Choosing a new property and casualty system can be a daunting task for any insurance professional. It requires you to understand what you need in a system and the questions to ask. Of course, that's easier said than done, and there are many common mistakes which may critically impact the outcome of your decision. Any one of a number of common pitfalls can create a host of problems and leave you with a system that doesn't do what you want or need it to do.

The following recommendations are a general roadmap for choosing a P&C system. Adhering to them won't guarantee you have the perfect system at the end of the process, but will help you avoid the most common mistakes.

Budgeting - Capital and Expense

The budgeting process will depend on organizational requirements for allocation of capital expenditures and operating expenses. All components of the expenditure must be included in the total budget, with allocation of costs over the life of the project. Capital and expense components include hardware, application software, and user license fees, along with a host of other incidental costs.

Project Management

Once a decision to purchase a new system has been made, a Project Team should be formed to include members of the IT department and business users including management, professional, and support staff. Project Leaders should be selected to represent both IT and the business units, along with a Project Manager to provide overall project oversight.

Understand Your Needs

This sounds easy, but it's critical to understand your organizational needs before you get started. What are the positives and negatives of your current systems platform? What components of your current systems will need to remain? What are the primary reasons for the system changes?

The type of systems platform should be identified and agreed upon such as a web-based system vs. a client server environment. Vendors offer IT hosting in their own data centers, may use Cloud technology, and may also allow hosting within the customer's firewall. Other considerations include whether to purchase or lease the application software.

Identify the specific lines of business the new system will need to handle. Many P&C systems can manage multiple lines of business, but it's important to identify which lines of business the system manages effectively without customization.

Management reporting is a major consideration in a systems purchase. Make sure there is full integration with your current data warehouse. Also, understand your data integration needs, as well as third party data interfaces and how you will migrate existing data to a new system. Lastly, make sure the system is easy to use and facilitates a simplified workflow.

Internal Operational Analysis

Evaluation of your current systems environment is critical to the systems identification and selection process; however, a comprehensive internal operational analysis may sometimes be minimized or even overlooked. Interviewing managerial, professional, technical, and support staff is critical to clearly understand system and workflow needs. Developing workflow analysis diagrams by business unit and department provides an illustration of current processes and a better understanding of the overall operations. Listen to the input from the business community within your organization - it will yield a successful project!

Vendor Identification, Elimination & Evaluation

Identifying suitable system vendors can be a difficult task when evaluating the pros and cons of each vendor using a scoring process. Do your homework on the vendor's background and reputation. On-site presentations are important and should be comprehensive enough to understand most of the system's major features and functionality.

Service levels offered by the vendor with Service Level Agreements (SLAs) provide for contractual protection in the event of poor quality service and/or implementation. Research information on the systems being offered. You should know the difference and cost impact between configuration and customization. Typically, customization requires changes to the application code and configuration can be accomplished with a tool built into the software.

Since you have developed a budget; it is important to get early "high-level" price indications. There is no sense in pursuing a vendor if their cost structure exceeds your budget.

Vendor Selection & Decision

Ask questions and insist on written responses to items critical to the selection process. Pricing needs to be clear in terms of each price component. Identify three to five current customer references for contact and possible site visits; and develop a vendor scoring process weighted by relevant categories. The scoring process is a key component in your final decision.

If you are considering a product which requires customization, request a documented Proof of Concept to support the vendor's indication they can deliver what you need in a timely manner.

Implementation

Know your limitations - most systems implementations take 18 to 24 months if customization is involved. Outsourcing the implementation will save you time and money. Schedule your implementation in phases to avoid downtime and negative impact on customer service. If you are allocating time to your project team to assist with the implementation process, make sure they have a sufficient amount of time to participate in the process.

Conclusion

Choosing a new P&C system is an immense task with a lot of moving parts, as illustrated above. However, it's also something every insurance company must tackle from time to time. By taking a reasoned, measured, and methodical approach, you can make the process far less painful and ultimately much more successful.