Insurers face a tech readiness paradox, report shows

Insurers globally are experiencing what one IT service provider calls a “tech readiness paradox.”

Although 94% of insurance leaders globally are confident their IT infrastructure is industry-leading, only 39% of those leaders say their IT infrastructure is ready to weather future risks, according to the Kyndryl Readiness Report.

That’s compared to 90% and 39%, respectively, across other industries surveyed.

Further, an additional 56% of insurance leaders are concerned their IT tools are outdated or close to end-of-life.

Canadian insurance industry execs have previously discussed the need to modernize their outdated legacy systems. Though many in the industry accelerated their digital efforts during the COVID pandemic, these findings suggest more needs to be done to prevent insurers from disruption.

Insurance leaders (23%) report the lowest rates of readiness for cyber-attacks relative to all the industries surveyed (30%), Kyndryl finds. What’s more, less than a third feel their cybersecurity measures are ready to manage future risks.

These findings come as reports show cyber-attacks against the insurance industry are increasing. Insurers and their broker sales force are targeted for their vast warehouses of customer information and financial data, the report says.

“The insurance industry, long adept at mitigating risk, now faces significant and accelerating challenges,” says the report. “While technology integration offers potential solutions, many insurers struggle to keep pace, balancing innovation with risk mitigation.”

 

Insurers’ future risks 

Insurers are also focussed on external business risks, such as macroeconomic pressure and costly natural disasters, which are driving up claims costs. 

“These challenges raise important questions about the industry’s readiness to weather macroeconomic headwinds,” Kyndryl’s report reads.

In Canada, insured losses from severe weather events totalled $8.5 billion in 2024, far exceeding the previous record of $6.2 billion recorded in 2016 (adjusted for inflation). 

Almost two-thirds (64%) of global insurers highlight environmental disruption as their top business concern, yet only 26% feel ready to respond to the risk.

Macroeconomic uncertainty ranks second, with 63% highlighting this as a top concern, yet only 21% feel ready to respond.

Overall, 28% of insurance leaders feel ready to face future risks — ranging from environmental disasters to economic uncertainty, as listed above, to cyber-attacks, tech innovation, talent deficits, and more — compared to 29% across other industries.

Most insurance leaders (68%) highlight their struggle to keep up with the pace of innovation, a level of anxiety surpassed only by the energy and utilities (75%) and healthcare (72%) industries.

Insurance leaders (54%) are also more likely than other industries to say regulation is moving too fast.

 

Insurers’ risk mitigation actions 

Appropriately, 40% of insurance leaders say they are likely to conduct regular risk assessment measures, mapping and audits, whereas only 31% of people in other industries said the same.

Thirty-nine percent of insurers cited updating IT infrastructures as their next top risk mitigation priority. In other industries, 42% said the same.

Insurance leaders’ other top risk mitigation measures are: implementing robust cybersecurity measures (ranked third), enhancing regulatory compliance efforts (fourth), and developing and implementing business continuity and disaster recovery plans (fifth).

The need for risk mitigation remains the global insurance industry’s top priority.

“At a time when insurers are facing increased claims and higher reinsurance costs, the industry must now work to balance innovation with risk mitigation,” Kyndryl writes. “IT is the best line of defence to mitigate risk, but most insurers lag behind in their tech modernization journey.” 

Further, while insurance companies (12%) are above average (8%) in solving IT events through automation efforts, they’re slightly below average (71% vs. 75% average) in adopting IT best practices.

 

Feature image by iStock.com/Montri Uaroon