The insurance industry is navigating a period of profound change. For decades, carriers have wrestled with modernizing their core systems, a slow and costly process. Now, artificial intelligence is accelerating this transformation, offering new ways to solve old problems and create truly customer centric experiences. How can insurers embrace this change without falling into familiar traps?
In a recent episode of the Unstructured Unlocked podcast, Nigel Walsh, Global Head of Insurance at ServiceNow, offered his expert perspective. Drawing on a career that includes leadership roles at Google and Deloitte, Walsh discussed the evolution of insurance technology, from monolithic core systems to agile, orchestrated solutions. This article explores his key insights on the future of insurance modernization.
Listen to the full podcast here
The next wave of transformation is here
The journey of core system transformation has been a long one. Many insurers have spent the better part of two decades moving from green screen mainframes to more modern platforms. While these projects established a new foundation, Nigel Walsh believes we are on the cusp of another, even more significant, wave of change powered by AI.
A persistent challenge in the industry has been its policy centric nature. When you call your insurer, the first question is almost always for your policy number. This experience is a direct result of how underlying systems are built. AI is challenging this old model by enabling a shift toward genuine customer centricity. Walsh suggests the key is abstracting data away from core processing systems into a more flexible, accessible layer.
This architecture separates the system of record from the system of engagement. It allows carriers to innovate rapidly at the customer facing edge without needing to disrupt the stable core. AI use cases, which began on the periphery in areas like customer service, are now moving closer to the heart of the business. This promises to unlock substantial value and finally deliver the seamless experience customers expect.
Related content: How AI enhances precision, speed, and efficiency in insurance underwriting
Solving the industry’s “Messy Middle”
The insurance technology landscape is famously complex. Years of mergers, acquisitions, and layered technology have created what many call the “messy middle.” This is a tangled web of disparate systems, from legacy platforms to modern applications, that struggle to communicate with each other.
Historically, carriers tried to bridge these gaps with offshore manual labor or brittle Robotic Process Automation (RPA). Walsh sees AI and intelligent agents as a more powerful and elegant solution. He suggests that while large scale modernization projects will continue, their focus will shift. Instead of replacing one monolithic system with another, carriers will build agile, component based ecosystems.
The centerpiece of this new approach is an intelligent workflow that acts as a “steel thread” running through the entire organization. This workflow can connect to various applications and data sources, which can be swapped out over time. A claims process that once relied on a fax machine can now leverage AI for voice transcription and sentiment analysis, all while the fundamental workflow remains consistent. This provides the optionality to adapt and evolve without getting locked into a single vendor or a multiyear project.
The future is orchestrated, not built
The traditional debate of “build versus buy” is becoming less relevant. In the age of AI, it is rare for any company to build a solution entirely from scratch. Even custom applications are built upon foundational components, such as large language models (LLMs) from major technology providers. The new paradigm, according to Walsh, is orchestration.
He argues that the future of insurance technology is orchestrated, not built. Competitive advantage will no longer come from owning every piece of the technology stack. Instead, it will come from the ability to skillfully orchestrate an ecosystem of best in class services. The goal is to create a flexible fabric that connects different technologies in a way that is tailored to specific business needs.
This approach delivers incredible agility. A global carrier could use one AI model in North America and a different one in Europe to comply with local data regulations, all within a single, coherent framework. By mastering orchestration, insurers can innovate faster, reduce vendor dependency, and respond more effectively to market opportunities.
Governance and enablement: the keys to AI success
As carriers adopt AI, two critical factors will determine their success: governance and enablement. The rapid spread of AI tools can create a chaotic and disconnected environment. Without proper controls, managing risk and ensuring regulatory compliance becomes nearly impossible.
Walsh stresses the importance of establishing an “AI control tower” to provide a centralized view and governance over all AI activities. This proactive approach gives leaders the confidence that AI is being used responsibly and effectively. In a highly regulated industry like insurance, robust governance is not just a best practice; it is a necessity.
The second key is people enablement. AI transformation is fundamentally a human endeavor. Walsh points to the evolving role of the Chief People Officer in preparing the workforce for this new era. This involves creating programs for reskilling and upskilling employees and fostering a culture of curiosity and continuous learning. Empowering people to use AI tools effectively is just as critical as the technology itself.
Charting your path forward
The insights from Nigel Walsh illuminate a clear path for the insurance industry. The future is agile, data driven, and intelligently orchestrated. To thrive, carriers must rethink their approach to modernization, embrace flexible architectures, and make significant investments in both governance and people. By doing so, they can navigate the complexities of this new landscape and unlock the full potential of artificial intelligence.
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