Insurance companies spend considerable resources on processing claims (which results in a claim denial or payment to cover a loss). Short, accurate processing is desirable because both customers and the company benefit by resolving claims satisfactorily and by using minimum resources to do so. To improve its insurance claims processing, Global Insurance Company began a pilot project in its Northwest Region claims office to track the time to process each new automobile loss claim during a recent quarter. Processing time begins when a company representative receives a claim and ends when the final settlement is reached.

Following are time data related to processing these claims at the company’s Northwest Region.

Claim-ProcessiTnigme Data Average 8-Hour Days Spent in Waiting Waiting Revisions Average Days to Processing for for and Cycle Time Complete Percent Number byAdjusters Adjusters Information Corrections in Days 0-10 4% 111),;57240) 0.25 3.50 4.10 0.12 TAM Wee 10 28,800 0.34 8.10 10.10 0.11 18.65 21-30 30 86,400 0.65 9.40 15.20 0.15 25.40 31-40 24 69,120 1.30 9.10 25.60 0.28 36.28 41-50 is) 54,720 2.40 Hee 31.40 0.44 46.14 51-60 8 23,040 2.90 12.30 38.20 0.88 54.28 More than 60 5 14,400 3.10 iso) 49.70 2.60 66.90 Total 100% 288,000 Required

a. Compute the overall average cycle time and throughput efficiency ratio in total and for each stage of processing for automobile loss claims during the quarter. (Note: These data can be easily analyzed with a computer spreadsheet.)

b. Comment on the apparent cause(s) of long cycle times and low throughput efficiencies.

c. What recommendation would you make to Global Insurance Company to improve its processing of automobile loss claims?