More than three-quarters of London market insurance organisations anticipate substantial changes to their core technology infrastructure to accommodate artificial intelligence (AI) and evolving underwriting demands, according to research published by Federato, a technology company specialising in AI-powered underwriting solutions for insurers.
Federato’s study found that 76% of organisations expect to undertake significant system integration, modernisation or transformation to meet future operational requirements.
The findings also indicate that technology-related delays continue to affect commercial performance, with 89% of respondents reporting that their businesses had lost opportunities to competitors because of operational speed over the preceding 12 months.
The report, The London Insurance Market’s Execution Gap: AI Ambition and Core Technology, draws on responses from 245 insurance professionals representing Lloyd’s managing agents, company market insurers, managing general agents (MGAs), reinsurers and brokers. Federato reported that 58% of those surveyed were already operating AI applications in production.
Despite the growing use of AI, confidence in existing technology infrastructure appears limited. According to Federato, just 24% of respondents considered gradual improvements to their current core systems adequate to address longer-term business and underwriting needs.
The research points to structural and operational complexities as significant obstacles to technology upgrades. Subscription-based and multi-party underwriting arrangements were identified as a challenge by 43% of participants, while 42% cited the difficulties associated with managing different systems throughout the insurance policy lifecycle. Another 38% reported problems integrating core platforms with broker, bureau and settlement processes.
Federato also identified a connection between the speed of implementing underwriting decisions and reported business losses. Its survey found that 42% of respondents experienced delays of several weeks or more before changes in underwriting strategy were reflected in routine underwriting activity.
The proportion of organisations reporting lost business varied according to how quickly they could implement these changes. Federato found that 59% of firms capable of making immediate adjustments had experienced losses attributed to operational speed, compared with every organisation reporting implementation periods of at least one month.
The study further suggests that firms experiencing competitive disadvantages linked to operational delays are more inclined to invest in technology replacement or consolidation. Among organisations reporting lost business because of speed, 50% identified unified platforms or policy administration system (PAS) modernisation as their leading technology investment priority for the next three years. This compared with 21% of organisations that had not reported similar losses, representing a difference of approximately 2.4 times.
The findings also raise questions about the extent to which AI deployment alone can address existing operational inefficiencies. Federato reported that 71% of organisations using AI within business-critical processes continued to experience business losses associated with speed. Meanwhile, 54% reported challenges connecting their core infrastructure to broker, bureau or settlement operations.
Improving responsiveness emerged as a leading objective for technology investment. According to Federato, 36% of respondents prioritised accelerating quotation processes and improving responses to brokers when considering AI adoption and core system upgrades.
Other objectives included strengthening underwriting profitability, identified by 26% of respondents, and expanding premium volumes without equivalent increases in employee numbers, cited by 25%.
Will Ross, CEO and Co-founder of Federato, commented: “The research reveals a clear consensus: legacy core systems are too slow, and bolt-on AI can’t deliver what it promised. We expect common sense to prevail: executives will realise there’s no point in wasting more time and money trying to make legacy systems work, and they’ll do what’s necessary.”
