For those new to the industry, the length and complexity of the solution purchasing process for insurance companies must seem overwhelming, and, at times, unnecessary. For many, the word “overkill” might come to mind, but the much-maligned request for proposal (RFP) process drives purchasing in the risk-averse insurance industry, and serves as the backbone for how insurers select future technology partners. Especially for core administration (policy, billing and claims) systems initiatives, a well-built RFP can provide an organized approach for working through dozens of seemingly viable alternatives and scoring in accordance with specific insurance company priorities. There are three vitally important things that are often neglected in the RFP process, however, and which should be primary considerations for a long-term partnership.
To Customize or Not to Customize
First, insurance companies should consider how well the “base system” meets the needs of the organization. Most systems have out-of-the-box entry screens, workflows, reports and processes that when utilized as designed can rapidly speed implementation and productive system use. While there is almost always some level of customization requested, it is important to keep in mind that when more customization is incorporated into an implementation it inevitably adds to project timelines, drives up costs, and drastically impacts an insurer’s ability to upgrade and maintain the system economically over time. Upgrading a significantly customized insurance core system often costs 50 percent or more of the original implementation costs, in addition to insurer project and testing resources. So, it is important to consider what is already available vs. “what is possible.”
The Real Power of Configuration Tools
Second, pay attention to how the system configuration tools work and how such tools will be used not only during implementation, but for ongoing maintenance as well. The capabilities of configuration tools are frequently overlooked because in the majority of cases the vendor (or vendor-owned consultants) take responsibility for setting up the first few lines of business. This means configuration tools are not given the same upfront scrutiny as policy, claims or billing functionality, and following the initial implementation, insurers either continue to rely on the vendor to make changes/updates to systems or transition the responsibilities to internal IT staff. Either way, the capabilities of these tools will impact time to market for any future changes or new lines of business. Another hidden value of excellent configuration tools are lower implementation costs. Many vendors talk about the quality of the system’s configuration tools, but then propose very high implementation estimates, so how good are the tools really?
Making a Love Connection
The final (and most important) thing a typical RFP won’t provide is a picture of the culture and ease of doing business with a prospective vendor partner. Sending a RFP to a number of prospective vendor partners is the equivalent of speed dating, and, if successful, it could and should expedite the identification of a few good finalists. At this point, it is crucial to begin to build a robust rapport between organizations. This often neglected part of the selection process is why many projects fail. This can made worse by traditional consolidation of communication through either procurement or consulting channels, thus not allowing for essential interaction to determine if the two organizations are a good cultural fit. After the contracts are signed and the project kicks off, there are still (at least) two companies working as long-term partners (one would hope). It is imperative for all involved that there is cultural compatibility and alignment of goals.
Spend the Time, Save the Headache
Throughout the insurance value chain and across lines of business and process stakeholders, the gravity, time, and effort involved in getting to the right core administration system partner and solution is understood. The costs of these systems are high, and there are still too many projects that fail to meet insurer expectations, or just fail altogether. It is important for underwriters, claims examiners, accountants, executives and IT staff to be comfortable with the selected partner and solution. Spending the time in the RFP process to make sure the system is highly compatible with the company’s future vision, is truly easy to configure and maintain on a go-forward basis, and that the company being considered as a partner is the right fit will save the headache later.
Scott Hinz is the Director of Sales for Innovative Computer Systems, developer of the Finys Suite. He can be reached for further comment or information via email at firstname.lastname@example.org.