Insurance companies rely on software to provide critical opportunities to leap ahead, enhance client services, and maximize productivity for their business. However, a software upgrade can be a complex project that monopolizes resources, leading to drained budgets or worse, reluctancy to implement new technologies.
The challenge for companies to benefit from the latest software is finding a strategy to harness this power of technology, while also managing the costs of such projects to ensure they don’t interfere with the company's surplus position and growth initiatives.
Enter: software financing.
How Does Software Financing Work?
A growing cost of technology is tied to software expenses, which can easily reach six and even seven figures. Implementations often involve huge upfront consulting fees, training requirements, and ongoing expenditures.
Financing allows businesses to spread the cost of software over the useful life of its application, which, in turn, preserves money for strategic growth initiatives and can help avoid a hit to their surplus.
Software may seem like an odd thing to finance – it lacks the tangibility of physical equipment and many banks are reluctant to finance “soft” costs such as a software upgrade project.
However, with the cost of these projects skyrocketing, financing is becoming increasingly common in the insurance industry, as well as in the wider business world. The right lender will be prepared to finance the entirety of a software system or upgrade project, including hardware, software, maintenance costs, consulting fees and other implementation services.
The Benefits of Software Financing
The overall advantage of software financing is that it allows companies to take control of unwieldy, often unplanned expenses. The result is increased flexibility to take on other, more profitable ventures.
Software financing allows insurance companies to:
Spread payments over time. A lease structure better aligns benefit with expense. Similar to office space or equipment, businesses generate value from continual use of the software; therefore, it makes sense to spread out the costs over its useful life.
Maintain AM Best Ratings. Financing software allows carriers to maintain their AM Best ratings as their cash position remains strong.
Avoid Hit to Surplus. Large software projects can have a negative impact on your surplus position. A sale and leaseback allows companies to put cash back on their books for previously purchased items and improve their overall surplus position.
Grow Faster and Do More. A company’s momentum doesn’t have to come to a halt to implement a new billing and claims system or upgrade policy administration software. Software licenses, hardware upgrades, and training can all be integrated into one simple lease.
Software Powers Insurance Companies
Given the high costs involved and the complexity of implementation and updates, companies may be inclined to think of software as a necessary annoyance. But anyone who remembers the era before software saturated the profession will recognize how digital tools have revolutionized work. We can share information faster, store and find records with ease, and keep track of time and accounts with greater precision.
In short, software projects are strategic investments that help your business make the most of their human resources. Financing is a way for companies to realize the full potential of their software without sacrificing growth or cash flow.