Question

An insurance company processes 800 claims per year. The average processing time for a claim is 5 weeks. 45% of all claims received are car insurance claims, 40% of all claims received are motorcycle insurance claims, 10% are boat insurance claims, and the remaining are house insurance claims. Hint: These are throughput values. On average there are, 20 car, 9 motorcycles, 12 boats, and some house claims in process. Hint: These are inventory values. Assume 50 weeks per year.

1. What is the average number of claims that are in process?
A. 128 claims.
B. 64 claims.
C. 90 claims.
D. 80 claims.
E. 160 claims.
2. How many house insurance claims are in process?
A. 77 claims.
B. 21 claims.
C. 72 claims.
D. 39 claims.
E. 45 claims.
3. How long, on average, does it take to process a car insurance claim?
A. 7.5 weeks.
B. 4.5 weeks.
C. 3.75 weeks.
D. 6.67 weeks.
E. 2.78 weeks.
4. How long, on average, does it take to process a house insurance claim?
A. 15.63 weeks.
B. 48.75 weeks.
C. 17.5 weeks.
D. 36 weeks.
E. 11.25 weeks.

Answer 1

1. D. 80 claims.

2. D. 39 claims

3. E. 2.78 weeks

4. B. 48.75 weeks

Step-by-step explanation:

1. Calculation to determine the average number of claims that are in process

Using this formula

Average number of claims in process = Lead time in weeks*units per week

Let plug in the formula

Average number of claims in process = 5*(800/50)

Average number of claims in process= 80 claims

Therefore the average number of claims that are in process is 80 claims

2. Calculation to determine How many house insurance claims are in process

Average number of house insurance claims in process = 80-20-9-12

Average number of house insurance claims in process = 39 claims

Therefore the Average number of house insurance claims in process is 39 claims

3. Calculation to determine How long, on average, does it take to process a car insurance claim

First step is to calculate the Units per week

Units per week = (800/50)*45%

Units per week= 7.2

Now let calculate How long, does it take to process a car insurance claim

Time taken to process a car insurance claim = 20/7.2

Time taken to process a car insurance claim = 2.777777778

Time taken to process a car insurance claim = 2.78 weeks (Approximately)

Therefore How long, on average, it take to process a car insurance claim is 2.78 weeks

4. Calculation to determine How long, on average, does it take to process a house insurance claim

Using this formula

Time taken to process a house insurance claim = Average number of house insurance claims in process/Weekly house insurance claims

Let plug in the formula

Time taken to process a house insurance claim= 39/[(800/50)*5%]

Time taken to process a house insurance claim= 48.75 weeks

Therefore How long, on average, it take to process a house insurance claim is 48.75 weeks