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There’s a moment in many insurance companies life when software tools and systems used for years become insufficient, cumbersome, and simply outdated. These changes are being forced by the progressive digital transformation. Based on our experience, core system replacements are generally planned at intervals of 10-12 years, considering various factors including budget constraints, organizational culture, and evolving business requirements.
It’s a moment that certainly brings a sense of dread in both business and IT-sided professionals. It comes with questions like:
- How are we going to proceed?
- How do we choose the right system to move forward?
- What are the key risks, and how do we avoid them?
- How much is it all going to cost?
Figuring out all those things on your own may be extremely difficult.
In this article, we’ll shine some light on the challenging process of insurance software successful implementation and integrations.
When does an Insurance Company need to Change or Implement emerging technologies?
The most common reason for software change in insurance business is a realization that the current system is outdated. The fact that it’s outdated leads to a number of issues and potential risks regarding performance, stability, and, most importantly, security.
That last element often works as a final straw that ultimately motivates many insurance organizations to look at the alternatives.
The sense of urgency to change software may also come from a realization that a current system doesn’t allow a insurance companies to keep a competitive edge. That applies to strict boundaries of custom policy administration systems used for many years. They’re the only thing a company knows, so moving forward from them is always difficult.
Unfortunately, at some point, it’s not a matter of preference. The insurance industry never sleeps, and it’s often a matter of a comprehensive software solution that gives a crucial advantage.
One of the most important signals for insurance industry companies is the growing percentage of online insurance purchases without a broker. According to the report by E&Y, more than 33% of people buy car insurance entirely online, so there’s a growing need to provide an excellent online customer experience backed by a reliable system.
So, it can also be a matter of survival in that sense. You might have to adjust and change your insurance software to deliver solutions that will be up to (and perhaps above)the newest industry standards.
8 Key Challenges Faced by Insurance Companies in System Integration and Implementation
According to an Ovum survey, a mere 27% of insurance companies consider the implementation of a policy management system to be successful. Let's explore eight key factors that may have played a role in this outcome.
We’ll focus on those aspects that will apply to almost any insurance industry company, so you’ll see quite a few similarities to the many challenges you face if you’re working in the industry.
1. Finding the Right Software Insurance Development Company
Many insurance companies you’ll approach after you decide it’s time to change will say they’re up to the task. It’s not entirely out of the realm of possibilities, but the process won’t be as smooth as it could be, and you can run into some big trouble.
A software house that has no experience in the insurance industry would require a thorough and lengthy discovery phase. Developers and managers would have to learn about all the basics and critical processes, requirements, and risks associated with insurance software solutions.
And who knows how much time and budget it will consume?
Worst case scenario, insufficient research and communication may lead to wrong decisions in the early stages that jeopardize the entire project.
So, choosing a software company with industry expertise can immediately start the partnership on another level. You can work with specialists who understand your business challenges and processes, and can provide ready-to-go solutions.
Instead of explaining how annexation and policy renewals work, you could focus on finding the correct solutions to your issues immediately.
2. Thorough Analysis of System Requirements
A survey by Accerto discovered that almost 75% of customers who attempted to purchase insurance online reported problems.
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The challenge for insurance companies is to address those problems and focus on features that will solve real problems while not creating new ones.
During the implementation process, it's crucial to prioritize core business functions over a wish list. The system supplier should function as a strategic partner for the insurance companies, asking detailed questions such as 'why?' 'what for?' and 'how?' to align the implementation with the insurer's business goals. In some cases, it may be necessary to explore alternative approaches to achieve these goals more effectively.
It’s good to keep that in mind because a company that’s ready for something as significant as a change of the entire system may miss key functionalities that may determine the success of the entire project. We’ve seen situations in which, along with some crucial software transformation, companies would implement features that have little to no business value. And those things not only cost a lot but distract from elements that matter.
The understanding of the insurance business on the software development company’s side is invaluable in this matter. A good software partner with industry expertise will ensure the client’s budget won’t go to waste for the nice-to-haves.
