Lone Star Insurance Co [L51] specializes in automobile insurance business. The management of its claims department is preparing operating plans for...

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4. Lone Star Insurance Co [L51] specializes in automobile insurance business. Themanagement of its claims department is preparing operating plans for the nextyear, particularly the ideal staffing level for claims representatives [who arecalled "claims reps" for short]. Based on the past and the planned future sales ofinsurance policies, LSI forecasts the new claims arrival rate to be about 10,000claims per quarter during the next four quarters [i.e. one year]. The claimsdepartment has determined that a claims rep needs to perform four hours of claims handling work per claim to close a claim. The average age of a claim atclosing is estimated to be six months [i.e. two quarters). Studies also indicate thata claims rep can effectively perform [after adjusting for lunch and other breaks,administrative meetings, etc] about 400 hours of claims handling work per quarter. The company desires to achieve a claims’ closing rate that is equal to thenew claims arrival rate [i.e 10,000 claims per quarter]. a. What average level of pending claims [i.e. number of open claims} may LSIexpect at any point in time during the coming year? Explain. [Please note that this is an ongoing, not a startup, operation} b. How many claims reps should LSI employ next year? Explain. 1What caseload[average number of pending claims per claims rep) will the claims reps experience?