Evaluating Insurance Software Vendors: What to Look For

Choosing an insurance software vendor is not simply a comparison of features, functionality, and price. The system may support accounting, policy administration, claims, reporting, data, and other business functions for years, so leadership needs to understand how well each option fits the way the company operates and where the business is going.

Before comparing vendors, insurance companies should be clear about their business requirements, current processes, future needs, stakeholder priorities, implementation expectations, and the decisions the system will need to support.

The question is not only, “What can this software do?” It is also, “Is this the right system and vendor for our business?”

Large-scale system transformations can take years to complete and require significant investment of people, time, and capital. Decisions made during software evaluation can shape implementation, operating processes, reporting, data, and the vendor relationship long after the contract is signed.

The reasons for considering a new system vary. A company may be preparing for growth into new lines of business, replacing an aging ERP or core system, addressing financial reporting or compliance needs, or trying to improve processes that the current technology no longer supports.

Sometimes several of those issues are happening at once. Knowing a system needs to change is often the easier decision. Determining what the business actually needs, which vendor can support it, and how to compare the options is where the real evaluation begins.

Six Things to Consider When Evaluating an Insurance Software Vendor

Leaders generally consider three scenarios when faced with the question of what kind of software solution to implement:

• Upgrade an existing platform to a more modern version of the same software that may be generations newer.
• Consider alternative system solutions to replace existing legacy systems.
• For new business segments, consider all potential solutions in the marketplace.

While these options may seem straightforward, the devil is in the details. Understanding the best long-term options for a company requires thorough due diligence that relies on an experienced team of project managers and subject matter experts (SMEs).

Whichever path leadership is considering, the evaluation should address six areas before a vendor decision is made:

1. Do the Work Before Comparing Vendors

I once heard a business leader on a project say, “You can’t skip steps.” Time and again, this mantra proves true for large, complex, technical projects–and it demonstrates the value of devoting considerable energy to selecting suitable software systems from the onset.

Cutting corners to make decisions based on prior experience with a system or general market knowledge to save time and money can create costly shortcuts later in the project.

A few reasons companies bypass project due diligence include:

• Misplaced trust in the status quo and comfort in a limited solution review
• Concerns or constraints regarding the time and money needed to conduct a complete systems review
• Not having enough experience with system evaluations to recognize where a more thorough review is needed

2. Define Business Requirements Before Evaluating Vendors

A high-performance core software platform is only as valuable as the underlying business processes and cultural buy-in that support it. At this stage, it is crucial to identify business requirements and find the right solution instead of uncovering risks or issues after the foundation is poured.

A powerful tool regularly used in software evaluation and selection is the Request for Proposal (RFP). An effective RFP digs deep into all aspects of an organization’s software solution needs and a potential implementation partner’s capabilities.

Depending on the scale of the project, preparing an RFP may involve months or more of work. Like a guide for a wilderness journey, an experienced project manager or subject matter expert (SME) knows the dangers and how to prepare detailed requirements and the selection process. Heed the sage advice: “You don’t know what you don’t know.” Acknowledging the complexities and experiencing shortcomings early can mean the difference between success and failure.

Creating a software selection RFP can be much like navigating a minefield. To avoid disaster, experienced decision-makers consider all facets of the project, from physical servers to executive culture and everything in between.

Too often, teams reach a decision based on a partial assessment of needs or simply looking at the project narrowly as an IT initiative. Begin with the notion that the software decision impacts the foundation of business operations and strategic planning for years or decades.

3. Evaluate the Vendor, Not Just the Software

Working under the assumption that a new software system will solve the world’s problems leads to unintended consequences and eventualities. Businesses fall for the belief that software vendors align a new system to your existing – and often unique – business processes. After all, they were hired to implement the business tool, right?

Sure, but remember: The vendors know software. Their expertise does not generally extend much beyond their system.

Comprehensive evaluation of business requirements, change management, strategic planning, and cultural alignment all fall outside their sphere of expertise, yet they are the nexus of an enterprise software implementation. Call it “the why” of the project. A knowledgeable project manager leads your team to achieve that full potential, from project planning and system selection to a successful transition into a prosperous future.

4. How to Compare Insurance Software Vendors

Squeezing every ounce of opportunity from the software requires an honest organizational assessment. Know thyself. Acknowledge the comprehensive needs of the organization, not just specific solution areas. Software is a tool. Knowing why you’re using software and leveraging that to your advantage is a true skill.

• Start with a top-to-bottom review of existing processes
• Document the stakeholder needs
• Develop an evaluation matrix to more easily compare vendor solutions against potentially hundreds of requirements

In addition to providing a comprehensive understanding of the company’s needs, documentation of requirements through the RFP process frames the project’s goals, progression plan, and an audit trail for decisions.

5. Why Due Diligence Helps Avoid Costly Delays

A recent TAC4 project highlights the importance of due diligence: A new client was experiencing considerable angst and frustration with their project before bringing our team in to help. A primary struggle involved internal stakeholders voicing concerns over requirements not being adequately collected or reviewed at the project’s onset, leading to several months of additional work to gain clarity and outline a better approach.

6. What a Structured Vendor Evaluation Gives Leadership

Consider the due diligence that involves a thorough evaluation of solutions as an investment opportunity and a tool for success, not as a project delay or expense. Due diligence establishes the foundation for your project success and provides a deep understanding of the organization’s workings.

With the help of an experienced RFP manager and project leader, the software evaluation phase captures deep insights into the organization’s processes and culture, positioning the company for success long after implementing the new solution.

You can’t skip steps. A focused mindset during the early stages of software evaluation is one way a leader can distinguish their projects from others.