5 Insurance Industry Challenges Leaders Need to Solve

(And How AI-powered Automation Helps)

23 September 2026

by Richard Higginbotham

The insurance industry is under more pressure than at almost any point in its history. Customers now expect the same instant, seamless experience they get from their banking app or their favourite retailer. Regulators keep raising the bar. And behind the scenes, many insurers are still running core processes on systems that were never built for this pace of change.

These insurance industry challenges are not new, but they’re becoming harder to ignore. Insurers that rely on outdated infrastructure are seeing IT costs on legacy platforms climb by as much as 41%, while digital claims processing has been shown to cut settlement times by around half once it’s properly implemented.

AI is increasingly at the centre of that shift too, with AI-driven automation now able to cut claims costs by up to 30% where insurers have adopted it. Yet more than 70% of insurers are still operating on legacy platforms, which slows innovation and pushes operational costs higher.

So, what exactly are the biggest insurance industry issues right now and what can leaders do about them, particularly when it comes to using AI effectively? Here’s a breakdown, based on Netcall’s quick guide, 5 Challenges for Insurance Leaders and How to Tackle Them.

1. Legacy systems and integration barriers

Outdated core systems remain one of the most persistent insurance industry challenges. They slow processes down, limit digital transformation and make it genuinely difficult to connect new tools, including AI applications to old infrastructure. The instinct might be to rip everything out and start again, but that’s rarely realistic given the cost and risk involved.

A smarter route is to integrate AI-powered automation on top of existing systems, rather than replacing them wholesale. This gets insurers to quick wins without the disruption of a full infrastructure overhaul, something that’s become an increasingly urgent priority as digital-first insurtechs, many built around AI from day one, raise the bar for what “modern” looks like.

2. Customer expectations for speed and transparency

Policyholders want real-time updates, self-service options and digital interactions that don’t require a phone call. When responses are delayed or communication feels disjointed, trust in the brand takes a hit and that matters more than ever with younger customers who are quick to compare insurers against tech-first alternatives.

AI-powered chatbots and virtual assistants are increasingly filling this gap, giving customers instant visibility into claims progress, through portals, apps or automated messaging, keeps them informed and in control throughout the process. It’s one of the simplest ways AI can turn a known pain point into a genuine point of difference.

3. Operational inefficiencies and cost pressures

Manual handling of applications, claims and admin tasks doesn’t just slow things down, it drives up costs and stretches settlement times. Every extra manual touchpoint is a place where errors creep in and resources get tied up on repetitive work rather than higher value activity.

4. Fraud detection and risk mitigation

Fraudulent claims cost the insurance sector billions every year and traditional fraud detection that relies heavily on manual review simply can’t keep pace. It’s slow, inconsistent and often only catches issues after the fact.

This is one of the areas where AI delivers the clearest return. AI-driven automation can spot suspicious patterns and flag high-risk cases early, learning from historical claims data to get sharper over time, without holding up legitimate claims. That balance, catching more fraud with AI while keeping genuine customers moving quickly through the process, is one of the clearer wins automation can deliver right now.

5. Regulatory compliance and governance

Regulatory demands in insurance rarely stand still and keeping pace with them is a constant drain on time and resource. Manual, inconsistent processes make compliance harder to prove and easier to get wrong.

Process automation, increasingly supported by AI, helps by standardising workflows, maintaining clear audit trails and cutting down on the human error that so often triggers compliance issues in the first place. AI can also help flag anomalies or gaps in documentation before they become a regulatory problem.

Proof it works: Legal & General’s claims transformation

These aren’t just theoretical fixes. Legal & General, a leading UK financial services provider, used Netcall’s low-code platform to build MyClaim, an application designed to streamline claims from start to finish for its Retail Protection teams, who often support vulnerable customers going through life-changing events.

The result was a smoother, more visible claims journey, automated updates on customers’ preferred channels and a build team able to respond quickly to change requests. As Paul Buckle, Change Manager at Legal & General, put it, “having a communications tool and process management system together is useful in sharing information to ensure our customers are served as best as possible“.

Other insurers have seen similarly strong results with smart automation:

1. Baloise cut 20,000 hours from email handling
2. The Lloyd’s Market Association saved £4 million in payment processing
3. Input For You reduced the average claims processing time by 80%.

These are the kinds of outcomes that turn insurance industry issues into competitive advantages.

Tackling insurance industry challenges without a full rebuild

The common thread across all five challenges is this: Insurers don’t need to replace everything overnight to see real improvement. A smarter approach combines process mapping, low-code application development, intelligent document processing, task automation, document generation and omnichannel communication, layered onto existing systems rather than instead of them.

This matters because insurance IT budgets are already stretched thin, with a significant share going towards simply maintaining legacy platforms rather than innovating. AI-powered automation that works with what’s already there, instead of demanding a costly rip-and-replace, is what makes transformation achievable within realistic budgets and timelines.

Ready to see the full picture?

This is just a snapshot of the challenges and solutions covered in Netcall’s full report, 5 Challenges for Insurance Leaders and How to Tackle Them. It includes deeper insight into each challenge, a closer look at Legal & General’s automation journey and practical guidance on where to start.

Download the full report here to get the complete picture on tackling today’s insurance industry challenges with smart automation.

About the author

Richard Higginbotham

Product Marketing – Intelligent Automation

Richard and his team bring the Liberty platform to life – showing how people and AI can work better together. With a background in transformation, data and enterprise tech, he’s helped organisations across sectors modernise operations and reimagine service delivery, delivering human-centric solutions that make work smarter, safer and more effective.