The insurance industry is one of the largest in the world. So why does it seem to be progressing at a slower rate than its peers across financial services?
While more technology-forward industries are capitalising on improved cycle times and reduced operational burdens, the insurance sector is failing to mirror this approach. Settlement cycles have lengthened, not shortened. The back office is already under strain. And transaction volumes are expected to rise 29% over the next two to three years. The data is clear: without active investment in the right kind of modernisation, the gap will only widen.
What the data tells us
Our data shows that settlement cycles are up from 56 to 60 days. With the technology available to insurers, this should be moving in the opposite direction.
The sector is growing, but the infrastructure supporting it is not keeping pace. 14% of operational budgets are spent correcting manual process errors – capital that could be funding growth instead. Across insurance back offices, very manual, people-heavy functions are still being held together by spreadsheets, and data quality continues to lag behind other sectors.
The consequences reach further than the finance function. Quick settlement unlocks growth opportunities – the ability to take on more business lines, sell different products, and free up capital through more efficient balance sheets. When settlement slows, those opportunities close. The indirect impact on the wider business, and on what gets discussed in the boardroom, is considerable.
Why the industry resists change
The insurance industry is traditional. The market is dominated by large, well-established but slow-moving players that have not had to change their operational processes for decades. As firms scale, operational processes grow more complex and bottlenecks multiply.
M&A activity compounds this. Over 80% of respondents in our recent survey expect M&A activity in insurance to increase, yet 54% say merging data sources is already creating friction. More acquisitions means more systems to reconcile, more processes to unpick, and more institutional knowledge tied to ways of working that predate modern automation.
Insurance startups face none of this. They are building from scratch, alongside new technology, which makes them more agile and more willing to innovate. That divide is only going to widen, unless incumbents approach modernisation the right way.
Awareness of what is possible is growing. At the conferences we attend, the conversation has moved on from a generic discussion about AI to something much more specific – agentic AI, different personas, bots designed to take over defined roles and processes within a business. The ambition is clearly there. However, for most established firms, the operational foundations to support it are not yet in place.
The problem with blind automation
If you lead an insurance firm and are aware of the data, the instinct might be to automate your way out of the problem. Our research shows that two thirds of insurers are managing more than 10 data sources feeding their premium processes – 17 on average. That fragmentation has built up over years, often held together by people whose institutional knowledge is tied to processes that predate modern technology.
The question firms rarely ask is what happens to that knowledge when new software arrives. The operational logic embedded in years of manual workarounds rarely exists in documentation. It lives with the people who built those processes. Automation that bypasses experienced people does not inherit what they know. And deploying it on top of fragmented data compounds the problem, as inaccuracies persist and regulatory requirements remain unmet. Firms must take the time to understand what is broken in their existing systems before introducing new technology. That is where trusted technology partners can add real value – not by lifting and dropping a current flawed process into new software, but by auditing what is actually there and building from that knowledge.
The technology exists. The question is whether traditional, risk-averse insurance firms are willing to use it the right way.