How Overly Customized Software Adversely Affects Growth
For health and life insurance agencies, there are 4 main ways to manage your book of business:
- Industry-specific agency management system (AMS)
- Generic CRM
- Homegrown solution
- Spreadsheets/paper files
With so many offerings in the space, it can be difficult to decide which one is best for you. Today, we’ll cover the 4 major downfalls you run into when using heavily customized software:
- Lack of Flexibility
- Lack of Security
- Creates Dependency
- Costly to Maintain
This blog’s primary focus will be on generic CRMs that offer extensive customization options and homegrown solutions you have to build from the ground up.
Of course, you can customize spreadsheets and an industry-specific AMS. However, the customizations to spreadsheets are rather limited, and the benefit of purchasing an industry-specific AMS is that it’s already built for your industry.
Downfall #1: How Overly Customized Software Can Lack Flexibility
Flexibility is a big issue. In the world of technology, flexibility refers to: “The ability for the solution to adapt to possible or future changes in its requirements.”
But flexibility doesn’t just mean customizable.
A flexible system operates in the manner you currently need as it’s tailored to your business model. For example, it’s industry-specific. Even if your system allows you to customize the interface, it may lead to one (or both) of these problems:
- The costs and time commitment for customization become unmanageable.
- The customizations are never quite right.
Usually, this comes about because the system’s original structure wasn’t built to sustain the customizations you’ve implemented. These customizations lead to what is coined as “Frankenstein Software,” which refers to software that has been heavily customized to be nearly unrecognizable from where it started.
Some of the common customizations for life and health insurance agencies are creating an individual-based (or contact-based) tracking system vs. a policy-based one and building out a commissions processing platform.
The 2 significant risks you run with Frankenstein Software are:
- Software failure
- Software workarounds
The failure comes when the original software can no longer support or manage the customizations you’ve implemented and is unable to operate properly.
Think of it as a house. You buy a basic ranch home. Then, you start to build add-on after add-on to the original structure. Eventually, the original structure will not be able to support the new pieces, and it could risk losing its original appeal for you, or worse, collapse.
This is exactly how software works. However, instead of collapse, it would put the overall functionality at risk. As the software launches new updates to the platform, those updates could counteract or completely wipe out the customizations you’ve painstakingly built and spent money on over the years.
"AgencyBloc is the only CRM designed specifically for the health and life insurance industry, so it required very little customization. It's an intuitive system at a very reasonable cost with excellent and responsive customer service."
—Chris G., Northwest Farmer-Stockman Inc.
Downfall #2: How Overly Customized Software Can Lack Security
Having a back-up plan in place can mean the difference between data loss and data recovered. However, managing security on your own or via a generic software with significant customizations can be troublesome.
Dynamic Technologies identified these as the major causes of data loss:
- Hardware failures (45%)
- Loss of power (35%)
- Software failure (34%)
- Data corruption (24%)
- External security breaches (23%)
- Accidental user error (20%)
As you can see, it’s not always ill-intentioned forces that could cause you to lose data. Human error, hardware/software failures, and simple power outages are just as prevalent. Without a plan in place to account for a catastrophe, you stand to lose a substantial part of your business.
One study found that 96% of all business workstations are not backed up.
Failing to backup your system means that your data is more vulnerable to theft, disaster, and loss, meaning you’re putting your clients and their sensitive data at risk.
However, it is important to pay attention to the ill-intentioned side, too. Homegrown solutions and unsupported CRMs are not always built with the same encryption or security of modern-day technology. While many things can age well (for example, fine wine), the same is not true for security measures.
An updated, cloud-based system can come with a security team behind the product to help you stay safe. Plus, it can include bank-grade encryption and other security measures that keep your data safe in-transit and at-rest while backing up all of your information to secure, remote servers.
"AgencyBloc's level of security gives us peace of mind that our data and our clients' data is heavily protected, while still allowing our employees to easily access it on-the-go to best serve our clients."
—Renee D., Varney & Company Benefits Advisors
Learn more about the security questions you should be asking in our video below:
Downfall #3: How Overly Customized Software Creates Dependency
When it comes to dependency, there are two factors you must consider:
- Dependency on designated IT professionals
- Lack of dependency on the software (downtime)
If you aren’t a software and computer programming professional who can maintain and regularly update your system, you’ll need someone you can rely on. Remember, system failure is one of the top 3 reasons for data loss in business. It is essential to have someone in place to maintain and monitor your data to ensure the system is working correctly and that your business is also safe.
On average, an IT professional can cost your company $100,000+ a year; or you can opt for an hourly or contract IT person who could cost hundreds of dollars per hour—which could result in the same expense or more.
