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The case gives a detailed account of the information technology (IT)

and customer relationship management (CRM) initiatives

implemented by the HealthCare division of Cigna Corporation, the
third largest healthcare services provider in the US. The case details
the circumstances that led Andrea Anania, the Chief Information
Officer of Cigna's HealthCare division, to take up IT systems
migration projects and how the hasty and poor CRM systems
implementation affected the organization’s business operations and
customer service.
In 2002, Cigna faced the problems in their customer database system
which resulted in misquoting their number of customers by extra
900000. They also faced the problem of customer service and
profitability due to these reasons company’s membership fell from
13.3 million to 12.5 million and a net loss of US$398 million.
The main reason for Cigna’s poor customer service and reduction in
membership was failure of restructuring of its IT and CRM system at
its HealthCare Division. To overcome this problem they adopt new
technology AS400 from that of 20 year old computer system to
support claims processing by PowerMHS software and ProClaim
software. Despite Anania’s ,Chief Information Officer of Cigna,
confidence the change in technology did not hold good and company
lost 6% of its member alone in 2002.
The reasons which Cigna’s top management came to count for this
dissatisfaction were greater than expected cost of implementing the
projects, misconception of the economic benefits from the project.
Background of Cigna:
Cigna was formed by merger of Philadelphia based Insurance
Company of North America (INA) and Hartford based Connecticut
General Corporation (CGC) in 1982.Cigna act as their chief operating
companies and headquartered in Philadelphia. In 1984 Cigna
acquired the American Foreign Insurance association (AFIA) to
become one of the largest Insurance Company in the world and came
into the Dental Health care market-The first insurance company to do
so. In 1989 Cigna international financial services was founded to give
health and life insurance to people living outside US. During same
year company acquired the leading mental health care institution,
Metropolitian Clinics of Counseling companies and named Cigna
Behavioral Health, Inc. Cigna also acquired Equicor, one of the
largest employees-benefits providers in US in 1990. In 1998, for the
first time Cigna’s share price crossed US$200.
At the end of 2000, Cigna sold its property casually domestic and
international business to Bermuda based ACE Limited to focus on its
global health, life, and pension business. They also started as in Asset
Management Company. In 2002 Cigna entered in Chinese Insurance
market. By 2004 Cigna had 3 operating divisions- Cigna Group
Insurance, Cigna healthcare and Cigna International. These divisions
provide accident & disability insurance, health & life insurance and
retirement & investment services across US. Cigna again acquired a
New Hampshire based healthcare company in 1997 which give
company a major boost. They had an alliance with 3100 hospitals and
220, 000 physicians under its HMO (Health Maintenance
Organisation) business.
HMO provides pre-paid medical services to its customers
through a network of doctors and hospitals. All the member pay
monthly premiums and receive coverage for all eligible medical
costs. The doctors and hospitals, referred to as service providers
and paid by the insurers.

Cigna Health care subsidiaries are:

• Connecticut General Life Insurance Company
• Tel- Drug Inc
• Cigna Behavioral Health Inc.
• Intracorp
• Cigna Health Corporation
• Cigna Dental Health Inc.
Products offered by Cigna healthcare:
• Medical
• Health
• Dental
• Pharmacy
• Insurance products
In 1998, Anania positioned as Chief Information officer in Cigna and
Executive Vice-President of Systems of Cigna’s Healthcare along
with data processing, telecommunication and development of
information technology system.
Implementing CRM system:
In 1999, Cigna operates with old IT system which include separate
units for enrollment, processing of claims and verification of
eligibility. The processing and verification system had different
system which are not even interconnected. Hence separate bills were
produced for each product across each division. To rectify this
problem Anania introduced integrated system that would 1)generate 1
bill across products and division, 2) process the medical claims, 3)
provide case histories of all the customers, 4) facilitate exchange of
information with customer.
She planned to introduce 2 such system for HMO and other for
indemnity business. Anania bring upon national toll-free number and
Electronic Data Interchange (EDI) to receive and update claims made
via Internet. To implement this Cap Gemini Ernst & Young
(CGE&Y) were called in. CGE&Y implement Accelerated Solution
Environment (ASE) tools to enhance decision making. The main aim
was to speed up the processing of 120 million medical claims without
much human intervention. AS400 include PowerMHS software to
support claims of managed care and Proclaim software for indemnity
In 2000, some physicians filed a class action lawsuit against Cigna
for late payment of claims. In 2001, Insurance Commissioner of
Georgia, John W. Oxendine, imposed a fine of US$300,000 for delay
of payment of claim, largest fine against HMO.
During 2002, Cigna promised to give efficient customer services by
the use of new IT System. It results in increase in customer base new
as well as existing renewal policies with reaching a number of more
than 13 million.
Anania start with the migration process for more than 13 million
customers would take too long so she decided to move groups of 3.5
million customers at a time to new platforms without testing the
whole system for its integrity. By this several problems came which
have no solution like front end application could not retrieve data
from back end system easily, back end data was not filtered even the
information did not appear correctly, problem regarding health
coverage plans. The customer’s database was not updated because of
which many employees lost their medical coverage.
Due to this customer go for service centers to inquire about faulty
services but because of lack of employees they were unable to get it.
To tackle this problem Anania hired 1000 new employees but as they
were not trained so the problem got further compounded. Due to poor
customer service, many customers started turning away from Cigna
to its competitors. The company lost nearly 1 million customers by
end of 2002.Heavy competition forced Cigna to reduce the premiums
on its health plan.
According to a survey in Pennsylvania on 14 HMO it was found that
customer dissatisfaction was highest at Cigna. Anania cited reason
for this as lack of time for testing the system for the failure of the
migration project.
Launching of
Anania started with web portal project aimed to make millions of
health care customers easy and secure online transactions the portal
was launched in June 2002 it helped customers to check their medical
claim states , manage their health care and retirement accounts. This
service was free for Cigna customers. The portal was built in
collaboration with Yahoo and Sun Microsystems Inc ( sun). Yahoo
enabled customer to assess directly through its my
yahoo homepages. Anania decided to slow the pace of migration
process and slowly transferred all customized data base toward new
platforms without any major problem. The site provided information
regarding various products available, at Cigna and helps the users to
choose a suitable plan, select or change doctor’s online, talk to
nurse’s online, order medications. Customers got accurate bills
quickly and easily. In 2003 won the ‘Best in Show’
award in the benefits management category. In the same fiscal
CIGNA earned net income of US $668 million on revenue of US
$18.80 billion the increase in net income arose due to decreased cost
and increased earnings at health care division. However customer
retention was less than 70%.
By 2004 Cigna decided to launched a new suite named
‘CIGNATURE-Your plan Your choice’. The suite enabled employers
to designee a cost effective employee health care plan. By 2005
Cigna recorded customer retention rate at health care division
increased to 84%. The CIGNATURE suite received favorable
reviews from customers and was expected to attract many more
According to analysts, the company was now processing medical
claim quickly and to a certain extent achieved its goal to reduce
human intervention. However, management admits that the project
had exceeded the original budget of US $1 billion. Cigna’s financial
performance show negative statistics which shows a difficult phase
for Cigna. According to another section of analysts Cigna had been
moving in the right direction and as soon as migration will complete
it would enable Cigna to compete strongly, giving rise to higher
profit margin and stable growth in membership.