How to Escape the IT Budget Trap in Reinsurance
In reinsurance, where stability is sacred and change is, well, politely avoided, most IT budgets are built on a quiet, reassuring concept: Keep the lights on. And there’s nothing wrong with that! Until it becomes the only thing you're budgeting for.
Maintenance, support, patch jobs, spreadsheet rescues - these things keep operations running, but they don’t make them run better. Over time, a maintenance-heavy budget starts to look less like prudence and more like procrastination. So how do we escape this? And why should we want to?!
Why “Keeping the Lights On” Isn’t Enough
For many reinsurance firms, the bulk of the IT budget goes into just keeping things running. Maintaining legacy systems, patching up spreadsheets and workflows, making sure that core processes like pricing, claims, and reporting don’t fall over. This type of “keeping the lights on” spending feels like a safe bet. After all, no leader wants to be the one who caused operational disruption by underfunding the basics.
But here’s the trap: this kind of spending creates the illusion of progress. You're spending money, sure, but not necessarily to move the business forward. It’s survival, not strategy.
Over time, this maintenance-first approach can quietly erode your competitive position. Technical debt piles up, manual workarounds become business as usual, and worst of all, budget cycles come and go without any material gains.
According to ReFocus, while technology investment does carry upfront cost, the long-term benefits often outweigh it. As they put it, you wouldn’t invest in a stock and simply hope it grows - you’d expect a return. The same logic applies to tech. Spending only to keep the lights on may ensure survival, but it rarely sets the stage for growth.
Some of the sector’s leaders are already demonstrating that this mindset shift is happening at the top. It is reported that roughly 45%–50% of Chubb Insurance technology investments is now focused on “development of all kinds.” This includes enhancing data analytics, scaling AI capabilities, and deploying tools that can either augment or even replace human work. To me, this just shows how far traditional players are willing to go when the business case is clear.
The Development Dilemma: Why “New” Often Gets Deferred
Thus, if “keeping the lights on” feels like the safe option, investing in new development can feel like a gamble. Even in organisations that understand the long-term benefits of technology implementation, it’s often the innovation budget that gets cut, delayed, or deprioritised.
Why? In reinsurance, several factors play into this caution:
Cultural conservatism: The sector is built around long-tail risks and long-term thinking. Stability is often prioritised over disruption. While this is an asset in underwriting, it means many firms only act when a system is already failing.
Fear of the unknown: Development projects, like automation or AI, carry risk. Leaders worry: What if it doesn’t deliver? What if it disrupts operations? What if it locks us into the wrong vendor or platform?
ROI ambiguity: keep the light on spending is easy to defend, because if systems work, processes continue. But development rarely shows instant results. Improvements like faster claims handling or freed-up underwriting capacity tend to arrive gradually, making them harder to quantify in early budget discussions.
Because of this, leadership teams often revert to short-term thinking, cutting ‘non-essential’ development first. But if all the money goes into maintenance… there’s nothing left to modernise the business! The longer this pattern continues, the harder it becomes to catch up.
Rethinking the Budget Split
I would argue the traditional split between “run” and “grow” tech budgets (between keeping the lights on and driving transformation) no longer holds up in a market where technology costs are increasingly dynamic.
Rather than aiming for a fixed ratio (say, 70% maintenance and 30% development), leading firms are now adopting flexible, needs-based budgeting models. This approach allows IT spending to scale with the business, not just maintain it.
As outlined by Business Plans, insurance businesses are already adjusting to this kind of dynamic model. They’ve learned to anticipate fluctuations across areas like:
Cloud usage: Storage and processing costs can spike by 25% or more during periods of peak demand. Fixed budgets don’t accommodate this level of agility - flexible models do.
Customer support and user engagement: As digital service use increases, so too do the associated support costs. Sometimes by 10–20%. These changes need to be tracked and matched in the budget.
Technology infrastructure and AI integration: As firms scale, so must their investment in platforms, analytics, and cybersecurity. These costs are significant but essential to maintaining performance and trust.
Marketing and client-facing systems: Spend can shift 15–30% depending on growth targets and market conditions, especially where digital outreach and lead generation tools are concerned.
So what are the key lessons from all this? Your budget split shouldn’t be based on legacy percentages - it should be based on business intent. Firms that treat tech spend as a strategic enabler, not a fixed overhead, tend to get the most value from it.
It Starts With Changing The Question
Here’s the thing: most IT budget conversations start with the wrong question: “What’s the minimum we need to spend to keep things running?”
When in fact, the real question should be: “What do we need to invest to make this business better, faster, more valuable to our clients?”
Escaping the trap isn’t about slashing maintenance spend overnight. You can’t just flick a switch and stop needing legacy systems. But you can stop letting them dictate your entire strategy. The moment you reframe your IT budget as a tool for enablement, you create space for bolder decisions. Thus, if your next IT budget meeting looks suspiciously like last year’s… maybe it’s time to ask different questions.
And if you’d like support in furthering your technology implementation in reinsurance claims or accounting functions, drop me a message: https://www.buondrius.com/contact