Australia insurers urged to modernise core technology

Having the right foundation technology in place makes it easier to gain an edge on the competition.

Is your organisation looking to add new lines or improve its market share in one or more key business areas in the upcoming financial year?

For the majority of local insurers, the answer is likely to be a resounding yes. Here in Australia, the market is both crowded and cutthroat, with challenger brands continuing to nip at the heels of established players and carve out profitable niches in key verticals.

Against that backdrop, innovating at speed is the key to profitability and growth. Organisations have to achieve the duality of top-line growth while driving down expense ratio.

From products focused on digital risks to embedded insurance and flexible, usage-based pricing models such as pay-as-you-drive car cover, smart operators are continuing to search for new ways to add value and mitigate emerging risks, while containing their expense ratio.

Addressing today's opportunities with yesterday's technology

However, doing so can be more challenging than it needs to be for insurers that continue to rely on legacy technology – old-school platforms and disjointed batch processes that don't support them to optimise their operations and pivot rapidly when opportunities present themselves. Organisations that have grown through acquisition have slowly accumulated operational processes and applications that have led to architectural complexity. This, combined with process complexity, has contributed to higher expense ratios.

Typically, these organisations struggle to access the real-time data capabilities they need to adopt new lines of business and implement revised governance standards that reflect their changing needs and product array.

Meanwhile, in the back office, repetitive manual processes can add friction to quoting and claims workflows, decelerate customer journeys, and negatively impact profitability and the bottom line.

Falling behind in the artificial intelligence (AI) adoption race

Moreover, in the absence of a modern industry platform designed to drive efficiencies and growth, harnessing the power of generative and agentic AI is likely to prove an extraordinarily difficult undertaking.

And therein lies an existential risk for organisations whose raison d'etre has always been the identification and mitigation of risk, in a multiplicity of incarnations.

With competitors racing to develop and implement AI functionality, some 60 per cent of insurers globally have already produced enterprise- or business unit-level AI strategies, and 56 per cent have one or more AI models in pilot or production, according to the latest Guidewire research. Insurers that are slow to the party will quickly find themselves at the back of the pack.

While their counterparts capitalise on the benefits this transformational technology can confer – think supercharged productivity, enhanced decision-making capability and the capacity to create personalised, ultra-responsive customer experiences at scale – they'll be hard-pressed to deliver anything approximating a comparable value proposition.

Laying a strong foundation for innovation and AI adoption

That's why replacing outdated, semi-manual and disparate point solutions with a flexible, cloud-native software platform that manages the entire insurance lifecycle, from policy administration and underwriting to billing management and claims processing, is a critical move.

If successful, it can lead to vastly improved efficiency in the underwriting and claims functions and lay the groundwork for successful AI transformation in both the front and back offices. This, in turn, will lead to simpler processes and agile integrated architecture, which can drive a lower expense ratio.

Ideally, select a premium vendor that has a stellar reputation for supporting core information and communication technology (ICT) infrastructure upgrades at speed, without disrupting operations.

Elect to work with one that has forged strong ties with seasoned systems integrators – well-established partners with strong track records for delivering projects on time and on budget –, and you'll stand the best chance of making the transition smoothly, swiftly, and successfully.

Placing your organisation on a stronger footing in FY2027 and beyond

The insurance landscape in Australia continues to evolve at blistering speed. Providers that aren't ultra-focused on evolving quickly, optimising their operations and embracing AI will struggle to deliver the value and customer experience that today's discerning and cost-conscious consumers and businesses expect and demand.

Having the right core platform in place will see your organisation well-positioned to do both in the upcoming 12 months and beyond.

If remaining relevant and profitable in the long-term is your overarching priority, foundation technology will underpin your efforts to keep pace with the competition in an increasingly challenging commercial landscape.