Internal hurdles such as legacy systems are the biggest roadblocks to insurance innovation, Oliver Wyman says.

The consultancy’s Insurance Redefined report, which surveyed 42 insurance executives across six Asia Pacific countries, finds “legacy IT and infrastructure” is considered the “biggest hurdle in reinventing the insurance business for the future”.

This was followed by finding the right talent, changing customer demands, an uncertain economic outlook, and the persistent low interest rate environment.

Oliver Wyman Partner and Head of Asia Pacific Insurance Angat Sandhu says the legacy systems issue has contributed to a lack of innovation.

“A lot of insurance companies have policy administration systems that are decades old,” he told insuranceNEWS.com.au.

“Many have grown through mergers and acquisitions so it isn’t just one system but five, 10 or 15. They’ve not been upgraded or invested in as the business case has not stacked up. They’re costly to replace.”

But he says insurance organisations now have “no choice” but to take action.

“They have to do this to better serve their customers. It doesn’t mean everyone is going to be immediately switching off their legacy systems, but they are thinking about it a lot more.”

Mr Sandhu says some are considering setting up “greenfield” platforms for new business, and then considering migrating legacy business over at a later date.

The report finds the area where insurers intend to invest most over the next one to three years is “developing partnerships”, with incumbents acknowledging “that the journey of transformation requires support from external allies”.

Mr Sandhu says insurers are starting to realise they can’t “own the whole value chain themselves” and that creates opportunity for insurtechs.

But despite this many challenges remain.

“Insurtechs struggle to navigate large organisations and get to speak to the right people,” Mr Sandhu says, and even if deals are signed it is hard to scale them up beyond a pilot or trial phase.

He believes the pace of change is slower in Australia than the US or UK, because those other countries have been forced into action by tougher conditions.

“The US and UK have been in lower growth conditions for longer, and Australia is only just getting to that stage now,” he said.

Click here to access the full report.