Failed insurance software conversions abound. Learn from the mistakes of others.
To remain competitive, insurance adjusting firms must embrace digital transformation. But sadly, 70% of these projects fail. There are many reasons for that including poor planning, lack of vision, or choosing the wrong vendor. The desired result is an efficient, modernized operation, but all too often, financial pitfalls derail projects and result in substantial economic losses.
Financial setbacks are never good, but in the case of system conversion projects, more may be impacted than the bottom line. For instance, companies can suffer from delayed adoption of essential technologies, resulting in a loss of competitive advantage. Reliance on legacy systems can hold you back. So, how do you do an end-run around the staggering rate of failed insurance software conversions?
The simple answer to avoiding system conversion pitfalls is learning from the mistakes of others. Is there risk? Yes. However, by learning the lessons of failed conversions, CEOs, IT leaders, and decision-makers can avoid financial and other minefields to ensure a successful transition to modern software that brings operational efficiency.
The financial impacts of system conversion
When they go right, system conversions have a positive financial benefit, adding efficiencies and offering customers a tailored, first-class, seamless experience that boosts retention. Similarly, a failed insurance software conversion project also has a huge financial impact, wasting time and resources to the tune of millions of dollars in some cases. In a business environment where only the financially strong and digitally enabled survive, avoiding mistakes is imperative.
Typical insurance system conversion financial pitfalls
There are many moving parts to system conversion, but your budget shouldn’t be one of them. Like budgeting for any project, a best practice is to include a buffer for unexpected costs. While doing a good job of defining the scope of your project should lead to an overall estimate of costs, things do crop up. But budgeting is only one area that can bring financial havoc.
- Prolonged downtime. Downtime is expensive. For example, when Facebook was down for 14 hours in 2019, it cost them almost $90 million. Exacerbating the cost of downtime is:
- Reputational damage. Your clients won’t be happy, and negative word-of-mouth can be a real revenue killer.
- Productivity loss. Every minute you can’t do your job costs you money until you are up and running again.
- Lost opportunities. Downtime can mean missed opportunities for new business and service upsells to current clients.
- Overly complex software and training expenses. When software is too complex, it’s difficult to use. If your employees need hours and hours of training to use new software, it’s too complex. Once employees are trained, adoption should be easy. Clunky, difficult-to-use software significantly impedes usage and slows business operations, leading to lost productivity.
- Corrective actions. Failed conversions mean the process has to begin again at a significant financial cost.
Learning from other conversions gone bad
Even huge companies suffer from the pitfalls of system conversion. These failed attempts offer lessons that insurance adjusting firms should keep in mind.
When the Hershey chocolate company wanted to modernize its legacy systems at a cost of $112 million, executives decided to accelerate the timeline. This made viability testing almost impossible. Leaders also scheduled the new system launch for a peak business period. The result? They lost $100 million in orders, a 19% decline in quarterly revenue. The mistakes caused the company’s stock value to dip by 8%.
- Hewlett Packard
One would think a technology company would know how to do system conversion right, but this was not the case. A system conversion resulted in incompatibility with legacy systems, which led to 20% of server orders being unfulfilled and logistical nightmares As a result, $160 million was wasted.
- Miller Coors
Choosing the wrong vendor cost this alcoholic beverage giant $100 million. After three years and no substantial progress, the vendor was finally fired at a significant cost of both time and money.
So, what lessons can be learned?
Avoid insurance system conversion pitfalls: best practices
No matter the size of your firm, the same best practices must be applied to avoid insurance system conversion pitfalls.
- Plan strategically. This isn’t a rush project. Set clear objectives and define problems and needs so your conversion addresses specific challenges. Have a backup plan to deal with downtime. Ensure the right internal people are in place to work efficiently with your vendor. Consider future needs.
- Set a realistic budget. A recent study found that 13% of small-to-medium-sized businesses set unrealistic budgets. Understanding the project’s full scope is the key to developing a realistic budget.
Work with your vendor about what’s needed and what the software conversion will cost. Be sure to discuss potential unexpected expenses.
- Communicate with stakeholders. Clear communication is essential for the success of any project. Develop a structured communication plan that offers regular status reports. Your stakeholders include your clients, employees, and any vendors, and all should be in the know.
- Train, train, train. New technology can be overwhelming, and you want to ensure your employees become familiar with the software and know how to use it effectively and efficiently.
Training has a directly impacts productivity and performance and will give front-line workers the confidence needed to improve performance.
- Partner with an experienced vendor. Industry experience counts. A vendor who regularly performs software conversions for an alcoholic beverage company isn’t going to understand the challenges of insurance adjusting. Partner with a vendor that offers insurance services solutions that increase efficiency with a product that is easy for your employees to use.
- Monitor. Continuous monitoring means fewer surprises. When you monitor progress, offer feedback at every iteration. Make immediate course corrections during the conversion process, ensuring everyone is on the same page and the project continues on a path to success.
Information is power
Avoiding insurance system conversion pitfalls isn’t complicated – it’s a matter of being well-informed of the potential risks, remaining proactive in strategic planning, budgeting for contingencies, and continuously monitoring progress.
A Zen proverb says, “It takes a wise man to learn from his mistakes, but an even wiser man to learn from others.” Failure to absorb and put into action steps to avoid failed insurance software conversions can doom your project to failure.
The right vendor partner can make all the difference. The experts at Susco have over 50 years of experience developing technology for claims management and extensive experience with legacy system conversions. We’ll improve your overall business operations and employee efficiency and productivity with updated tools and technology that are easy to use.
Our custom software solutions get you where you need to be and the technology to get you where you want to go with a competitive advantage. Let’s get started!