Process Activity Analysis for a Service Company Statewide Insurance Company has a process for making payments on insurance claims as follows: An activity analysis revealed that the cost of these activities was as follows: Receiving claim $39,900 Adjusting claim 172,900 Paying claim 53,200 Total $266,000 This process includes only the cost of processing the claim payments, not the actual amount of the claim payments. The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted. The process received, adjusted, and paid 3,800 claims during the period. All claims were treated identically in this process. To improve the cost of this process, management has determined that claims should be segregated into two categories. Claims under $1,000 and claims greater than $1,000: claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim. Claims above $1,000 would be adjusted. It is estimated that 65% of the claims are under $1,000 and would thus be paid without adjustment. It is also estimated that the additional effort to segregate claims would add 10% to the "receiving claim" activity cost. Question Content Area a. Develop a table showing the percent of individual activity cost to the total process cost. Round the percents to the nearest whole number, if required. Statewide Insurance Company Individual activity cost to the total process cost Activities Activity Cost Percent of Total Process Receiving claim $fill in the blank 45c3ad054fa1fb8_1 fill in the blank 45c3ad054fa1fb8_2 % Adjusting claim fill in the blank 45c3ad054fa1fb8_3 fill in the blank 45c3ad054fa1fb8_4 % Paying claim fill in the blank 45c3ad054fa1fb8_5 fill in the blank 45c3ad054fa1fb8_6 % Total $fill in the blank 45c3ad054fa1fb8_7 fill in the blank 45c3ad054fa1fb8_8 % Question Content Area b. Determine the average total process cost per claim payment, assuming 3,800 total claims. Round to the nearest whole dollar. $fill in the blank 370d8e08ff83f9e_1 per paid claim Question Content Area c. Prepare a table showing the changes in the activity costs as a result of the changes proposed by management. If an amount is zero, leave the entry box blank. Use the minus sign to indicate an additional cost in the last column. Statewide Insurance Company Changes in the activity costs Activities Activity Cost Prior to Improvement Activity Cost After Improvement Activity Cost Saving Receiving claim $fill in the blank 8ec888f99fc1038_1 $fill in the blank 8ec888f99fc1038_2 $fill in the blank 8ec888f99fc1038_3 Adjusting claim fill in the blank 8ec888f99fc1038_4 fill in the blank 8ec888f99fc1038_5 fill in the blank 8ec888f99fc1038_6 Paying claim fill in the blank 8ec888f99fc1038_7 fill in the blank 8ec888f99fc1038_8 fill in the blank 8ec888f99fc1038_9 Totals $fill in the blank 8ec888f99fc1038_10 $fill in the blank 8ec888f99fc1038_11 $fill in the blank 8ec888f99fc1038_12 Question Content Area d. Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 3,800 total claims. Round to the nearest cent. $fill in the blank 3ce9bcfbef8df86_1 per paid claim
Process Activity Analysis for a Service Company
Statewide Insurance Company has a process for making payments on insurance claims as follows:
An activity analysis revealed that the cost of these activities was as follows:
Receiving claim $39,900
Adjusting claim 172,900
Paying claim 53,200
Total $266,000
This process includes only the cost of processing the claim payments, not the actual amount of the claim payments. The adjusting activity involves verifying and estimating the amount of the claim and is variable to the number of claims adjusted.
The process received, adjusted, and paid 3,800 claims during the period. All claims were treated identically in this process.
To improve the cost of this process, management has determined that claims should be segregated into two categories. Claims under $1,000 and claims greater than $1,000: claims under $1,000 would not be adjusted but would be accepted upon the insured's evidence of claim. Claims above $1,000 would be adjusted. It is estimated that 65% of the claims are under $1,000 and would thus be paid without adjustment. It is also estimated that the additional effort to segregate claims would add 10% to the "receiving claim" activity cost.
Question Content Area
a. Develop a table showing the percent of individual activity cost to the total
Statewide Insurance Company
Individual activity cost to the total process cost
Activities Activity Cost Percent of
Total Process
Receiving claim $fill in the blank 45c3ad054fa1fb8_1
fill in the blank 45c3ad054fa1fb8_2
%
Adjusting claim fill in the blank 45c3ad054fa1fb8_3
fill in the blank 45c3ad054fa1fb8_4
%
Paying claim fill in the blank 45c3ad054fa1fb8_5
fill in the blank 45c3ad054fa1fb8_6
%
Total $fill in the blank 45c3ad054fa1fb8_7
fill in the blank 45c3ad054fa1fb8_8
%
Question Content Area
b. Determine the
$fill in the blank 370d8e08ff83f9e_1
per paid claim
Question Content Area
c. Prepare a table showing the changes in the activity costs as a result of the changes proposed by management. If an amount is zero, leave the entry box blank. Use the minus sign to indicate an additional cost in the last column.
Statewide Insurance Company
Changes in the activity costs
Activities Activity Cost Prior
to Improvement Activity Cost
After Improvement Activity Cost
Saving
Receiving claim $fill in the blank 8ec888f99fc1038_1
$fill in the blank 8ec888f99fc1038_2
$fill in the blank 8ec888f99fc1038_3
Adjusting claim fill in the blank 8ec888f99fc1038_4
fill in the blank 8ec888f99fc1038_5
fill in the blank 8ec888f99fc1038_6
Paying claim fill in the blank 8ec888f99fc1038_7
fill in the blank 8ec888f99fc1038_8
fill in the blank 8ec888f99fc1038_9
Totals $fill in the blank 8ec888f99fc1038_10
$fill in the blank 8ec888f99fc1038_11
$fill in the blank 8ec888f99fc1038_12
Question Content Area
d. Estimate the average cost per claim payment, assuming that the changes proposed by management are enacted for 3,800 total claims. Round to the nearest cent.
$fill in the blank 3ce9bcfbef8df86_1
per paid claim
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