WHITEPAPER

AI IN INSURANCE: A GLIMPSE INTO THE FUTURE

Transforming Insurance Technology:

Rethinking Legacy Systems
for an AI-Driven Future
Vishal Pai
Head of Global Business Operations and Consulting
InsureMO

This white paper explores the transformative impact of AI on the insurance industry,
highlighting the limitations of legacy systems and advocating for decomposed
architectures like InsureMO's Insurance Middle Office. It provides a compelling vision
for reimagining insurance processes around AI capabilities, offering CXOs strategic
insights to future-proof their operations in an increasingly AI-driven landscape
Executive Summary

The insurance industry is at a critical inflection point. With advancements in large

language models (LLMs) and Agentic AI, intelligent solutions are getting more
industrialized and mainstream. This has the potential to rapidly transform how the
Insurance business operates. However, this transformation also exposes the limitations
of monolithic legacy systems—rigid, tightly coupled architectures that are increasingly
misaligned with the demands of an AI-driven future. Hence, this shift forces insurance
companies to reconsider their technology investments, particularly regarding core
systems, which may no longer be aligned with future needs.

The article explores how AI-driven transformations will enhance these Insurance
processes by providing more efficient, consistent, and automated operations,
signalling the decline of traditional SaaS and monolithic applications. It further
critiques current monolithic core systems, which have evolved into complex, tightly
coupled solutions that limit flexibility and scalability needed for AI-driven innovation.
For insurance CXOs, the article emphasizes the importance of shifting focus from
improving existing human-driven processes to reimagining them with AI capabilities.
Replacing monolithic core systems with similar ones could delay progress, and IT
investments should focus on enabling real-time information access and supporting
multiple AI agents via open APIs.

Finally, the article advocates for a decomposed system architecture, such as that
offered by InsureMO, which supports Agentic AI and other systems. This architecture
provides flexibility, scalability, and real-time data access, positioning insurance
businesses to adapt to evolving technologies and future-proof their operations. By
reimagining processes around AI capabilities, insurers can position themselves to
thrive in a rapidly evolving landscape.

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 Industrialization of AI is sounding the knell for Business Systems as we know it

In a recent interview, the CEO of Microsoft sparked a debate across the tech industry
by predicting that AI advancements will soon lead to the "death" of SaaS as we know it
today. This insight has prompted CXOs across various sectors to reconsider their
business models, operating strategies, and IT approaches to prepare for this rapidly
approaching future. AI use cases that once required months for training, testing and
perfecting, are now reaching production-grade levels in just weeks; thanks to
innovations like LLMs and the advent of Agentic AI.

As AI becomes more industrialized, it marks a critical inflection point for the entire
industry. By 2025, 87% of insurance companies are expected to have adopted AI in
some form, up from 65% in 2021. (Source: CoinLaw, 2024) For insurance companies,
particularly those investing heavily in new core systems, it raises the crucial question of
whether these investments align with future needs.

Imagine a future where every stakeholder in the insurance ecosystem—customers,

agents, policy administrators, and claims adjusters—operates like Tony Stark with their
own JARVIS-like multi-agent AI assistant. These multi-agent AI systems can
understand natural language inputs (text or speech), analyse internal and external data
sources, provide actionable insights, make recommendations, and even autonomously
complete tasks. While this seemed like science fiction in the 2008 Iron Man movie, it
no longer feels distant.

The industrialization of AI brings profound implications for the insurance industry:

Sales: Underwriting: Servicing and Claims:

AI agents could aid or Underwriting will become AI-driven systems could
replace human agents in more informed and streamline servicing and
selling insurance, providing efficient. Also, automated claims, ensuring
a more efficient, consistent, for most parts. compliance and payment
and humane experience. within a single customer
interaction.

These advancements signal the decline of traditional SaaS models and monolithic
applications, which are ill-equipped to support such dynamic capabilities.

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Time for CXOs to reassess their modernization strategies

For decades, insurers have relied on monolithic core systems—comprehensive

platforms designed to handle everything from policy administration to claims
processing. These systems evolved into complex systems with tightly coupled layers of
data, rules engines, workflows, and analytics. While they served their purpose in an era
dominated by human-driven processes, they are now ill-suited for the demands of an
AI-first world. A recent global survey revealed that outdated technology infrastructure
is the primary obstacle to innovation within the insurance industry, with 45% of
companies acknowledging it as a major impediment. (Source: Insurance Business
Magazine)

Illustration 1: Evolution of monolithic core systems with capabilities being piled up over the decades

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Key Challenges with Monolithic Systems
Human-Centric Processing:
Monolithic systems are designed around human-led workflows, making it
challenging to adapt to AI-driven task distribution.
User interfaces and business processes are tightly integrated, reducing flexibility
for AI-driven innovations.

