SOM Case Assignment

Case Study Report: CIGNA Property and Casualty Reengineering

Team: Name Anirban Roy Choudhury Tanmoy Kumar Ghosh Probal Dutta Mantrani Shekhar Ghosh Bishwajeet Soy Roll Numbers ePGP-03-100 ePGP-03-183 ePGP-03-145 ePGP-03-168 ePGP-03-024

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SOM Case Assignment

Q1 . What situation Isom or P&C is Facing? CIGNA P&C insurance provides loss protection to properties against premium. The competitiveness depends on the factors like pricing, effective underwriting (risk assessment), servicing, efficiency in operation, differentiation. Insurance can be obtained through national and regional companies that used an agency distribution, direct writers or brokers, or through self insurance. Underwriting was a key process where pricing was decided after classifying, rating and transferring solicited risk prior to issuance of policy. Claims are distributed after proper estimation by claims personnel. The judgement of such personnel based on their experience and knowledge affects the estimate. Present situation is
1. 2. 3. 4. 5. CIGNA is under financial stress. The loss between 1989 and 1993 amounting 1 billion with a combined ratio of 140% Recent natural disasters and Government ruling adversely affecting the insurance company like CIGNA. IT personnel are decentralized, though reporting to corporate system. More like low performing generalists organization though wanted to become high performing specialists. Producer management a. Agent relationship was weak. b. Relationship among producers and CIS were dire straits. c. P&Cs generalist strategy has confused and alienated a large number of qualified agents. d. As a result, producers passed their poor business to P&C. Underwriting a. P&C had become a commodity underwriter with no focus. b. Underwrite anything that generates premium, with less consideration of risk. c. Revenue was boosted but claims increased in higher proportion. Claims a. Growing volume of difficult and complex cases needed higher skill b. People had tendency to overpay to maintain good relationship. Performance Evaluation is primarily on Financial performance.

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SOM Case Assignment

Q2. Is Isoms business vision responsive to the situation? The vision of Isom was to 1. Convert CIGNA into top-performing specialist organization. 2. Nimble organization to enter and leave any leveraged markets. 3. Higher priority on profitability than volume. 4. Expand performance evaluation beyond financial measures. 5. Be ahead in the competition. With the vision he should be able to overcome the stressful business situation CIGNA is facing. He should be able to respond to market and regulatory needs, run business profitably, move away from generalist to high performing specialist organization and beat the competitors. Q3. Whats your evaluation of Approach Taken in terms of vision, restructuring the organization, bringing in the consultants, design approach, approach taken for analysis?

Vision: Isom had a vision to bring the organization out f current business crisis and put it on solid ground of profitability and flexibility. Be competitive and high performing organization. He had strategy inline with the vision to improve relationship with the brokers to help retention, win back lost customers and at the same time run the business profitably. The brokers are categorized in term of the quality of business and future opportunity for profit. Also profiling was done on the providers. The underwriting process was also redesigned to support the intense decision making process. Restructuring the organization: To achieve the vision, he put together a new executive team, where he got 4 out of 10 members from the outside. Also, at the ground level more focus was given on IT enabled decision making. Traditionally, risk assessment was done at the personal level by the underwriters- this needed the strength of knowledge workers. The new effort was to enable, not to replace it. Reduce the complexity by enriching responsibilities and enhancing the process performance thru work flows. Emphasis was given on knowledge management so that knowledge workers can work on diversified business situations. In one IT enabled cooperative network where key information are easily accessible which will help to handle more difficult cases. Two tiers of communication approach is taken to manage both structured and unstructured knowledge which not only helped enhancing performance but gives the insight. Implementation of BSC helped to align the individual performance goals to organization level goals. Two consultants were brought into the system Gemini for analysis and business process redesign and Renaissance for IT and implementation of BSC. Isom is justified while taking help from external consultants as they will bring the knowledge and expertise in to the system. In their executive council also they had a mix of existing people and outsiders. This way, they could blend the industry level knowledge and experiences within the organization. Design: After the extensive analysis, design and prototyping was conducted. The business process transformation streams were reevaluated all the three business process - producer Page 3 of 5

SOM Case Assignment management, underwriting and claims management. Client server architecture where the data is managed centrally and assessed thru variety of applications with customized view to different users. To be effective, the architecture need to support varied circumstances. This needs three types of resources: information needed to derive solutions, communication infrastructure and applications to transform information into knowledge. They took small steps to decommission not all the legacy systems. Due to the time constraints, new systems should be highly responsive to changing business needs. In the proto type, legacy systems were analyzed to adapt the relevant applications to the new requirements and on the other hand, new reusable software components were created to reduce duplication. Approach for analysis: A 10-week of analysis were executed. Isom formulated one mild restructuring and building relationships within the executive team, however, consultants executed one extensive analysis. This involves interviews, conducting surveys and workshops. The outcome of the analysis pointed fundamental problem in business process and generated need for radical change. The effort proved to be worth to convince the management to go for a drastic measure than what was originally thought. Q4. What is your Assessment of Reengineering Design? The reengineering focusing on knowledge management to exceed the performance wall, two tier approach of communications and balanced score card. IT enabled knowledge management will provide higher level of insights to knowledge workers to take better decisions, serve multiple business units. Work flow based process helps to identify the sequences of individual steps, added with this is the technical know-how which gives bigger picture to the worker of the consequences of the steps. Depending upon the workers command of the know-how organization can perform at different level following same steps. By effectively managing two-tier communication framework, knowledge workers have access to both structured and unstructured information. This let the information flow, and also generate ideas. This way, it involved redesigning roles so that knowledge management was incorporated into existing set of responsibilities. That means, they could drastically achieve operational efficiency without massive restructuring of organizational roles. The BSC was redesigned to fit into organizational strategy, which is stated below.
Select and enter new markets with above average profit potential. Select and attract the right kinds of customers. Select and manage the producers for those businesses Better identify exposures and hazards. Drive pricing more accurately toward the right risk assessment. Form partnerships with customers in order to reduce claims frequency. Reduce claims severity Manage claims performance to the required service level of each business unit.

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SOM Case Assignment Q5. What is your Evaluation of Implementation Approach? Do you feel implementation will be Successful? Why or why not? The success needs the following. The Analysis, Design and Prototype yielded the pain areas and laid out the broad road maps. But implementation needs the following to be successful
Senior management must drive reengineering initiatives with a well-articulated vision that is appropriate for the situation. IT is an undervalued asset that can be tapped through reengineering to transform a company from a make-and-sell-oriented enterprise to a sense-and-respond-oriented enterprise. Learning loops and the balanced scorecard are important mechanisms for incorporating continual learning and dynamically tracking the results of reengineering investments. Successful implementation of reengineering projects requires the involvement and participation of the companys managers and employees. Consultants and outsourcing are important for various aspects of a reengineering project, but they are insufficient without the buy-in from managers and professionals in the organization. Business process can be streamlined or reengineered, but to change the long-term economic picture, a transformation initiative needs to encompass the reevaluation of communication systems and the sharing of intellectual assets. Client/server unlocks this capability.

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