Tackling technical debt in the insurance industry 


8 minutes

Why is insurance so hindered by technical debt? What actionable steps can be taken to transform the industry? And what are the consequences of failing to act? 

Technology underpins the modern insurance industry, but it’s not always an easy relationship. Many insurers continue to struggle with serious technical debt. 

Read on to learn about this key challenge for the insurance industry, and the actionable steps to overcome it.  

What is technical debt in insurance?

The term “technical debt” refers to your IT infrastructure, and cumulative consequences of choosing shortcuts to meet immediate goals rather than implementing robust and sustainable practices. These consequences also result from the failure to continually update and invest in innovation.  

Technical debt is analogous to financial debt, in the sense that "interest" is accrued over time in the form of maintenance challenges and suboptimal outcomes.  

In practice, this can look like outdated pricing models, fragile spreadsheets, inefficient and highly manual workflows, poor actuary-underwriter collaboration, and a lack of quality accessible data.  

Why is insurance so hampered by technical debt?

While industries such as finance have modernized significantly over the past few decades, insurance has often lagged behind. This is for a number of reasons, including:  

Sprawling legacy systems 

Insurers often grapple with the challenge of managing large, well-established legacy systems. Many have been integral to their operations for years and supported by substantial investments.  

However, age and ubiquity do not an effective platform make; from behemoth, fragile spreadsheets to outdated software, these systems are often the crux of the issue for insurers struggling with technical debt. Updates and patches can only do so much to address the issue. 

Lack of advanced in-house technical knowledge 

Insurers aren't necessarily technical experts. While the insurance industry has a deep and rich history, the introduction of modern coding languages and powerful software to the insurance pricing process is relatively recent.  

This demands a shift in approach, and there is now an increased focus on both hiring and training for advanced technical skills. Insurers may also reach out to third parties who can bridge the gap between traditional industry knowledge and contemporary demands.  

Risk aversion  

Implementing changes to existing systems comes with inherent risks. Insurers are often risk-averse by nature, and addressing technical debt can appear to offer an uncertain return on investment.  


According to Tom Chamberlain, VP Customer & Consulting at hyperexponential, this is exacerbated by unsuccessful or underwhelming past endeavors. “There's a lot of project fatigue in companies as well... projects which take years and years to implement and then don't quite have the same big delivery that people are expecting.” 

Once burned, twice shy. While caution is understandable, this must be balanced with the risks that arise from technical debt. 

Cultural resistance to change 

Organizational culture plays a key role in addressing technical debt. Resistance to change within the company culture can hinder efforts to modernize, especially if employees are comfortable with existing processes.  

When it comes to execution, sluggish bureaucracy can make even kicking off a proof of concept or engaging with a vendor painful let alone the project itself!   

"You can say you are going to be data-driven and say you'll be innovative and invest the money, but then you actually have to have the right culture."

Tom Chamberlain, VP Customer & Consulting at hyperexponential  

The alignment of culture with innovation is crucial for meaningful progress. Otherwise, even addressing aspects of your technical debt will not truly unlock the improvement organizations are seeking. As Tom says, “it's very easy to continue to do things in the same way and even when presented with more information, not actually use it."

What is the impact of technical debt in insurance?

The burden of technical debt has far-reaching implications for organisations and their business outcomes.

Data goes wasted, and so does effort  

According to our State of Pricing 2023 report, 81% of insurers do not believe their pricing technology allows them to make the best data-driven decisions.

When operating with heavy technical debt and outdated processes, data is either absent or a hugely manual proposition 96% of underwriters spend over two hours per day rekeying data, and 61% over three hours.

This creates a number of risks, including: 

Compliance issues 
Processes with a heavy human touch are more likely to contain errors. These can range from the irritating to the dangerous if it is difficult to adhere to standards and regulations, and update processes when requirements change.  

Difficulty recruiting and retaining talent  
For the majority underwriters and actuaries, data entry is not the most fulfilling part of their role. This may be felt keenly by new additions to the industry, who have become accustomed to more newer technologies and more streamlined ways of working. 

Claire McDonald, executive board member of HDI Global says "these kids are coming out of uni or school with a very different skillset in terms of how to analyze and process data. And I think then organizations do need to catch up a bit, because if they are effectively going from 2020s and they're going back to 2010 or 2005, they're going to feel that much more than perhaps other people would of a different generation."

Suboptimal decision-making  

Data that has previously been siloed or simply never collected could be used to inform decision-making in the future. This is a key asset in carving out a competitive advantage. However, it’s only possible and scalable in suitably modernized systems.  

