Software is eating the world, at least according to Marc Andreessen. Regardless of where you stand on this quote, it is undeniable that software is becoming more prevalent in our personal and professional lives. Software is automating redundant tasks, reducing manual work, improving efficiency as well as allowing companies to generate more revenue.
The insurance industry, while more slow-moving, is no different. The age of software in insurance is very much upon us. Software in insurance takes many forms, and touches almost every point of the sales, renewal, and claim lifecycle. For every insurance company, the beating heart of the business is the Agency Management System. While we will not cover it here, Policy Management Systems fall within this category. In this article, we will break down what it costs, both to implement and maintain.
What is an Agency Management System?
An Agency Management System (AMS) is an insurance industry-specific product that centralizes the critical functions of running an insurance business. If you currently have an AMS, and are close to or outgrowing it, check out this article where we break down the key functionalities you should look for in your next AMS.
We often compare AMSs to Customer Relationship Management (CRM) software and with good reason. However, unlike a CRM, an AMS can have accounting, submissions, and other insurance-specific functions built in. Most AMSs will also allow connections with insurance carriers for quoting and binding policies.
What does an Agency Management System Cost?
Agency Management Systems will cost from $30 per employee per month to $300 per employee per month. If this seems like a big range, you are right. Most AMS vendors will charge extra for additional functionality. Most AMS companies no longer support on-premise deployments, but for those that do, prepare to pay extra for it.
When purchasing an AMS, you should also factor in customizations and third-party integrations. Anything ‘extra’ can add cost to your management system. One item that most decision-makers forget to account for is moving the records from your old system (including paper files) into the new one, which can run into the tens of thousands. When pricing out AMS vendors, look beyond the standard per seat (SaaS) licenses and amortize all those additional costs to get the system off the ground.
What does an Agency Management System cost to maintain?
Keeping your AMS up-to-date and current with your business needs is a worthwhile expenditure. Plan on budgeting 2-10% of the total license cost every year for maintenance and improvements. If your AMS vendor rolls out software updates for free as part of the contract, you can be closer to the 2% mark. If you have an on-premise installation, you will be closer to 10%.
While AMSs are highly customizable, to make them truly relevant to your business, you will need to engage the vendor’s support team or a 3rd party consultancy on a customized build-out. Rather than doing this work upfront, plan on living in the system for a year. Doing this will help you establish what customizations are useful and where simple internal process changes may suffice. A word of caution though - your company will need to maintain any customizations you build which can add up over time.
Pricing out an Agency Management System
An AMS can significantly improve how your insurance business operates. Think of an AMS as an investment that can help you gather the right information to make data-driven decisions. While every AMS will have differences, pick the one that meets the needs of your business. You can check out our article on how to document requirements for software here. Another approach is to ask for references from within your networks - learn from the experience of others and that may end up saving you time and money down the road.
