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Insurance modernisation ‘impossible’ unless cultural and technical issues are addressed

Technology leaders from some of the UK’s foremost insurance organisations say the sector must take drastic action to align with the digital economy, or risk major upheaval and an exodus of top talent.

At a roundtable hosted by DevOpsGroup this month Mark Akerman, CTO at Admiral, talked about change leadership and the importance of engaging progressive, outward-looking Non-Executive Directors. He was joined by Mark Simons, former Transformation Director at both QBE and Aviva, who suggested radical measures to address ‘technical debt’, a phenomenon he believes is stifling modernisation at many firms.

The talks sparked extensive debate amongst the 16 delegates representing insurers, InsurTechs, brokers and MGAs. Several held the view that some insurance CEOs are ignoring the need for digital transformation, choosing instead to shore up their businesses through M&A or divestment activity. Overall, the consensus was that unless deep-rooted issues like technical debt are acknowledged at Board level, then properly dealt with, established players could be heading for ruin.

Steve Thair, co-founder and CTO at DevOpsGroup, explains: “Technical debt is the accumulation of poor IT decisions, made to save time and money. As they build up, it gets harder to change things, which starts to impact organisational performance as well as IT performance. In the modern era, where providers need to adapt to shifting insurance needs and digitisation offers significant efficiency gains, this is a real problem.”

In a bid to arrest Board attention, Mark Simons says technical debt should be treated like any other liability and recognised on the balance sheet: “You can quantify technical debt by looking at the amount of the IT budget spent on business as usual versus innovation, and comparing the ratio to that of high-performing firms. The percentage difference is essentially your interest payment on the technical debt. Conveying the problem in financial terms makes it more tangible for non-technical business leaders.”

Many delegates expressed frustration at their inability to drive effective transformation due to the shackles of technical debt. Some voiced a fear that there will be a brain drain of IT talent from incumbent players unless steps are taken to resolve this.

“Right now, insurance firms have a window of opportunity to drive transformation,” Thair continues. “However, while they can smell the smoke from their burning platform, they don’t yet feel the heat. There is an element of complacency at play here. Traditionally, high barriers to entry protected the sector from disruption. But these are eroding as new business models and sources of capital emerge. Players that turn their attention to hard structural problems instead of financial engineering have the best long-term prospects.”