Challenges exist at both ends of the scale. “Larger, more well-established insurers in the specialty market [are] sitting on a wealth of data that they can't get at because of the technical debt... contrast that with smaller insurers, newer insurers, who probably could get access [but] don't have the same wealth of data,” says Jamie Wilson, Head of Pricing & Innovation at hyperexponential. "Those who have it can't get it. And those who could get it, don't have it.”  

The problem gets worse over time  

Addressing technical debt becomes increasingly challenging as systems age and complexities multiply. Dependencies on outdated technologies and practices are only going to deepen the longer they are in play.  

In practical terms, the cost and effort required for resolution escalate, while negative impact grows.  

On the other hand, investing in addressing technical debt and adopting reliable, modernized systems can have an exponentially positive effect. From capturing more data for future use to creating fulfilling and effective workflows, the impact can be broad and transformative.  

Insurers are less effective, less efficient, and ultimately less competitive 

As Jamie sees it, inaction is simply not an option for organizations that want to preserve their competitive advantage.

“There will be some companies that do it better than others, and they will effectively force that improvement in the companies that are slower, because when innovation happens... they will become more profitable. Other insurance companies will either have to follow and pick up the same level of innovation, or they will fall behind.” 

How can insurers tackle technical debt?

So how can insurers go about tackling the technical debt they’ve accrued? Here are three requirements for success. 

1. Focus on creating a culture of change.  

Insurers need to comprehend the potential costs and risks associated with neglecting this issue and communicate this effectively across the organization. This allows for: 

  • More informed decisions on resource allocation  

  • The development of processes conducive to effective project execution 

  • Strategic planning to mitigate risks effectively 

  • A cross-functional approach to updating and transforming workflows  


As a Transformation Consultant, Alice McGowan of Allianz Commercial is no stranger to creating a culture conducive to change. “At the end of the day, you need everyone who's involved in the process engaged and understanding. And what we did, which was really helpful, is we had the people in their teams in a single room looking at each other and talking to each other about what caused them pain along the value chain.” 

According to Alice, “it takes time to change the mindset. They say it takes...  psychologically about six months to convince people to change their way of working.” It’s also important to account for the different approaches and situations that can be present in multinational organizations. “The Americans have a slightly different approach to how our German colleagues work, to our Parisian colleagues, to our London colleagues.” 

Patience is key—creating a genuinely innovative environment open to new ways of working doesn’t happen overnight, but it’s necessary to comprehensively address technical debt.  

2. Get started today

The vast majority of insurers who have been operating for any length of time will have some level of technical debt. Tackling the issue will necessarily be retrospective in part, but it’s also important to establish a mindset of ongoing improvement.  

This ensures that addressing technical debt is not just a one-time resolution but an integral part of the organization's evolving strategy. 

Actionable strategies that immediately begin to chip away at accumulated technical debt, and reduce it in the future, include:  

  • Defining clear goals for addressing technical debt, aligning them with broader organizational objectives. 

  • Developing a prioritized backlog of technical debt items. This list serves as a roadmap for tackling technical debt systematically. 

  • Modifying development processes to integrate considerations for technical debt. Encouraging developers to proactively address potential debt during the coding phase. 

  • Scheduling regular reviews of your infrastructure strategy to adapt to evolving organizational needs and industry trends. 


3. Tackle technical debt through both incremental and transformational change 

Often, failed projects to tackle technical debt are very broad in scope. “There's these expectations that innovation needs to be this huge great big jump in in capability, and these are the ones that tend to fail and fall over because you're trying to do too much all at once,” says Tom Chamberlain. 

However, there is a genuine need in many organizations for a more wholesale transformation. This may require more resources and upfront investment, but it can be key to cutting through years of damaging technical debt.

The three  levels of innovation for pricing transformation:
  • Incremental change: Small, gradual adjustments and improvements to existing processes, systems, or strategies.

  • Breakthrough change: Significant, revolutionary advancements within a relatively short timeframe.

  • Transformational change: The comprehensive reevaluation and restructuring of an organization's fundamental elements, including its culture, processes, and strategies.

Caroline Bedford, Chief Executive at EDII, believes that "the insurance industry, or the specialty insurance industry that I work in, is particularly good at making those incremental changes. It's moving into those bigger impacts, so the breakthrough and transformational, that is naturally harder.” 

Balancing continual, incremental updates with less common larger projects will leave insurers in the strongest and most sustainable position.  

Begin your journey to pricing transformation

The time for action is now, and the roadmap to a resilient, innovative future lies in the proactive management of technical debt. 

That’s easier with the right technology partner. For custom pricing transformation advice, connect with our experts here.