Here is what insurers and MGAs need to know.
Over the past few years, insurers have been dealing with the cost and maintenance of legacy systems and wondering whether they should invest in building or buying new software to meet the digital demands of today’s market.
Because software development has progressed tremendously, core insurance products are now available via the cloud — SaaS (software-as-a-service) — for claims, underwriting, and other basic administrative functions. These software apps can greatly reduce carrier costs and maintenance. There is no need to buy or own the software or employ IT teams on the premises to support software as the SaaS provider does it all — the upgrading and maintenance — as part of the agreement. In addition, SaaS platforms can be accessed via a web browser, a dedicated desktop client, or an API app integrated into a desktop or mobile device. Celent’s North American Life Insurance Priorities and Pressures report confirms the growing interest of carriers in SaaS, as the software is available anywhere and at any time. “CIOs have little interest in on-premises installations, especially not enterprise solutions; only 5 to 10% of CIOs voiced any interest in on premise.”
The Case for Buying
If ready-made tech is available and it answers the carrier’s needs, then why spend time and resources on building something that already exists and has been proven effective?
To build the software requires internal development costs for product development, quality assurance, platform migration and patch fixes. In-house development usually requires continual development beyond the initial project scope. If time is of the essence and fast deployment is critical, purchased software comes in configurable templates. Carriers get a ready-made version that can be customized based on preferences. Since the templates have already been evaluated, there is less room for errors and any changes will not be complicated.
Because of the emphasis on easy-to-use and customer-friendly, the software must meet the needs of internal and external audiences. It needs to be highly usable. If it ends up being too complicated and not very user-friendly, the software will be unusable.
Another consideration is talent and expertise. If building software is not part of a carrier’s expertise, why spend time and resources to hire the talent needed to build and deploy software apps? Solutions may already exist in the market that address the relevant business challenges the carrier desires to fix.
One of the bigger challenges in building software is security. With cyber threats increasing exponentially, there will be a critical need to design the software to reduce the risk of data leaks, like a firewall or restrictions on what tools you buy, including confidentiality agreements with service providers.
Then, the issue is just how future-proof this new software tech will be? An internal IT team will be supporting the software which could offer an advantage in rolling out upgrades since the same IT team that developed the software will be designing its scalability. When new technology is rolled out, however, there is always a learning curve, no matter how user-friendly it is. And then, could the software end up becoming a ‘legacy system’ by becoming obsolete?
The Case for Building
While it seems the cards are stacked against building the software, there are times when building might be the right approach. A carrier or MGA with genuinely innovative products or services might want to license or monetize the product via external customers. Building it makes more sense in this case.
If a single issue requires a specific fix to meet the needs of a wide range of users, then building makes sense. Off-the-shelf products are designed to meet the needs of the widest range of users and can result in too many or too few features. If these can be changed or selected to suit specific requirements, it might pay to develop the software.
Implementing practical solutions across product lines can be costly and frustrating for users. Developing a customized solution might be the more effective route to take to solve this issue.
While there is talk about Low Code/ No Code applications and the ease of developing software, there are challenges that carriers face in developing Low Code/No Code apps. Partnering with an experienced software developer like Origami that has the technical expertise can help make the software development experience more effective if the decision is to build.