8 Key Challenges In The Implementing New Insurance Software

Marcin Nowak
November 27, 2023

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insurance companies life when software tools and systems used for years become insufficient, cumbersome, and simply outdated.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 system 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The most common reason for software change in insurance business is a realization that the current system is outdated.
The fact that it’s outdated leads to a number of issues and potential risks regarding performance, stability, and, most importantly, security.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 alwaysdifficult.

Unfortunately, at somepoint, 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 acrucial advantage.

One of the most importantsignals for insurance industry companies is the growing percentage of onlineinsurance purchases without a broker. According to the report by Ernst&Young, more than 33% of people buy car insurance entirely online, sothere’s a growing need to provide an excellent online customer experience backed by a reliable system.

So, it can also be amatter of survival in that sense. You might have to adjust and change yourinsurance systems 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 Ovumsurvey, a mere 27% of insurance companies consider the implementation of apolicy management system to be successful. Let's explore eight key factorsthat may have played a role in this outcome.

27% of insurers consider the impelementation of a policy management

We’ll focus on thoseaspects that will apply to almost any insurance industry company, so you’ll seequite a few similarities to the many challenges you face if you’re working inthe industry.

1. Finding the Right Software Insurance Development Company

Many insurance companiesyou’ll approach after you decide it’s time to change will say they’re up to thetask. It’s not entirely out of the realm of possibilities, but the processwon’t be as smooth as it could be, and you can run into some big trouble.

A software house that hasno experience in the insurance industry would require a thorough and lengthydiscovery phase. Developers and managers would have to learn about all thebasics and critical processes, requirements, and risks associated with insurancesoftware solutions.

And who knows how muchtime and budget it will consume? 

Worst case scenario,insufficient research and communication may lead to wrong decisions in theearly 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 howannexation and policy renewals work, you could focus on finding the correct solutions to your issues immediately.

2. Thorough Analysis of System Requirements

Asurvey by Accerto discovered that almost 75% of customers who attempted topurchase insurance online reported problems.

75% of customers who ateempted to purchase insurance

The challenge forinsurance companies is to address those problems and focus on features thatwill actually solve real problems while not creating new ones. 

During the implementationprocess, it's crucial to prioritize core business functions over a wish list.The system supplier should function as a strategic partner for the insurancecompanies, asking detailed questions such as 'why?' 'what for?' and 'how?' toalign the implementation with the insurer's business goals. In some cases, itmay be necessary to explore alternative approaches to achieve these goals moreeffectively.

It’s good to keep that inmind because a company that’s ready for something as significant as a change ofan entire system may miss key functionalities that may determine the success ofthe entire project.. We’ve seen situations in which, along with some crucialsoftware transformation, companies would implement features that have little tono business value. And those things not only cost a lot but distract fromelements that actually matter.

The understanding of theinsurance business on the software development company’s side is invaluable inthis matter. A good software partner with industry expertise will ensure theclient’s budget won’t go to waste for the nice to haves.

3. Building Interfaces That Instantly Feel Familiar to Users

Transitioning to a newsystem is a massive step for an entire insurance company. It’s supposed toanswer business needs, but at the same time, it has to be easy to implement ona human level. If a new system requires time-consuming training for anyonesupposed to use it, it means we’ve done something wrong.

In the work of aninsurance agents, a system should seamlessly facilitate their work, maximizesales efficiency, and offer user-friendliness. Gone are the days when extensivetraining was a prerequisite for system usage. What truly matters today is the convenience,simplicity, and overall effectiveness of the system and this is significantchallenge. Drawing from our own experience, we've learned that cutting cornersin user experience (UX) research and system design may seem time-consuming andless cost effective initially, but it ultimately pays off in the future in theform 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’snot easy to achieve, but it is possible.

4. Staying in Line With Industry Regulations

“Can we do it?” is aquestion in software insurer development that usually means, “Is it technicallypossible, and can we afford it?”

When it comes toinsurance software solutions, we must follow legal regulations for a particularcountry regarding own and customer data security, billing, personalinformation, policy guidelines, and more.

A insurance software teamhas to keep that in mind at every step of the project. An experienced partneris invaluable here because he or she has technical and legal know-how on how tomeet the regulator's requirements in various ways.

5. Handling Data Migration

Data migration can be oneof the most challenging elements of the process, especially if we’re dealingwith insurance policies from very different periods. If the data migrationprocess is not meticulously planned, executed, and validated, it can lead todata inconsistencies, loss, or corruption, which will ultimately impact thesystem's functionality and reliability. Managing such issues can be far morecostly and time-consuming than initially anticipated.

Read more about Data Migration Solution

We understand that thisis a challenging task, but it is achievable. One approach suggests a gradualtransition, where old policies in the system are phased out, and new ones areinitiated in the new system. However, this method may not be feasible for long-termpolicies or health insurance. Effective data migration demands a deepcomprehension of the data and the development of reliable methods for itstransfer.

6. Fear Regarding System Changes and New Technologies

Change management is amassive challenge in any new system implementation, and it’s no different inthe case of insurance sector companies. No matter how perfect the new systemwill be, you have to be ready for some resistance to new technologies.

Well-designed customerexperience plays a significant role here. The system has to be for users andwith users.

Byincluding 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 isimplemented.

7. Talent Shortage in the Insurance Industry

Insurance businessesoften employ individuals well-versed in business, industry, and insuranceproduct knowledge, but many of them are not adequately equipped to handlesubstantial IT projects, like core system replacements, which tend to occurevery 10-12 years, contingent upon budget considerations, organizationalculture, and evolving needs. The intervals between these projects can lead tothe turnover of essential insurance team members, leaving newer, inexperiencedemployees bewildered by the intricacies of the project. In such instances,outsourcing the implementation of an insurance system may be a suitablesolution. The partnering company takes on the responsibility of insuranceprofessionals from the IT area recruitment, possesses the requisite projectdocumentation, and ensures the continuity of the entire process.

8. “The sales dropped, so it must be the new system” 

It’s a phrase that youshould prepare insurance companies. However, data monitoring allows us todetermine whether weaker sales results are actually the reason for the newsystem. We can do by gathering and analyzing critical pieces of data regardinguser 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 typesof information, first, you can verify where are the actual system bottlenecksthat may need your attention and which issues are related to other factors.

But this precise dataalso equips you with robust, evidence-based arguments against brokers who mayattribute their low performance to the new system.

From our insuranceexperience, 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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