By Bill Garvey, Eastern Shore Consulting
When carriers ask me what’s out there in the world of software solutions I can confidently tell them many good options currently exist for Policy Administration, Rating, Claims and Billing. Vendors have matured in their abilities to meet functional requirements, develop systems that perform well in carrier environments, and they have learned how to install their applications. As vendors gain more live experience, the test bed of reality strengthens their applications often at the expense of an insurance company, but the lessons move solutions forward, not backward.
So why choose one vendor over another? Vetting functional, technical and implementation qualities is obviously critical. Cost, financial strength and future viability are all measurable. But the subject of this article is an often overlooked criterion for software search — considering whether or not a particular vendor’s people, from development team to senior management, are who you want to do business with. Defining exactly how you make that determination isn’t easy, but it is possible.
Historically, insurance companies have stayed with their software vendor for years. Decades elapse before replacement is considered. This may not be the paradigm of the future. Carriers would rather not go through the expense of system replacement every ten years (or sooner). And they should be able to stay nimble in a changing insurance marketplace if their software is as configurable as vendors promise. But carriers still need a vendor they can trust, who’ll care about their vision, who’ll be a face-to-face partner, not a pain in some other part of the corporate anatomy.
Carriers should ask: Will boutique Vendor A, whose people and product we like, make it over the long haul? Will Vendor B, a giant, care about our concerns after the sale is finalized? Will the rapid growth of Vendor C result in their going public or getting sold to a larger player? There are tangible mitigations to worst case scenarios. It is not as difficult or as expensive as once it was to acquire the rights to a vendor’s source code. This may not be the most elegant risk mitigation, but it assures some level of safety for situations many carriers would rather avoid. Contractual provisions for transition from vendor to carrier support must be negotiated. Contractual considerations around resource commitment and product development are fair game and, quite frankly, expected during final negotiations.
But carriers still need to answer: Do we really want to work with these people? This question is becoming a frequent business driver for system replacement. Many carriers I’ve talked with tell horror stories about vendors who treat them poorly, or whose delivery processes are inherently flawed, or whose corporate culture is not in sync with their own. Methods exist to draw these traits out during a software search, but only if your company is willing to take the time. A cursory view of software analysts’ reports, or decisions based on the system your competitor has installed, does not answer this critical question.
Reading between the lines
A structured search allows carriers opportunities to score tangible qualities, and to evaluate a vendor’s intangible skills. The RFP is useful not only for documenting cost structure, functionality and technology concerns, but also to gauge a vendor’s corporate culture. Did the vendor respect our questions, and us, by answering the RFP candidly? Which vendor reflects a greater understanding of insurance, and specifically of our business? Which seemed to merely “cut and paste” their responses from other RFP’s they’ve replied to? Which took the time to ask questions beforehand to get clarification of our requirements?
You want to do business with vendors who want to get it right. You also want to do business with people who will be honest even to their detriment. There isn’t a software vendor in the market today who has everything you want. You need the truth from a partner as strategic as your software provider. Don’t worry, you can handle it. The alternative is latching onto promises that are probably empty.
At each phase of a software search you need to read between the lines. Vendors who take time to clarify the requirements of a scripted demo, who show up at the demo prepared, who have documented your requirements in a clearly defined manner both on screen and in some notebook they refer to is far better than the vendor who didn’t ask a thing before showing up on your doorstep. Vendors who try to bypass your process with attempts to get right to the CEO should make you leery about a long term relationship. Vendors who promise “future release” often during a scripted demo need to be considered for elimination.
You will gather invaluable information from checking the client references a vendor provides you. Beware that the vendor is not going to arrange a call with its unhappy client, so be prepared with specific questions about the product and the relationship. It’s courteous to provide these in advance, but it’s also OK to have a few questions saved as follow up to those you provide. Make sure you ask about vendor staff turnover during the client’s project. If it’s a phone call, listen carefully. Long pauses may mean someone is wondering how best to drop the dime without hurting their vendor. Calls I attend often result in honest expressions about a vendor after the sale. People are eager to talk.
Privately held vendors should give three prior years of financial data for your accountants to review. Everyone is protected by an NDA (Non-Disclosure Agreement), so there should be no concern about the privacy of such data which is critical for making a decision as expensive as software acquisition. Vendors who aren’t as cooperative as you’d like might be hiding something. The message they intend is worse than the message they send. Ask yourself if you want to establish a long term relationship with a business who won’t share important information.
In future articles I will discuss how best to vet the more tangible qualities of insurance software. But relationships matter as much, or perhaps more, than what a vendor provides “out of the box.” Insurance carriers need strategic partners they can rely on and who care about their business. Technology is the vehicle to your future. The driver matters more than ever.
About the author
Bill Garvey has over three decades of Insurance Operations and IT executive and management experience. He works out of Halifax, Nova Scotia.
Eastern Shore Consulting assists insurers in building the business case for legacy system replacement, selecting the best software, and enabling a successful implementation. Call 902-457-7350 or visit www.easternshoreconsulting.ca