Insurers and other stakeholders in the risk management industry require top-notch software solutions to deliver an exceptional customer experience. However, they face a crucial decision: should they develop their own software or invest in an established marketplace solution?
Insurance companies are currently facing a crucial phase in their efforts to modernize. It is widely recognized among insurers, agencies, MGAs/MGUs, and others that they need to embrace digitalization in order to stay competitive and meet the expectations of customers who seek digital products, services, and instant access. While this truth is straightforward, putting it into practice presents its own set of challenges.
Building From Scratch or Buying off the Shelf
In order to stay ahead in a competitive market, companies need to make strategic decisions, and one crucial choice they face is whether to invest resources in developing a new software system or opt for the convenience of purchasing an existing one.
When insurance providers are deciding whether to develop their own unique insurance software or purchase a pre-existing marketplace solution, it is important for them to carefully evaluate the advantages and disadvantages of each option. This evaluation helps them select the solution that aligns most effectively with their business objectives and gives them a competitive advantage in the industry.
Risks and Rewards of Building a System
Risks of Building in-house solutions
Insurers who opt to create their own software solutions in-house encounter several obstacles. A major challenge is the expense associated with designing, building, testing, and implementing a proprietary solution. This cost factor typically deters many companies, as developing a unique software solution lacks the cost efficiencies that specialized software design firms offer, ultimately making the entire process overpriced and out of budget.
The costs don’t stop once the software is deployed either. Ongoing expenses for upgrades, fixes, enhancements, and general maintenance must be factored in. In-house software solutions need to continuously innovate and stay current, requiring ongoing design and updates. On the other hand, external marketplace solutions benefit from teams of software engineers who receive feedback from multiple clients, test new ideas, and offer the best solutions to customers.
When it comes to choosing between building or buying a claims management software solution, time plays a critical role. Delays are common in development projects, and unexpected issues can arise, further extending the timeline. If an insurer lacks specialized IT resources for developing a claims management platform, they may have to consider hiring additional staff.
Rewards of Building in-house solutions
When an insurance company chooses to develop their own claims solution, they need to excel in all areas. But it also offers rewards such as a customized, unique software solution tailored specifically to its customers and products. In-house development allows for immediate changes based on split testing or consumer feedback and provides complete control over the software solution.
Insurers that build their platform internally retain control over the business development cycle, expectations, communications, timelines, as well as data security and privacy. For some, this may be a significant advantage when considering the pros and cons.
However, insurers must also consider the opportunity costs involved in developing software solutions. Managing risk is different from being a software development firm, and companies need to consider whether their funds and time could be better allocated elsewhere - and whether an in-house solution compromises quality compared to one developed by a specialized external firm.
Benefits of Buying Marketplace Software Solutions
Insurance technology (insurtech) companies have a solid track record of developing specialized software solutions for the insurance industry. These companies, such as Snapsheet founded in 2012, have played a significant role in transforming the insurance technology landscape with their groundbreaking API-driven software solutions.
Insurers who choose to purchase a pre-existing solution from an insurtech provider enjoy several advantages. These benefits typically include quick deployment and implementation, ongoing support, regular updates, and included maintenance, often making these out-of-the-box solutions cost-effective.
However, it's important to note that "out-of-the-box" doesn't mean the insurer can't personalize the product to align with its brand, culture, and customer demands.
Configurable software can be adapted to suit each insurer’s needs, meaning the same product could look and feel very different after each insurer configures it to their preferred design.
“By having integrated technologies and an open API, insurers benefit from the best solutions configured for their needs,” explained Eric Waldinger, CRO at Snapsheet. “By giving the power to the users, not IT, insurers can truly create the best customer and adjuster experience.”
When insurance companies decide to purchase a marketplace claims management solution, their primary challenge is to choose the right option from a wide range of available solutions. The reason is, selecting the wrong solution could be a major financial setback.
Some common problems insurers run into with some insurance software solutions include:
- Choosing an all-in, monolithic solution that doesn’t fit their business needs and is large and generic.
- Choosing a highly customizable option may lead to complications in updates and maintenance, which can have an impact on their downstream processes.
- Deciding on a solution that cannot be configured makes it difficult for the insurer to add its own look and feel to the software.
- Working with a vendor that lacks strong data security and privacy controls can put customer data at risk.
Senior Tech Strategy and Implementation Leader at Snapsheet, Stephanie Acker, talked about how configurable software is changing the insurance ecosystem: “The insurance landscape is shifting gears from a product-centric focus to a customer-centric focus. Configurable software and smart automation allow insurers to provide customers with a more personalized and efficient experience, while also benefiting from software updates, support, and scale.”
Partnerships for Claims Management Remain Another Option
Same Insurers have found success by partnering with startups or purchasing an existing insurtech company to gain exclusive access to its technology. Many major carriers host incubators where several tech companies work on-site with insurance companies to build targeted solutions.
In an insurer-backed incubator, the startups that participate get to design and build their products inside an established company, while the host insurer benefits from solutions explicitly created to solve their challenges. The Lloyd’s Lab, located at its flagship Lime Street offices, is one example of a successful incubator.
With this option, insurers have design input but rely on the startups to innovate the product details. Incubators sometimes have an unintended benefit for their host companies by improving the overall innovation and creativity of the firm. However, it can be more time-consuming for tech companies to develop their solutions alongside a traditional insurer.
Things to Remember When Deciding to Build vs. Buy Your Next Insurance Software Solution
These considerations are important to keep in mind when deciding to build vs. buy your next insurance software solution:
- Time - The time an insurer can spend developing a solution is an important consideration. A longer lead time could allow for building a solution in-house, while insurers that need a solution right away should consider buying an out-of-the-box solution.
- Cost - Insurers must carefully weigh cost considerations. Buying a solution is often more cost-effective when compared with building in-house.
- Configurability - Insurers who configure existing products to meet their needs may have an easier update and maintenance schedule than those who customize new solutions.
- Availability - If a solution currently exists in the marketplace in a mature form, it may be more cost-effective than recreating it in-house.
Considering all of these factors, choosing the right insurance software for your company can be a complex task. However, with our expertise, we can simplify the process for you and recommend the best solution.
Snapsheet can simplify the implementation process and lighten the load for your team while providing ongoing worry-free maintenance. Enjoy the comfort of a stress-free claims management solution that's configured to your needs.
Contact Snapsheet today for a free demo and find out how you can start improving your claims management process today!
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