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Build vs Buy – Our Policy Management System

Lately, we’ve been getting a ton of positive customer feedback about our website quoting flow, and more generally, our streamlined processes. The number of people getting online quotes from us has been growing dramatically, and currently represents about 70% of our overall quoting activity. To top it off, we recently found out that we’re a finalist for the Insurance-Canada Technology Awards. I’ll be heading to Toronto next week to find out if we’ve won.

Update: We won the award for our category!

All of this seems to confirm our decision to invest significantly in software development by building our own systems from scratch, instead of buying a license to someone else’s. At the time, this wasn’t a decision we took lightly. We knew that either way our policy management system would be our single largest investment, and would have a huge impact on how we interact with our customers.

The “safe” route certainly would have been to just buy something off the shelf. It’s true that going that route would have still meant a significant cost. We’re talking 6 figures, plus big consulting bucks to get the vendor to customize/configure the system for our use, then ongoing maintenance/support fees after that. But at least with an off the shelf system, you have some certainty that at the end the system is going to work, and that any bugs aren’t going to be your problem to fix. We’ve all heard the horror stories of IT projects going horribly awry. Ultimately there were a few important reasons why we didn’t go that route:

  • This might sound like marketing hype, but nobody else in the industry has introduced the level of sophistication we have into our rating algorithms. We believe strongly in charging the right price for the risk. We feel that the practice of cross-subsidizing customers (ie charging some too much, and some too little) isn’t fair, and is bad business. Because nobody else is doing what we’re doing, that meant that none of the existing systems out there could do what we needed them to do, in terms of providing real-time pricing for our product.
  • With an off the shelf system, your ability to innovate is pretty limited. Without access to source code, you’re at the mercy of the vendor. If they’re not interested in implementing a feature you’re looking for, well then too bad…you’re just going to have to live with it, or come up with some kludge that’s going to introduce process inefficiency and will end up impacting the customer in some way.
  • We’re totally committed to automating as many of our business processes as possible, so we can keep our overhead low as we scale up, and allow our staff to focus on interacting with customers – not doing backend administration. With an off the shelf system, your ability to do that is very limited. If they don’t have an existing batch job that will do what you want to do, too bad – guess you’re going to have to do it by hand.
  • From books to travel, the internet has revolutionized many industries and this trend is just going to continue. We knew that the web was going to be a key sales channel for us, so we wanted to make sure there wasn’t going to be anything stopping us from offering an amazing online experience. We were shocked to see how many of the off the shelf policy management systems were originally written before the internet even existed! Think cobol and IBM AS400s. While some had cobbled together some sort of web-based front end, it was usually a hack, and certainly didn’t offer full self-serve policy lifecycle management capabilities. That’s what we’re working towards.

So yes, we’ve built our own policy management system, from scratch. It’s been a huge undertaking, and I’m sure if I had hair, I’d have a few more grey ones now. We’ve had a few dicey moments when bugs were introduced into our production environment, from which we’ve had to scramble to recover. All-in-all, it’s been an amazing learning experience for all of us, and we feel we’re now ideally positioned. Because we’ve written the system in-house we’re extremely nimble. There have been many occasions where we’re doing some brainstorming and come up with a new feature we’d like to try out, and we’ve got it in production a few days later. Let’s see any of the giant insurance companies based out east do that!

As the IT guy, I could bore you for hours with details about our system, but I’ll save that for a future blog post!


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