 425 468
Requests Processed 2,305 2,401 2,457 2,476 2,289 2,391
Late 227 248 310 387 425 471
Renewals – number lost 400 414 436 467 429 497
Weighted Average TAT (days) 5.9 5.1 5.3 5.7 5.8 6.2

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