As the insurance industry increasingly embraces modern technology, a growing challenge is emerging: the widening workforce gap in IT teams. According to a study from
This problem is compounded by the fact that younger, tech-savvy professionals are often hesitant to join the insurance sector.
Insurance companies are having difficulty attracting and retaining top technical talent with the right technical skills, creating a significant barrier to modernization. While these firms are aware of the issue, many still fall short in addressing it effectively. This article explores the root causes of the workforce gap and offers potential solutions to bridge it.
The talent drought
Insurance companies were once pioneers in enterprise IT, especially in the 1970s and 1980s when they built their own systems and operated on mainframes.
However, as technology rapidly evolved, many insurers remained satisfied with their earlier systems, and the industry fell behind in adopting newer tools and frameworks. Since insurers have always focused on both policyholders and agents, there was less pressure to transition to digital infrastructure until recent years when both groups demanded better experiences. Additionally, the complexity and poor documentation of older systems, along with a growing risk aversion for multi-year IT transformations, left many insurers reliant on outdated legacy systems that are difficult to modernize.
A significant consequence of this is that younger, tech-savvy professionals are less inclined to work in the insurance industry. The technologies that attract today's developers—cloud and AI—are not the ones insurers have been investing in. Instead, they often seek expertise in languages seen as outdated, such as COBOL, PowerBuilder, or Visual Basic. Even insurers who have updated their systems in the last two decades aren't perceived as leveraging the latest IT approaches or the kinds of technology seen in Silicon Valley tech companies.
The skills mismatch: Appealing to young talent
One of the main reasons younger talent shies away from working in insurance is the lack of growth opportunities tied to modern technologies. In today's competitive tech landscape, developers want to build expertise in languages and tools that are broadly applicable across industries. When insurance companies ask employees to focus on niche, legacy technologies or to learn proprietary languages that only support one vendor's vertical solution, they risk pigeonholing those employees into roles with a limited long-term career path.
Moreover, insurers often fail to position themselves as exciting places for tech professionals to work. Many young developers are drawn to companies known for cutting-edge projects—like Google or AWS—but insurance firms often lack compelling narratives around their technological opportunities.
Insurance poses a number of data and IT challenges that could be reframed as worthwhile projects that would advance a talented engineer's career. For example, insurers deal with a massive amount of both structured and unstructured demographic data. Technology workers that work on organizing and analyzing this data can build skills that would be applicable to any industry, including at leading tech firms. Insurers just need to move past their legacy technology to make room for these kinds of exciting and valuable challenges to take priority.
The path forward: Attracting and retaining IT talent
To close the workforce gap, insurers need to rethink their recruitment strategies and internal culture.
Here are three key strategies:
- Partnering with tech giants: One effective way for insurers to rebrand themselves as forward-thinking employers is by partnering with technology giants like AWS, Microsoft, and Google. These collaborations not only provide access to state-of-the-art tools but also elevate the company's reputation among tech talent. By aligning themselves with well-known hyperscalers, insurers can signal that they're working on innovative, cutting-edge projects, making them more attractive to developers eager to work with modern technologies.
- Shifting from legacy systems to open tech: Adopting modern, open technologies is crucial. Insurers should move away from proprietary systems that require niche skills and embrace platforms that allow IT teams to leverage their broader expertise. Socotra, for example, enables insurers to integrate open APIs and mature technologies into their workflow. This approach allows IT professionals to bring their skills to the table without being confined to one industry-specific technology. In turn, it makes insurance companies more attractive to developers who want to use their knowledge in a variety of contexts.
- Promoting innovation internally: Insurance companies need to rethink their organizational approach to innovation. Instead of having dedicated innovation teams, insurers should integrate innovation into their broader IT operations. This is a common practice at leading technology companies. By encouraging all employees to spend a portion of their time working on innovative projects, insurers will not only foster a culture of creativity but also provide opportunities for IT staff to grow, learn, and develop new skills. This approach ensures that the work remains engaging and helps to prevent burnout or stagnation in IT roles.
A call to action
The workforce and skills gaps in insurance IT teams are not insurmountable. By adopting modern technologies, promoting collaboration with tech giants, and fostering an innovative culture, insurers can build a workforce capable of driving the industry forward.
It's time for insurers to shift their focus from legacy systems and outdated recruitment methods to creating a more dynamic and exciting workplace for the tech professionals of tomorrow. By doing so, they'll ensure that they have the talent needed to navigate the future of the insurance industry.
