Top 10 Factors Affecting Insurance Software Development Cost

Updated on :June 19, 2024
By :Irina Kravchenko

Today, the IT market offers a lot of proposals to develop a wide range of software products which have similar functionalities and structure but which are very often different at their price. The ever-changing market situation shows the need for the development of new methodologies for estimating the software cost.

For successful assets investment and management, customers need to know not only what software estimation is, but also understand the factors affecting the cost.

Software development is a step-by-step process: starting with the idea and initial requirements and ending with a commercial launch. The cost estimation is needed to analyze the profitability of the existing and future tech projects as well as of the investment rationale. There are various estimation methodologies used to calculate the cost of the software.

Methods of Software Cost Estimation

Method of expert estimations is based on multiple interviews with experts in software development having extensive knowledge in a particular industry or business domain.

Method of analogy is used to estimate the project cost if similar projects have been already realized. It is based on the comparison of the planned project with the previously accomplished projects having the same characteristics.

Empirical method is based on specially conducted researches and investigations with further statistical analysis. They are different in their sets of the factors included in the cost formula.

Structural-algorithmic method is based on the analysis of the statistics data on the previously accomplished projects.

Software Life-Cycle Model (SLIM) is based on the estimating time and work needed to estimate the software product of a certain scope.

Neural networks - self-learning systems simulating human activities; a tool to look for patterns, forecasting, and analyzing data.

Constructive Cost Model (COCOMO) establishes the dependency between the program code scope and labor input.

Despite there are a lot of methods to calculate the cost of the software, there’s no single one which would be surpassing the other. To estimate accurately the software project cost, vendors may combine the methods or use multiple methods to compare the costs.

10 Factors That Influence Insurance Software Cost

Since insurance software products are usually complex multi-modular systems, it’s quite difficult to estimate their cost accurately. Let’s figure out what factors influence the price of insurance IT products.

  1. Risks

Risks usually begin with an uncertain event or a condition that could occur. If some uncertainty occurs, it may have a negative effect on project implementation. Thus, there’s a strong correlation between the software cost and the assessed project risks. The higher project risks are, the higher are the costs for the development services.

  1. Budget Revisions

The project budget is the money allocated for the software development for a certain period of time. The budget should be managed efficiently to reach the project objectives. When it comes to budget revisions, however, stakeholders forget that it may affect the total cost. It is considered that projects with many budget revisions are much more expensive than those with few revisions.

  1. Number of Features/Function Points

As we know, insurance software has a lot of useful features like claims management, policy administration, data compliance, and utilization, etc. Each feature is characterized by the availability of multiple functionalities. For the development of these system modules, developers make efforts and spend much time. The number of system features affects the cost of the end product. To estimate the cost, developers use special measurement units called “function points” which express the number of functionalities.

  1. Number of Project Participants

Among the major project variables, there is a number of participants and the team composition. Every added project participant will definitely result in an added cost of the project. The same team composition influences the total cost of the software because employees’ skills, knowledge, and even personality traits affect productivity and performance. 

  1. Duration of the Project

Project costs and the number of workdays are interrelated since every added workday provides additional costs. Thus, the project duration should also be estimated properly. For this, developers follow an established procedure which may include estimation of the productive hours per day, multitasking productivity loss, delays calculation, available workdays, etc. All these factors influence the overall duration of the insurance software project.

  1. Implementation Efficiency

Implementation phase requires large amounts of resources and efficient efforts to provide less expensive projects. Although this factor is considered to be non-significant for the cost, insurance software buyers should take it into account by thoroughly planning training of end users beforehand. Implementation efficiency depends also on the accuracy of SRS documentation and the conformance to requirements. More about the latter in the section below.

  1. Conformance to Requirements

Insurance agencies and companies handle different types of insurance programs like professional liability, property, life, business, etc. Depending on the type of insurance the company offers, it needs the software which will correspond to the functionalities necessary to provide relevant services. Before starting to develop a project, customers must provide developers with their needs, wants, and initial requirements. Developers, on the other hand, should conduct in-depth business analysis to find out the key needs and peculiarities of the business they will build a system for. 

  1. Existence of Overall Schedule

The existence of an overall schedule is often thought of as a key to keeping costs low. A schedule is a list of all the activities, milestones, and deliverables which typically have the start and end dates. Any changes in the schedule will more likely cause an increased backlog in software product delivery.

  1. Cost and Length of Pre-Study

It is presumed that large and long-lasting projects have more expensive pre-study phases than small projects. Note, that a well-conducted pre-study is a good investment of time and money. It is the quality of the pre-study rather than the length or cost of the pre-study that influence the project cost where a thoroughly performed pre-study reduces the total price of the end product. Thus, customers should take the quality of the business analysis and pre-study into consideration as these could increase the accuracy of the development cost estimation models.

  1. Cooperation

Cooperation is considered to be one of the main factors affecting software development costs. However, some experts don’t find any significant correlation between cooperation and costs. Despite there are quite opposite opinions, effective management, communication, and collaboration still influence the project cost estimation accuracy.

Today, insurance systems are complex making development costs difficult to estimate. In this article, we tried to identify the key factors affecting software development cost. To sum our study up, we can admit that function points, the number of team members, and conformance to requirements are the most significant factors that influence the estimation. According to our research, including data about the risks would increase the accuracy of established estimation models.

If you are looking to have a customized Insurance software for your firm that does not burn a hole in your pocket, then pick a company from top software development companies listed at GoodFirms.

Irina Kravchenko
Irina Kravchenko

Irina Kravchenko is a content writer for Diceus, a technology partner for developing enterprise solutions. She is passionate in her belief that useful content is of great importance. Irina writes mostly on software development and marketing topics.

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