SUBJECT: BUSINESS PROCESS RE-ENGINEERING

CASE STUDY: CIGNA PROPERTY AND CASUALTY REENGINEERING

Roll No.:
Rohan JoijodeEPGPOM-08-15
Utkarsh Srivastava- EPGCOM-08-21
Parag Vilas Kaslikar- EPGP-07-061
Vimal Mohan- EPGP-07-094

Date: 23.06.2016

1.

What situation Isom or P&C is facing?

Isom joined the board of CIGNA in March, 1993 as the president of the
property and casualty division. Situation at that moment can be described
as
CIGNA P&C had total 6500 employees operating through the United
States, $4 billion of revenues and very poor results for past five
years
Division was plagued with serious weakness in management and
poor supplier relationships
It was experiencing severe financial stress, losing almost $1billion
between 1989 and 1993. In 1993, it had combined ratio of 140%
i.e. $1.40 in losses and expense for every incoming $1.00 in earning
for the division.
Series of 1992 natural disasters and Los Angeles riots, compounded
by sharp increase in compensation claims resulting from new
government environmental rulings, send P&C into crisis mode.
Reactive downsizing done due to crisis did not stem losses, in fact,
resulted in the loss of some valuable talent to competitors and a
drain of employee morale.
2.

Is Isoms business vision responsive to the situation?

In general, most of the companies in property and casualty insurance

business would want to be high performing specialists rather than
generalists.
Yes, in this case however his vision was responsive to the situation. He
had a good view of the situation and knew that radical shift in the
divisions strategy is required to turn around the future.
P&C was a low performing generalist insurance division
Years of pursuing a wide range of market segments had alienated a
large number of qualified agents. P&Cs generalists strategy has
confused agents as to which type of risks they were seeking to
underwrite.
At times the firm had attempted to underwrite anything that
generated premiums, sometimes with almost no consideration of
risk. Approach boosted revenues but also increased the volumes of
claims even more and with disastrous consequences to bottom line.
Claims usually paid more than what was required just to keep
customers happy and maintain relationships with them, which
further reduced chances of making profits.
Isoms vision was to radically change this situation by
Fundamentally converting its products, customers,
processes, behaviours and technology.

mind-set,

3.

Partnering with key agents and seek to underwrite only specific risks
with better profit margins and less claim potential.
Transforming the divisions static value chain into a dynamic and
interactive value chain with feedback loops
Measuring profits and not revenues

Whats your evaluation of Approach Taken in terms of vision,

restructuring the organization, bringing in the consultants, design
approach, approach taken for analysis?
Our evaluation of Isoms approach:

Everyone in property and casualty business wanted to be one of the

specialists of the industry; hence his choice for the company to be
one was a valid and had following straight benefits
Building of relationships with key agents and reduced agents
frustration about what company seeks to underwrite
Better control on the variety of the managed risks and claims
by underwriting risks with low claim and high profit potential
Restructuring of P&C was the need of the hour as they needed to
transform into a more dynamic firm
Restructuring was done keeping in mind the channel of
distribution, target customers, type of products offered and
type of risk.
It helped to separate the low, medium and high complex
scenarios in such a way that they are handled by different
divisions in most effective manner.
A new executive team was formed to bring in fresh ideas on
the table and curb resistance to change and other type of
inertia.
Isom wanted to execute on his vision and for that he and Valerio felt
a need to develop multiple performance measures to assess the
achievement of companys business vision and to track these
measures as a way to effectively manage implementation program
and appraise employees
The effective tool for them was Balanced Scorecard and
they needed experts who can help them to drive the
transformation
Renaissance used the Balanced Scorecard methodology for
a more strategic dimension to its consulting. Hence was best
suited to be approached for complete transformation of P&C
Valerio has worked at Gemini consulting along with
Renaissance
consulting
in
assisting
companies
in
implementing Balanced Scorecard. Hence, he was confident in
their ability and was a strong reference for Isom.
After the analysis P&C was convinced that its core business
processes need to be re-evaluated and redesigned the efforts were

4.

centered on producer management relations, underwriting and

claims management.
This was required to build key relationships with agents and
reduce frustration and confusion among them
Focus on profitable markets and weed out non-profitable risk
underwritings from the portfolio
Manage claims in a faster to reduce the severity loss.
To transform the static value chain into a dynamic and
interactive value chain with feedback loops.
The approach to the complete re-engineering is considered as good
for the following reasons
Experts, Renaissance and Gemini consulting, were involved to
execute the transformation
Approach allowed them to develop multiple performance
measures to assess the achievement of companys business
vision
It also allowed them to track these measures as a way to
effectively manage implementation program and appraise
employees
The approach intended to convert the linear value chain into a
more dynamic value network, mapping the potential crossfunctional communication, collaboration and knowledge
sharing activities that could help drive top quartile
performance.
What is your Assessment of Reengineering Design?

The re-engineering design involved the following

Empowering the knowledge worker through IT this would have
allowed more responsibilities and authority to employees who are
core strength of P&C and can help them to drive up performance by
leveraging technology to not just distribute information, but
knowledge and skill. It intended to take them from the path of being
responsive, to being consultative and finally solving customer
problems before they even appear.
Two-tier approach to communication This intended to collect all
the structured and unstructured business information available with
employees, identify what is useful for other employees and
organization, then store it in an organized format so that it is easy to
access for others. This involved the insights collected by claims
department which get communicated to underwriting team to do
their job better.
Balanced Scorecard allowed to develop multiple performance
measures to assess the achievement of companys business vision
and to track these measures as a way to effectively manage
implementation program and appraise employees
Information Technology The idea of learning and knowledge
building needed to be integrated in the all the re-designed core
processes by developing, collection and sharing know-how.

5.

Technology was the critical factor in implementing this conceptual

framework.
In-sourcing it involved both the consulting colleagues and the local
IT teams of the specific departments, this helped expedite the
process because internal IT had great deal of knowledge about
existing systems and there was less resistance to change as it was
less threatening than outsourcing.
Client/Server Architecture This allowed all data to be stored
centrally, and accessed by different roles/individuals based on their
needs via different applications.

What is your Evaluation of Implementation Approach? Do you feel

implementation will be Successful? Why or why not?

The implementation approach started with a right vision and freshly

formed executive team willing to transform the division.
Re-engineering experts with experience in consulting other
businesses were involved to partner and drive the transformation.
Restructuring was done for better control and trimming down the
costs.
The methodology chosen allowed developing multiple performance
measures to assess the achievement of companys business vision
and to track these measures as a way to effectively manage
implementation program and appraise employees.
The transformation happened in a partnering mode involving the
internal teams who had best knowledge about the existing
processes.
The linear value chain was intended to be transformed in to a
dynamic network with feedback loops from one department to
another.
The approach involved integrating the idea of learning and
knowledge with all redesigned core business processes, to collect
store and share knowledge.
Hence, we feel that the implementation will be successful