Insurers are dreaming of AI, but many are still anchored to outdated systems. A 2024 Novidea survey found that 41% of insurance professionals admit their core systems haven’t been updated in over five years. Even more striking, 76% of large firms rely on six or more systems, and nearly a fifth operate with ten or more. This tangled web of legacy technology undermines data quality, security, and scalability, threatening the very potential of AI to transform business.
“For many insurers, data quality and security are top concerns,” says Paul Kershaw, UK Enterprise Sales Manager at Novidea. “Processes are still often manual or spreadsheet-based, introducing unnecessary risks of human error and regulatory challenges.”
Pressure to modernise
Despite the clear risks, 74% of insurance executives have been hesitant to modernise. Two forces, however, are starting to shift the landscape: the adoption of AI and the influence of the London Market.
Insurers now realise that without a solid digital foundation and structured data, AI’s promise remains largely theoretical. Lloyd’s leadership in digital transformation is pushing brokers and insurers to follow suit, or risk falling behind competitively.
Cloud-based platforms built on technologies like Salesforce offer more than security—they enable operational efficiency and seamless integration. “Cloud platforms eliminate the vulnerabilities that come with legacy systems,” Kershaw notes.
“Security is just the beginning; modern platforms transform performance and allow firms to harness AI meaningfully.”
AI-powered underwriting
The impact of AI is already visible in underwriting. By analysing broader data sets, including financial histories, adverse director records, and group structures, underwriters can make highly tailored decisions. Ashleigh Gwilliam, Director of Insurance Industry Growth at FullCircl, explains, “AI and ML has enabled more granular risk assessment by absorbing and analysing vast data sources. Underwriters can make better decisions on customer risk, providing bespoke premiums and terms.”
Brokers are leveraging this wealth of insight to refine client engagement strategies, ensuring that coverage evolves alongside shifting circumstances.
This data-driven approach also helps insurers meet the new Consumer Duty Principles, emphasising fairness and the duty of care in serving clients’ best interests.
Automation possibilities
AI is transforming claims operations as well. Automation reduces manual workloads and accelerates processing times.
Efrat Marmur, VP Marketing at Air Doctor, says, “For claims, automation has significantly reduced manual workload and shortened processing times, overall improving transparency. Customer engagement has also been enhanced through AI-driven recommendations, providing personalised support and insights.”
Smarter customer engagement
Large Language Models (LLMs) and AI-driven chatbots are reshaping the customer experience. Peter Ohnemus, CEO of dacadoo, highlights, “The whole area around LLMs and smart structured communication—where voice is improving—makes onboarding and customer interaction more structured, simple, and consumer-focused.”
These tools operate 24/7, providing personalised insights while freeing staff to focus on high-value interactions.
Working in harmony
Technology alone isn’t enough. Vikas Acharya, CEO of ChainThat Limited, stresses the importance of hybrid human-AI models: “Underwriting automation is most valuable when it removes friction in low-touch cases, but underwriters still play a vital role in nuanced or high-value risks. Insurance remains a relationship business.”
He adds, “The focus needs to shift from fears of AI ‘replacing humans’ to the reality of ‘augmenting human capability.’ Technology adoption can only succeed if people are brought along for the journey.” Acharya also highlights the importance of change management, reskilling, and upskilling to ensure AI tools are used effectively.
The cost of legacy systems
The risks of sticking with outdated systems are becoming increasingly obvious. Kershaw explains, “In an industry reliant on efficiency and compliance, outdated technology is a barrier not just to AI adoption, but to day-to-day performance. Firms risk falling behind in both customer experience and operational agility.”
For many insurers, modernising core systems is the first step toward unlocking AI’s full potential.
An AI-ready future
Clearly, AI cannot operate in isolation. It is only as effective as the systems and people that support it. Legacy systems slow adoption, increase risk, and limit the strategic potential of AI. Conversely, modernisation enables insurers to harness AI for tangible business impact—from underwriting precision to operational efficiency and personalised customer service.
Kershaw concludes, “Modern platforms don’t just make insurers more efficient—they make them more intelligent. Those who modernise now are building the foundations for a truly data-driven, AI-ready business.”
Insurers that embrace this transformation will not only survive but thrive. They will turn AI from a distant promise into measurable performance, gaining competitive advantage, operational agility, and the ability to meet customers’ evolving expectations in a digital-first world.
