Has The Curse Lifted on Outdated Technology in Reinsurance?
While the reinsurance sector may not be the backdrop for a classic horror film, it has historically battled significant internal obstacles, specifically those tied to technology adoption and strategic resistance to change. The challenges outlined in my original Halloween article (which you can read here) are centred on five major failings that ‘haunted’ the balance sheets, if you will:
Ignoring Data Security
The Curse of Outdated Technology
Lack of Adaptation
Forgetting About Customer Experience
Tech Transformation Must Consider the Wider Organisational Landscape
While several of these mistakes still linger quite a bit, strategic investment and implementation of technology have definitely begun to lift the curse! Thus, I wanted to properly revisit my above five points, taking into consideration the fact that, well, things have changed.
What I Mean When I Say Things Have Changed
Let's take it back to pre-2023. The difficulty in modernising core reinsurance infrastructure was compounded by other mistakes. You've got outdated systems making data security complicated, which in turn limits adaptation and prevents the creation of modern, efficient customer and broker experiences. Crucially, the sheer cost of modernisation during this time period often triggered organisational resistance, causing many leaders to straight up avoid any tech implementation. The internal expertise required to maintain these antiquated systems was ageing, too. So, it’s fair to say things were getting urgent.
The crucial change arrived around 2024 and hasn’t stopped impacting us well into 2025. It came in the form of generative artificial intelligence (GenAI) and subsequent agentic AI systems. This technology has redefined the cost curve and feasibility analysis for core system modernisation.
Now that that’s established, let’s look at what this has meant for my five ‘mistakes’.
Ignoring Data Security
The industry has not ignored data security, but it is now competing with a fair few other priorities. The surge in funding dedicated to core system modernisation and Generative AI has placed pressure on other IT categories. This is evidenced by the fact that security budgets as a percentage of overall IT spending were found to have dropped marginally from 11.9% to 10.9% in 2024, a shift analysts attribute to a deliberate "rebound in core IT spending", as stated by Info Security Magazine. Take from this what you will. I say it’s a mistake evolved, not solved.
The Curse of Outdated Technology
This is the mistake seeing the most profound change, I’d say. Primarily, it’s driven by GenAI. GenAI has successfully reduced the cost of modernising a complex transaction processing system to less than half of the historical nine-figure bills, according to McKinsey. This, combined with a top global insurer reporting a more than 50 per cent improvement in code modernisation efficiency by deploying GenAI, tells us good things about the breaking down of the financial barrier to modernisation!
Lack of Adaptation
The industry has dramatically accelerated its pace of adaptation. Specifically with its use of, you guessed it, AI. It’s not so much a question of whether reinsurers will use AI anymore, but more a case of how they can best make use of the commercial potential. It may be unsurprising to you that 71% of P&C insurers are actively allocating budget to GenAI/Large Language Model (LLM) projects or are engaged in the research phase, according to Celent. Perhaps this demonstrates a shift from avoiding change to aggressively wanting it, in the form of new technology.
Forgetting About Customer Experience
This may be a sweeping statement, but I’d say addressing the customer service mistake is now intrinsically linked to the successful modernisation of core systems. And there are signs of improvement! Through specialised AI tools and solutions, such as Customer Experience as a Service (CXaaS), re/insurers are achieving substantial service improvements.
Tech Transformation Must Consider the Wider Organisational Landscape
Alas, the industry has learned from past failures, leading, at long last, to a mandate for change management and adoption. Hallelujah! Organisations are recognising that successful implementation requires parity between technology development and organisational readiness.
Sustaining the Momentum
And so the reinsurance sector has made decisive progress in mitigating all five of my initially stated mistakes. That being said, the success has introduced new challenges, particularly managing the tension between core investment and cybersecurity budgets and ensuring that all technological gains are fully realised through the necessary organisational investment and change management. Continued success depends on maintaining this momentum.
Need a hand gaining or maintaining your technology momentum? It may be Halloween, but that doesn’t mean it needs to be scary.
👋 I’m Sven, and I help reinsurance companies bring together the best of people, process and technology.
Email me at svenscandella@mac.com and let’s see how I can support you.
Sources:
https://www.bcg.com/publications/2024/three-paths-to-modernizing-core-it-for-insurers
https://www.infosecurity-magazine.com/news/cybersecurity-teams-lowest-budget/
https://www.celent.com/en/insights/644340126