Technological evolution in insurance companies and systems architecture

In a world of constant technological evolution, insurers face the challenge of keeping up to date to meet the increasingly specific needs of their clients and remain competitive. This updating is based on several pillars, one of the main ones being the architecture of computer systems, which can either favour or hinder technological transformation. In this article we explore how the modernisation of this architecture can create opportunities for innovation and efficiency within insurance companies, while identifying some of the challenges related with legacy systems.

Computer systems architecture includes a set of computer structures and components in an organisation that not only determine how the systems work, but also influence the ability to adapt to technological and business changes. In insurance companies, this architecture plays a crucial role both in the provision of services and in risk management, making it a critical factor for success.

Legacy systems are generally associated with old, obsolete technologies that are more difficult to maintain. These systems pose challenges for insurers within the context of technological transformation. However, each challenge can also represent an opportunity for improvement and evolution, particularly in the following aspects:

• Lack of agility – Legacy systems are more inflexible and are generally not prepared to deal with the rapid changes related with business needs. The adoption of more modern computer architectures, such as microservices and cloud storage/computing, can speed up this adaptation. Furthermore, systems based on more recent solutions guarantee greater autonomy in the configuration of products and business rules, thereby reducing time to market.
• Complex integration – The integration of new technologies with legacy systems can be more time-consuming and complex, delaying technological innovation related, for example, to the growing demand for solutions with integration via APIs and web services, which generally have functionalities oriented towards systems and technologies that tend to be up to date. These solutions reduce dependence on point-to-point integrations and facilitate cross-system interoperability.
• Maintenance costs – Legacy systems can become expensive to maintain, consuming time and resources that could be directed towards innovation. This modernisation may also be associated with the need to upgrade the systems of the technology providers, particularly the Core system. In this context, technology providers can offer important support, guaranteeing data integrity if systems evolve as well as the functionality of solutions.
• Security risks – Legacy systems can have greater security vulnerabilities, particularly in the absence of regular updates. The most up-to-date computer systems have more robust authentication and security solutions, which reduce the risk and exposure to a cyber-attack.
• Slow adaptation to GenAI – Generative artificial intelligence is already a ubiquitous presence with a very significant potential to influence our daily lives. When linked to the insurance business, GenAI can create major challenges for the efficiency and competitiveness of insurers, for example through fraud and manipulation, including the falsification of documents and the creation of fictitious events. However, it can also help insurers in different contexts by increasing the agility in underwriting and the efficiency in pricing, improving customer service, simplifying access to information and business processes in real time, enhancing fraud detection, privacy policies and data security, as well as governance and compliance.

There are several strategies that can be adopted to promote technological advances and the modernisation of systems architecture in insurance companies:

• Needs assessment, identifying the main gaps and challenges in existing systems and defining the requirements for a modern computer architecture.
• Incremental approach, through gradual change, starting in areas and systems with lower operational risk.
• Current standards and practices, both in the context of architecture and software development, such as DevOps and Continuous Integration/Continuous Deployment, to increase efficiency and quality, as well as data integrity and correct versioning.
• Strategic partnership with the technology supplier to guarantee the best support and the means to ensure positive technological evolution with tangible benefits.

Computer systems architecture plays a structural role in insurers’ ability to adapt to the need for technological innovation in a constantly changing market that is susceptible to large-scale events with immediate impacts. Modernising this architecture presents significant challenges, particularly when legacy systems are involved, but it also offers opportunities to improve agility, efficiency, security and customer service to guarantee immediate competitiveness and long-term sustainability.