Do We Need a New System?

A Case of Halflah Insurance Company

Pvt Ltd
Case study
Reference no 307-182-1
This case was written by Professor Muhammad I Ramay and
Khurram Shahzad Malik, Mohammad Ali Jinnah University. It is intended to be
used as the basis for class discussion rather than to illustrate either effective or
ineffective handling of a management situation. The case was made possible by
the co-operation of an organisation that wishes to remain anonymous.
2007, Mohammad Ali Jinnah University.
No part of this publication may be copied, stored, transmitted, reproduced
or distributed in any form or medium whatsoever without the permission
of the copyright owner.
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Do we need a new system?
A Case of Halflah Insurance Company Pvt. Ltd.
__________________________________________________

It was 11 O clock in the morning and Mr. Khalid Salman, the new CEO of Halflah
Insurance Company Pvt. Ltd. (HIC) was looking outside the window of his office with a
cup of coffee in his hand. What a bright sunny day it is! he said to himself. He was
reevaluating his recent decision of implementing a new information system in his
organization and seemed little worried about the aftermath. A while ago he had received
a telephone call from Manager Services & Support of his company. The manager
informed him about telephone calls that he had received in last one hour from different
clients of the company. The subject of all the calls was the same. The clients were having
great problems in filing insurance claims through their newly installed web based claim
processing system. The reasons for these problems were little computer literacy and
unavailability of computer for each employee of client organization.

It was not only the clients who were the victims of the new system but the employees were
also very much disturbed by this system. He recalled the words of Claim Processing
Officer of his company who said, After all why do we need this new system? It has made
our life a great misery. I dont see any benefits out of it till now and its already one and
a half month since its implementation. Not only are we suffering from it but more
importantly our clients are loosing confidence on us.

Background
Halflah Insurance Company Pvt. Ltd. is a local insurance company which provides
medical insurance services to employees of its client organizations. Its major clients
include local companies and multinationals operating in the country. The company was
incorporated in 1995, with offices in three different locations in the country and head
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office in federal capital. It has about 100 employees. The company has good financial
position because of little competition in its target market.

In the middle of 2006, the new CEO announced to change the claim filing and claim
processing systems. The existing manual systems were replaced by a highly automated
solution. The CEO was a business graduate from City University, London and had
experience with similar type of insurance companies in UK. He joined HIC and was
surprised that the company was still relying on manual systems. The employees were
used to working manually since start of the company. There was little involvement of
computers in company operations.

Insurance Company Procedures
The operations of the company were divided in two categories; first receiving claims
from its clients and second processing claims and making payments against these claims.
On company prescribed manual claim form the employees of client organization used to
file claims at the end of every month. These claim forms were available to them at
Accounts Office of their organizations. These claims were then sent to HIC for
reimbursement. The claims were then processed by claim processing officers of HIC.
Then these claims were sent to head office for approval and cheques were issued to the
client. The movement of claims from client to company and then to company head office
and back to company and client was through traditional postal system. The entire process
normally took 40 to 50 days.

Clients Dilemma
The clients at the time of treatment or visit to doctor had to pay money from his/her
pocket and got receipt for that payment. The payments include not only the hospital bills
and doctors fee but also the cost of expensive medicine. Later they filed the claim for
that payment and got it reimbursed from the company in about 60 days.

According to new procedure client still had to pay from his/her pocket at the time of
treatment but dont have to claim it in traditional way. Instead they need to logon to
companys website to access an online from and fill it. Entire process required hardly 10
minutes. Patients organization was out of scenario. The new CEO also wanted that
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company should set a deadline for refund. He insisted that the time between claim filed
and payment made against it should not be more than 5 days.

The Decision
Khalid took charge of the company as CEO in December 2005. He was previously
working with a reputable local company which was a Hi-Tech organization. He was very
surprised to see every thing being done manually. He could not find reasons for not
carrying out all the company operations through a sophisticated information system. So
he decided to automate the entire process of claim filing on clients end and claim
processing on companys end. He went for an Off-The-Shelf solution which was pretty
good and could easily have catered all the needs of the company on clients as well as
employees end. The new information system was a web based solution and could be
accessed by clients through internet.

The decision was purely based on Khalids personal experiences of success with
information technologies. He did not involve neither employees nor clients in his this
decision. He believed that this new system could give substantial benefits to the company
and clients equally.

Khalid called a meeting before the implementation of the new system. All the employees
of claim processing department and representatives of all the clients were present there.
He said, Under the new system our clients will be required to log on to companys web
site to access electronic claim filing form. They will fill and file claims online. The
employees will also process the claims online. The head office people will also have
online access to the processed claims. This will not only help us in doing our work more
efficiently and effectively but will also reduce the client payment time from 60 to just 5
days, thus increasing customer satisfaction.

The Problem
In July 2006 when new system went online and clients and employees were asked to give
away the manual processes, it created a cry all around. Every one was having great
difficulty in working with new system. Employees were not given formal training but the
implementation team helped them in using this new system on day to day basis for first
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15 days. This although greatly helped in reducing errors done by employees but still
employees were having few problems. Another reason for employee resistance towards
new system was expected future job slashing. Under new system a claim could be
processed in 10 minutes while it took 30 minutes under old system, so organization will
be requiring less number of claim processing officers in future. On this apprehension
employees resisted the change.

The real issues lied on clients end. Because when they started filing claims through this
new system, there was no one who could guide them. The error rate was extremely high
and queries for guidance and support were beyond the processing capability of services
and support officers. They asked for a person who could actually go with them to their
organization at the end of every month to file claims on their behalf. This was simply out
of question for the company.

Khalid was still in his office thinking what could have been done when the door of his
office opened. Manager Services & Support along with Manager Operations entered his
office to report the current situation. As Khalid had expected situation was the same
rather had been getting worse. What should we do now, asked Manager Services &
Support.

Discussion Questions
1. How do you analyze CEOs decision of computerization when every thing was being
done smoothly in manual form?
2. Do you think CEO had implemented too much change at once?
3. How CEOs change initiative can be mapped with Levins change management model
of unfreezing, changing and refreezing the situation?
4. What are the real reasons of problems faced by employees and clients?
5. What could have been done differently to better implement the change?