By Bill Garvey, Eastern Shore Consulting

An insurer's software acquisition budget is typically consumed by departments that produce revenue. The costs to acquire and install a policy administration system (PAS) run into the millions. Business benefits expressed as keeping up with competition or replacing legacy systems that slow time-to-market make persuasive arguments. Functions such as Human Resource, Finance and Claims can get a share of the software acquisition budget, but they have to work harder at it.There is value in automating employment application tracking, balancing the books, or reducing the cycle time of the claim process, but it must be expressed in clear cost benefit analysis (CBA) to support software acquisition. Business benefits can augment a CBA for these departments, but they will not stand on their own.

HR and Finance systems are less expensive, less complicated and less difficult to install than a PAS. Not as much configuration is necessary to meet a department's functional or workflow specifications and not as many interfaces are required. Taking the product "out of the box" is a good strategy. Vendors are also likely to offer application hosting to defray costs. Many have done this long before the term "cloud computing" gained popularity. Fears of data security and performance have largely been resolved.

Claim processing systems are more expensive than HR or Finance. Configuration complexity and the number of interfaces fall somewhere behind PAS, but not far. The "survival" argument does have merit for claims, but tangible benefits for replacing legacy systems are better.

For any software search, cost benefits can be expressed in uncomplicated terms:

• Staff reduction • Process improvement • Regulatory compliance • Cycle time reduction • Employee training & retention

Staff reduction - Layoffs don't have to be the answer. Many companies realize layoffs are bad for morale, and therefore, business. Approaching staff reduction in terms of attrition is a compelling alternative - especially at a time when finding replacements for retiring staff will be a greater problem in many cases. In a recent software search for account reconciliation, a client evaluated several affected departments over the five-year period which our project priced cost of ownership. Four employees were close to retirement. A fifth wanted to transfer to another department. Eliminating those positions over three of our five years made enough impact to justify the purchase.

Process improvement - Departments endure hand-offs and workarounds due to inadequate automation support. Often, temps are hired to perform some of these tasks. Business analysts working closely with their software counterpart will compare current state process against desired state. If the software can (and it should) streamline process the need for temporary employees is reduced or eliminated. Permanent employees can be used in more productive activities. Combined, these efforts support a cost and business case for the software purchase.

Regulatory compliance - Applicant tracking systems help HR manage employment applications submitted through a company's website or other recruitment services. A central location and database of a company's recruitment efforts assist in keeping it compliant with hiring regulations.

Account reconciliation systems improve state audit results by providing data quicker and more accurately. The savings are realized in prevented fines. The key to making this argument effective is to check with a software vendor's other customers. Answers to questions focused on how other companies reduced or avoided fines via software acquisition make a convincing case to the CFO.

Cycle time reduction - Time is money for claims. A direct correlation exists between how long a case takes to settle to how costly it will be. Newer claims systems have figured this out by facilitating the assignment of losses to internal adjusters, and to appraisers in the field. One company reduced its Property cycle time by 20 days through analysis and system support. The cost savings over a five year stretch made a significant impact on its CBA.

Employee training and retention - Old systems are hard to learn. New applications are not only intuitive but attractive to users. The company mentioned above predicted it could reduce the learning curve from 45 days for its legacy claim system to 10 days for its new system. The productivity gap was expressed in dollars which helped complete the purchase justification. The business benefit was conveyed in keeping good employees who liked the system.

The final key to getting your share of the acquisition budget is to understand the software market place, especially today. Vendors are willing to negotiate costs, to help you with CBA analysis and creation, and to supply data you need to make a case. It behooves you to work together. You'll get what you need to make your case.

About the Author: Bill Garvey, principal and owner of Eastern Shore Consulting (Halifax, Nova Scotia)has over 30 years of experience in IT and insurance operations and has guided several insurers through the software selection process. He can be reached at billgarvey@easternshoreconsulting.ca or (902) 457-7350.There is value in automating employment application tracking, balancing the books, or reducing the cycle time of the claim process, but it must be expressed in clear cost benefit analysis (CBA) to support software acquisition. Business benefits can augment a CBA for these departments, but they will not stand on their own.