Due to the fact they’d be the only one with the knowledge of the inner workings of your system, you and your team would become highly dependent on them. You would need them for all of the following:
This comes into play for both homegrown solutions and generic CRMs that require extensive back-end customization. If you’re the one managing your system, then you’re the one that has to hire the team to help you achieve that.
Remember, when you start building out all of the customizations you need for a CRM, you may be on your own. Some companies help support your customizations; others don’t. And the breadth of how much they support may only go so far. Keep that in mind when you’re searching for new software and vet your options appropriately.
But, that is only half of the dependency we discussed. The other half is the lack of dependency you may find with outdated software. Basically, you can’t depend on it.
Lack of dependency can be present in both homegrown solutions you’ve crafted and heavily customized generic CRMs. This is often caused because the computer is bogged down from too many additions added to the original system’s outdated framework. Another reason could be that the newer pieces added to the original framework are incompatible with the original operating system. The system may no longer be able to read the information efficiently and, thus, slows down the processor.
"I recommend AgencyBloc to anybody who's running an agency and trying to keep track of agents, policyholders, and carriers. With AgencyBloc, you've got it all in one single place on the web, accessible 24 hours a day with backup. It's always been on for us. We've never skipped a beat."
—Lynn S., KHI Solutions
Downfall #4: How Overly Customized Software Can be Costly to Maintain
Arguably the largest problem: the costs of maintaining a system can be staggering.
Let’s start at the beginning, building out a custom software or undergoing a software customization. This will be required if you build your own homegrown solution or if you heavily customize a generic CRM.
INVID Group reports that the cost to develop custom software ranges from $40,000 to $50,000. Diceus estimates upwards of $120,000. That number is formed from a few different things:
- All of the components and features you need (i.e., the more features, the more “screens,” which also equals more money)
- If it’s going to be on-premise or cloud-based
- If the browser will be mobile-friendly or if you’ll require an app
- The number of users
- The number of hours needed to complete the project
- The number of developers and tech personnel required
Another thing to consider is integrations. You don’t want to have to be the one doing all of the work. Instead, it’s financially smarter to partner with experts in different fields like lead generation, quoting, etc., to help your software be more well-rounded.
If you have to build out that integration, that’s another high cost for a developer and something you’ll have to keep an eye on as you maintain and launch enhancements. And remember, we discussed earlier that a developer could run you $100,000+ a year.
Speaking of that, if you’re building out your own software or managing your own heavily customized generic CRM, you will want to employ a developer full-time to help you mitigate risks and address issues as they arise. The benefit of this is that they’ll be more familiar with your platform, so the problems should, theoretically, take them less time to figure out. However, if you do want to go the route of hiring one by the hour, Diceus estimates the average hourly rate in the U.S. is $100-$200 an hour.
All that said, this price doesn’t usually include:
- Ongoing maintenance
- The build-out for future enhancements (which includes testing to ensure everything works together)
- The cost of security
As you can see, the costs can become insurmountable very quickly. But let’s talk about the cost of security real quick.
You’re housing the sensitive data of thousands of clients, prospects, and x-clients; you must keep it safe. But, if you’re using an in-house system with outdated security measures, this could be a potential HIPAA risk. Orion noted that HIPAA fines can reach upwards of $1.5 million per year per incident for failure to comply with regulations.
Keeping that in mind, let’s chat about the costs of running it all in general.
It actually costs more (sometimes a lot more) to run an old system than a new one. The added costs are attributed to things like virus attacks, incompatibilities with newer software technology, and multiple hardware issues. Orion found that:
Also, keep in mind, additional research found that PCs that are four years or older average 21 hours of downtime a year (which is a loss in productivity) and cost nearly twice as much to repair than a newer one.
If you’re using a homegrown solution that’s on-premise in your office, then you’ll also need to factor in the server room and the energy reliance it requires.
Although buying into a new system can seem like a lot of money, when you leverage it against the stacking costs of employing or outsourcing IT, employee downtime, loss of productivity, repairs, and customization costs you already have, it can come out to be a lot less.
"I looked at several agency management systems and selected AgencyBloc because of the price, it's industry-specific, it's easy to use. I can access my data anywhere, do business anywhere, and the system keeps things fast and in order for me."
—George D., Danielhealth
Upgrading Your Process
Using a system for so many years can create a comfort zone for users; however, if your system is not actively helping you achieve your goals, it may be time for an upgrade. The difference between using an industry-specific agency management system vs. a generic, Frankenstein software can be night and day with how fluid it runs.
If you are experiencing one or more of these problems, you may want to consider upgrading your technology. To help you make the right decision for your insurance agency, here are some resources to walk you through the whole buying process:
This blog was originally published on December 10, 2019, and has been most recently updated and republished on January 5, 2021.
by Allison Babberl
on Tuesday, January 5, 2021
Insurance Agency Management System
- vendor vetting