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One of the toughest decisions a manager has to make is recognizing when it is better to update existing computer equipment and software or replace them with new technology.

The idea of mastering new programs can be daunting and the thought of training every employee on the new system boggles the mind. However, the reward of increased employee productivity and customer satisfaction combined with reduced expenses on maintenance and support can make the change an easy decision.

Insurance companies that have delayed purchasing new systems are fortunate. In the last year, new technology has created breakthroughs in performance, pricing and availability. Web-enabled policy management software systems that fully integrate day-to-day activities such as checking ratings, generating new policies, processing claims, issuing invoices and producing management reports are now available at a fraction of the cost of earlier technology.

There are a lot of software companies competing for business. Before making a decision, CIOs and office managers need to ask the following questions:

Is the software system already operational?

Find out if the software system being considered is under development or ready for market, and expect to see a demonstration. It should be fully operational even though minor modifications to customize screens or to incorporate proprietary programs are required.

Any software firm that regularly deals with insurance companies will be familiar with daily operations and should have designed policy administration programs that perform the standard functions. When these multiple functions are integrated into one system, employees become more productive. An insurance company could triple the number of policies processed in a day. It is a waste of time to key in the same data more than once as required by systems with separate programs for each activity.

Dont become the test case. Find out if the software is installed and working at another location. Reputable companies with a solid product will be glad to provide the name of satisfied customers to support their marketing claims.

If no one can provide a testimonial, it may be that the products they sold to other companies a year or two ago are still in development. It should only take a few months to assess the exact needs of the customer, order the equipment, customize it and install the new system.

Is the technology truly advanced?

Most sales representatives are convinced that the system they are selling is a vast improvement over anything in the market. But a knowledgeable manager should be ready to ask questions.

The new Web-enabled software systems use the power of the Internet to link the corporate office with branch offices, agents and others. Anyone who has a computer with Internet service and meets security criteria can access the necessary customer files, cutting down on time spent transferring files, generating estimates and providing input on customer activity.

With a Web-enabled system, agents can perform many of these activities any time of day without assistance from the corporate office. When agents and others work directly with the standardized forms on the Internet, data input becomes much more accurate.

If the Web-enabled system is described as server-centric, it means that each time someone makes a change to a file, it is recorded instantly. There is no need to wait for batch processing or data input to get the most recent information on customers or for management reports.

Know what programming language the software developer is using. Look for popular programming methods such as Microsoft Windows or .NET frameworks. Avoid programs written in BASIC, COBOL or FORTRAN because those are now history lessons in university computer classes. Unfortunately, a lot of insurance companies that built their computer networks a few years ago using those languages are now being forced to replace their entire networks because they cannot find anyone to perform the updates.

Ask about the overall life expectancy of the system. Is the technology a significant improvement over what was previously on the market and is it widely available to others? If there is a large manufacturer throwing support behind the product, then updates to accommodate future growth will be easy.

Sometimes bigger is better, but sometimes it can be inefficient for the size of the company. Can the new system handle the processing requirements of large companies or provide personalization for small firms?

How much does it really cost?

Once a selection has been made and a price quoted, make sure the contract states the final cost of the software once it is installed and running. Are there additional fees for program modifications, installation, system corrections and other services related to the initial purchase? Will the provider continue to monitor the system and correct any glitches during the first year the system is operational? Will little add-ons cost a fortune?

One way to incur hidden costs is by purchasing a software system that cannot be easily updated. Look for a system that incorporates modular changes. If a separate program is required for each update or addition, then cost efficiencies from an integrated system begin to disappear.

Costs can skyrocket when new code must be written. The project may be very time-consuming and the insurance company cannot move quickly when it spots an opportunity to offer a new line of business. As a result, management may hesitate before offering customers a new product or service. Why incur the risk and expense if there is no guarantee of success?

Finally, consider the cost to train employees to use the new system, update software and provide technical support. Not only does the staff have to learn how the system operates, but the teacher must be trained too. Service agreements that provide personnel to operate the system can often be a viable way for smaller companies to keep a knowledgeable technical person on staff without the overhead.

It is a great time for insurance companies to update technology. Web-enabled systems that automate the entire company are already on the market for a price that even small companies can afford. When CIOs or office managers take a long-term look at software system requirements before making a choice, they will find that future innovations will complement the new systemand continue to generate savings for the company.

is president and founder of Property & Casualty Management Systems Inc., based in Richardson, Texas.


Reproduced from National Underwriter Edition, May 12, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.