Modular IT is reshaping the digital transformation agenda in insurance
Insurance industry players are in a race to move away from legacy systems towards a more modern and effective IT landscape. As technology evolves at an unprecedented pace, insurers must either embrace fundamental change or risk being left behind, according to Stephan de Jong, managing director at IG&H.
While digital transformation is not a new concept, the current technological landscape, particularly with the rise of AI, presents a new level of urgency and opportunity. Many insurers are hindered by legacy systems, fragmented IT infrastructures, and siloed processes.
These outdated systems, often the foundation of operations for insurers, are now obstacles to future growth. To keep up, insurers must move beyond simple patches and adopt a new, flexible architecture.
The shift to a modular approach
“Think of your IT infrastructure as a race car. To win the race, you need a vehicle that’s fast, flexible and tailored to the course ahead,” said Stephan de Jong, managing director technology at IG&H.
“Take the wheel with a modular, cloud-native architecture that allows you to adjust and improve as you go. You don’t have to accept being stuck for days, weeks or months at a time. Using new techniques allows the insurer to execute this task while continuing their work.”
With a modular architecture, insurers can launch new products faster, reducing time-to-market. They can also create customized customer journeys for hyper-personalized experiences and securely expose data across their ecosystem. This shift enables the automation of back-office operations like claims processing and policy management.
The paradox of AI
As insurers modernize their IT infrastructure, AI becomes a natural next step in driving innovation and personalization. Though some may call AI technology over-hyped, it is clear that we are in the middle of a race to adopt AI, similar to the revolution caused by the internet over 30 years ago. AI is no longer just a tool for gaining an advantage, but is increasingly seen as a necessary component for a business to stay competitive.
Despite this, adoption remains uneven. More than two-thirds of insurance CEOs view generative AI as a threat, yet approximately eight out of ten see it as a priority for investment. This creates a paradox of opportunity versus hesitation: insurers do not want to be left behind, but also do not want to jump the gun.
This coming new era of technology also enables a shift to hyper-personalization, where tailored experiences meet customer expectations in real time. This approach can help insurers differentiate themselves in a crowded market and build stronger customer connections.
Overcoming roadblocks
“Several barriers hinder successful digital transformations in the insurance sector, including complex implementation projects, siloed processes, low data availability, inflexible vendors, and insufficient collaboration or a lack of integration possibilities, just to name a few,” said De Jong.
“One of the biggest hurdles is legacy software, a roadblock to innovation and integration. Legacy systems not only impede innovation but also demoralize teams; their inefficiency and complexity are often a cause for headaches.”
Over half of insurance CEOs are worried about finding new talent, as new employees are often reluctant to work with outdated systems, some from as far back as the 1990s. As seasoned employees retire, institutional knowledge is often lost, making it even more difficult to maintain these systems.
Digital transformation is not a one-time project – it is an ongoing journey. It requires a holistic approach that integrates technology, people, and processes. By embracing modular systems and tackling the challenges of legacy infrastructure and talent gaps, insurers can build a future where they have the autonomy to choose the right solutions and innovate on their own terms.
“Thanks to consolidation and internationalization across the insurance market, the race is on. Insurers who regain IT control cannot only keep up with digital disruption, but also lead the way,” notes De Jong.
“These organizations can evolve as needed. They create a balance between self-development and configuration, testing new ideas without major disruptions to their core operations. Those who embrace modular IT today will be the ones shaping the future of customer-centric insurance tomorrow.”
