What’s the Difference?

Depending on the studies you cite or the reports you favor, the average cost of a failed system implementation in the insurance industry can vary significantly depending on the size of the company, the complexity of the system being implemented, the amount of money spent on the system, the number of people involved in and the time spent on the implementation project, the extent or nature of the failure, and other factors. But no matter what studies you cite or what reports you favor, the costs can range from hundreds of thousands to millions of dollars. Ouch.

Some factors that contribute to the cost of a failed system implementation include:

  1. Project Investment: This includes the cost of purchasing the software or system, the implementation fees, and the cost of any customization or integration expenses.
  2. Lost Productivity: When a system implementation fails, the employees appointed to support the implementation lose all the time and productivity they’d otherwise have committed to doing their regular jobs.
  3. Re-Implementation Costs: If a system implementation fails, the company may need to start over with a new system or make significant modifications to salvage the project, leading to additional expenses.
  4. Consulting and Legal Fees: Companies may need to hire consultants or legal experts to help navigate the fallout from a failed implementation, adding to the overall time, financial, and opportunity costs.
  5. Reputational Damage: A failed system implementation can create internal and external repetitional damage: Internally, the reputation of the decision-making team and the players involved in the failure will be tarnished. Externally, announcing the failure to agents and others in the value chain will ding the company’s credibility and reliability, leading to lost customers and revenue in the long term.

While it’s difficult to provide an exact average cost due to the variability of factors involved, we can say this with a fair degree of confidence: Failed system implementations can have significant financial consequences for insurance companies. This underscores the importance of thorough planning, testing, and risk management throughout the implementation process.

Saddle Up

At risk of sounding self-serving, the best thing you can do to optimize your system implementations and minimize your exposure to risk and cost is to work with a vendor who’s been to the rodeo before. With more than 40 successful implementations under our saddle, we’ve been there, done that, earned our saddle sores, and learned from every one of them. That’s why we let you know what needs to be done upfront. And it’s why we developed our PREP methodology.

Experience. That’s the difference.

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