Limited Externalization Capabilities:

Data and business logic are closely intertwined within the system, hindering
seamless integration with open architectures required by modern AI solutions.
Even traditional service-oriented architecture (SOA) approaches provide limited
externalization options, often constrained by the human-centric workflows they
support.

Costly Scalability:
Supporting AI applications demands atomic functions and high-volume API calls—
capabilities that monolithic systems struggle to provide cost-effectively.
Insurance companies that implement modular systems often experience a 35-40%
reduction in cost-to-serve due to improved processes and reduced reliance on
legacy systems. (Source: Decerto, 2024)
Scaling monolithic systems for high transaction volumes can be prohibitively
expensive, especially when compared to cloud-native alternatives.

Hence, to thrive in an AI-driven future, insurers must adopt strategies that go beyond
like-for-like improvements or replacements.

Modernization Strategies for CXOs

Reimagining Processes with AI:
Shift from optimizing human-driven workflows to redesigning them with AI at the
core.
Example: Automate claims processing end-to-end using LLMs for document
analysis and predictive decision-making.

Avoiding Monolithic Replacements:

Replacing one monolithic system with another is a costly endeavor that does not
future-proof operations.
Invest in modular architectures that support agile upgrades and integration with
emerging technologies.

Enabling Real-Time Access and Flexibility:

Prioritize IT investments that facilitate real-time data sharing across multiple
agents or front-end interfaces.
Open APIs enable seamless integration with advanced tools and technologies
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The Case for Decomposed System Architectures
A decomposed system architecture—like one offered with InsureMO’s Insurance
Middle Office—addresses the limitations of monolithic systems while enabling insurers
to harness the full potential of Agentic AI.

Illustration 2: Conceptual representation of a decomposed system architecture with InsureMO Middle office

Let us understand what do we mean and

get as benefits from a decomposed
system architecture.

Key features of Decomposed

Architectures

Flexible User Interface support for

fragmented User Experiences:
Business processes will be carried out
across fragmented user experiences
assisted by AI Agents and limited human
involvement for simplified tasks that
need human decision making. This
architecture enables fragmented user
experiences by decoupling business
processes from a single user interface
module, allowing diverse user
interactions.

Evolving Processes supported by Atomic Tools:

As new AI capabilities evolve, the business processes will also have to adapt to these.
This requires the Core business functions should be broken down for easier
orchestration, while ensuring that regulatory requirements, business rules, and
calculations remain well-defined. This architecture offers a wide array of options is
available for AI agents and other interfaces, including:
Composite and atomic business APIs
Stateless and stateful API functions

Data at fingertips and Actionable Insights:

Data is made readily available for quick analysis to support decision-making and
predictive capabilities with data access APIs.

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Core Systems as the System of Record
Existing SaaS and monolithic systems act as the system of record, reducing the need
for costly and risky data migrations or downstream integrations during core
modernization efforts.

Limitless API Calling Support*

Built on a cloud-native, microservices architecture, InsureMO offers the scalability**
required for Agentic AI applications, supporting limitless API calls.

*AI-driven applications require systems capable of handling up to 10x more API calls compared
to traditional workflows. (Source: Forrester Research, 2024)

**Cloud-native architectures supporting microservices have been shown to reduce infrastructure

costs by up to 30% while improving scalability for high-volume transactions. (Source: IDC, 2023)

Future-Proof Your Operations

The future of insurance lies in reimagining processes with AI at the core—not

simply upgrading legacy systems. By adopting a decomposed architecture
like InsureMO’s Insurance Middle Office, insurers can:

Deliver seamless experiences across fragmented user interfaces.

Adapt quickly to evolving business needs and regulatory requirements.
Unlock new revenue streams through innovative product offerings.

The time to act is now. Don’t let legacy systems hold you back—embrace the
future with InsureMO’s flexible architecture and be ready for what’s next.

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[email protected]
insuremo.com

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