The Top 7 IT Challenges Facing Insurance Companies Today

The insurance industry is undergoing a major transformation, driven by evolving customer expectations, digital innovation, and regulatory pressures. Insurers must address several critical IT challenges to stay competitive and operationally efficient. The following points summarize key areas for action, supported by insights from KPMG’s Insurance Transformation: The New Agenda report.

The Top 7 IT Challenges Facing Insurance Companies

1. Legacy Systems: Modernization and Integration

Many insurers continue to rely on decades-old systems, such as mainframes (e.g., AS/400) and COBOL-based applications. Maintaining these systems is increasingly complex and expensive – and expertise in these technologies is scarce, creating risks in areas such as cybersecurity, regulatory compliance, and operational continuity. Over time, technical debt accumulates, and modernization becomes urgent.

Also, connecting these backends to modern digital channels such as web portals, mobile apps, and third-party applications is complex, requiring API layers or gradual migration strategies.

2. IT Staffing & Resourcing: The Need for Flexibility

Insurance transformation initiatives often experience peaks and troughs in resource needs, for example during system migration or new product rollout. Organizations require flexible access to skilled personnel, including developers, data engineers, architects, and cybersecurity experts.

Additionally, in some countries like Germany, attracting young IT talent is particularly challenging due to perceptions of the sector.

3. Customer Experience (CX) Across Digital Channels

Customers expect seamless interactions across portals, apps, chatbots, and call centers. Data and context continuity are essential – for example, a claim started via a chatbot should be easily continued on a web portal.

Customer-facing digital initiatives are central to transformation. Examples include self-service portals, digital payment methods, online contracting, and policy management. These initiatives improve satisfaction, reduce manual workloads, and support competitive differentiation.

 4. Business Process Automation

Automation is critical for both operational efficiency and improved service delivery.

Automating administrative and repetitive tasks

Processes such as document processing, claims intake, and routine underwriting checks can be automated using OCR, intelligent document processing, and workflow automation.

Automating customer interactions

Chatbots and virtual assistants handle high-volume inquiries, freeing human agents for complex issues.

5. Data: Quality and Infrastructure are Key to Utilization

Underutilization of customer data

Despite vast data resources, only a fraction of available customer data is actively leveraged for decision-making. KPMG’s findings correlate with our experience: data and analytics are a top transformation priority.

Data management challenges

Key challenges include creating a unified customer view, data cleansing, ensuring data quality, and migrating data during system upgrades. Siloed data across legacy systems, external sources, and multiple product lines complicates these efforts.

Advanced data infrastructure

Data warehouses, lakes, and real-time pipelines are essential to support analytics, AI, and predictive modeling. High-quality, integrated data is crucial for accurate insights and operational decision-making.

6. Compliance: Data Privacy is Critical

Regulatory compliance, particularly regarding data privacy, remains a critical concern. Insurers must ensure proper consent management, secure storage, and transparency, while maintaining auditability and traceability.

AI adoption introduces additional compliance considerations. Decisions made by algorithms may require explainability, fairness, and documentation to satisfy regulators and customers.

7. AI & Advanced Analytics

AI-powered customer service

Beyond chatbots, AI can understand context, personalize interactions, and proactively guide customers, while escalating complex issues to humans.

Internal AI applications

AI supports risk assessment, fraud detection, claims processing, and product design. The goal is augmentation — assisting human decision-makers rather than full replacement.

Challenges to the adoption of AI include lack of skilled AI professionals, legacy systems, regulatory constraints, and organizational resistance.

DSS Consulting: We Speak Insurance

We at DSS Consulting “speak insurance”, as we have worked with eight of the top 10 insurers in Hungary, many of them subsidiaries of large international insurance companies.

Thanks to our decades of experience in insurance, we have deep sector-specific business knowledge, and we are well versed in typical insurance processes (e.g. fee and commission calculation) and systems (e.g. core systems, customer portals, contract management systems, reporting systems).

Our experience in solving the challenges detailed above can be briefly summarized as follows:

• Custom software development: We have developed several custom solutions for insurance companies, including classic customer portals, self-service portal solutions, fee and commission calculators. We have also supported our customers in implementing technological upgrades of their systems.
• IT contract staffing: We provide small or large IT teams (with typically software developers and testers as well as systems analysts) to several insurance companies, helping them implement their projects.
• Software testing: We have extensive experience in testing almost all typical insurance systems.
• Data migration: We have helped insurers in many cases with data migration during the replacement or upgrade of their life or non-life portfolio management systems.
• Data cleaning: In the insurance sector, the quality of customer data is key to successful operations. With the help of our data quality assurance solutions, we have cleaned and automatically deduplicated databases with millions of customer data.
• Data privacy solutions: In response to the requirements of the GDPR, we have developed two solutions that we have implemented at several insurance companies. DSS Data Anonym enables the use of properly anonymized data in insurance systems, while GDPRoofed enables our insurance clients to efficiently perform the registration tasks of the regulation.
• Utilizing various AI tools, we have also developed AI-assisted testing and AI-assisted data transformation solutions, which bring efficiency savings to our clients in the insurance sector as well.

Please click here to read more about our references in the insurance sector.

But Why Should You Work with a Hungarian Company?

Because Hungary has best-in-class software developers. For this, there is no better proof than HackerRank’s ranking based on their own statistics: Hungary ranks 5^th on the Best Developers list globally, head to head with Switzerland and Japan and well ahead of not only Ukraine, Bulgaria and Romania but also France, Italy, Germany and the UK.

Is your company facing similar challenges? Why not discuss them over a great cup of coffee?