3. Building Interfaces That Instantly Feel Familiar to Users
Transitioning to a new system is a massive step for an entire insurance company. It’s supposed to answer business needs, but at the same time, it has to be easy to implement on a human level. If a new system requires time-consuming training for anyone supposed to use it, it means we’ve done something wrong.
In the work of insurance agents, a system should seamlessly facilitate their work, maximize sales efficiency, and offer user-friendliness. Gone are the days when extensive training was a prerequisite for system usage. What truly matters today is the convenience, simplicity, and overall effectiveness of the system and this is a significant challenge. Drawing from our own experience, we've learned that cutting corners in user experience (UX) research and system design may seem time-consuming and less cost-effective initially, but it ultimately pays off in the future in the form of:
- Eliminating the need for training sessions
- Enhancing agent satisfaction and their eagerness to engage with the system
- Facilitating smoother transitions in adapting to change
It’s not easy to achieve, but it is possible.
4. Staying in Line With Industry Regulations
“Can we do it?” is a question in software insurer development that usually means, “Is it technically possible, and can we afford it?”
When it comes to insurance software solutions, we must follow legal regulations for a particular country regarding own and customer data security, billing, personal information, policy guidelines, and more.
An insurance software team has to keep that in mind at every step of the project. An experienced partner is invaluable here because he or she has technical and legal know-how on how to meet the regulator's requirements in various ways.
5. Handling Data Migration
Data migration can be one of the most challenging elements of the process, especially if we’re dealing with insurance policies from very different periods. If the data migration process is not meticulously planned, executed, and validated, it can lead to data inconsistencies, loss, or corruption, which will ultimately impact the system's functionality and reliability. Managing such issues can be far more costly and time-consuming than initially anticipated.
Read more about Data Migration Solution
We understand that this is a challenging task, but it is achievable. One approach suggests a gradual transition, where old policies in the system are phased out, and new ones are initiated in the new system. However, this method may not be feasible for long-termpolicies or health insurance. Effective data migration demands a deep comprehension of the data and the development of reliable methods for its transfer.
6. Fear Regarding System Changes and New Technologies
Change management is a massive challenge in any new system implementation, and it’s no different in the case of insurance sector companies. No matter how perfect the new system will be, you have to be ready for some resistance to new technologies.
Well-designed customer experience plays a significant role here. The system has to be for users and with users.
By including insurance brokers or other types of users in the process and listening to their feedback, you may gain natural word-of-mouth product ambassadors that are invaluable in the actual implementation.
It also helps to informend-users properly about all the significant changes, even before the system is implemented.
7. Talent Shortage in the Insurance Industry
Insurance businesses often employ individuals well-versed in business, industry, and insurance product knowledge, but many of them are not adequately equipped to handle substantial IT projects, like core system replacements, which tend to occur every 10-12 years, contingent upon budget considerations, organizational culture, and evolving needs. The intervals between these projects can lead to the turnover of essential insurance team members, leaving newer, inexperienced employees bewildered by the intricacies of the project. In such instances, outsourcing the implementation of an insurance system may be a suitable solution. The partnering company takes on the responsibility of insurance professionals from the IT area recruitment, possesses the requisite project documentation, and ensures the continuity of the entire process.
8. “The sales dropped, so it must be the new system”
It’s a phrase that you should prepare insurance companies. However, data monitoring allows us to determine whether weaker sales results are the reason for the new system. We can do this by gathering and analyzing critical pieces of data regarding activity and workflow, such as:
- time required for a specific action,
- rate of user adaptation to the new system,
- error rates and user-reported issues,
- performance metrics and task completion success rates.
By analyzing those types of information, first, you can verify where are the actual system bottlenecks that may need your attention and which issues are related to other factors.
But this precise data also equips you with robust, evidence-based arguments against brokers who may attribute their low performance to the new system.
From our insurance experience, more often, it’s the overall resistance to using new technology. But that’s another story, perhaps best saved for a light-hearted sequel, "Adventures of the Reluctant Broker”.
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