The insurance industry has long been known for its conservatism. Large legacy carriers with decades of history, slow-moving systems, and risk-averse cultures are slow to change, no matter how fast the world around them continues to move. Customers expect digital speed and personalization, and regulatory and capital pressures demand stronger financial discipline. In response, many institutional insurers are realizing they need to make strategic moves to stay competitive, like adopting AI, changing reinsurance treaties, or working with insurtech companies.
AI Adoption Into Enterprise Strategy
One of the biggest areas of change is, of course, AI. According to a recent analysis by Evident, leading insurers such as AXA, Allianz, USAA, Intact Financial, and Manulife are pushing beyond pilot programs into broader adoption of generative AI and advanced analytics. These companies are investing in talent, data platforms, and infrastructure to use AI in improving underwriting, pricing, claims, and customer service.
Similarly, McKinsey highlights that only a few insurers have extracted large value from utilizing AI systems, but those that have established an enterprise-wide AI stack, integrated across workflows, and embraced change management are getting ahead.
Reinsurance Strategy Allows Insurers to Take More Risk
Another sign of evolution is a changing reinsurance strategy, which could have broad implications for the industry. For example, in the insurtech space, Lemonade recently reduced its ceded portion of quota share reinsurance from about 55% to 20%.
Why does this matter? By retaining more risk, Lemonade is showing confidence in its underwriting, loss ratios, and pricing precision, particularly due to its AI-based risk models. As the company’s President and cofounder Shai Wininger put it, “We continued to reduce our reinsurance overhead, which is a reflection of how much stronger and more precise our tech-based underwriting and pricing machines have become. Reinsurance comes at a cost, and thanks to years of steady improvements, we’re now in a position to retain more of the risk ourselves, improve margins, and stay capital-light — all while continuing to work with some of the world’s top reinsurers.”
This move signals to legacy insurers that reinsurers are no longer the only ones who can manage risk. To keep up, they must sharpen their own pricing, data, and predictive models if they want to retain more and cede less.
Pressure from Climate & Regulation
Climate risk is adding urgency to the insurance industry. Extreme weather events like wildfires, floods, and storms are inflicting bigger losses than traditional models expected. This has forced property insurers in particular to rethink catastrophe modeling, exposure accumulation, and risk transfer. Legacy insurers are increasingly under capital stress as losses mount. Tools such as advanced climate risk models and IoT-enabled sensors are being adopted to assess exposure more accurately. McKinsey’s report emphasizes that AI and analytics are helping insurers better quantify risk in underwriting and pricing.
Regulatory pressure adds another layer. Requirements around capital, solvency, consumer protection, and data governance mean that insurers can’t ignore modernization. Insurers are compelled to show they can measure, monitor, and mitigate risks.
Upgrading Systems & Partnering with Insurtechs
To manage this transformation, many large companies are not trying to rebuild everything in-house. Instead, they are forming partnerships with insurtech firms, acquiring technology, or upgrading legacy systems. These moves help them access newer data sources, harness advanced risk forecasting tools, or deploy AI-powered workflows without entirely replacing core infrastructure. Evidence suggests that insurers that link AI adoption with strong data platforms, governance, and alignment across business functions see better returns.
What This Means for Insurers Who Want to Stay Relevant
If you’re part of a legacy insurance organization, here are takeaways to keep future-proofing your business:
- Invest in AI strategically: start with high-impact domains (underwriting, claims, pricing), build clean data architecture, and scale beyond small pilots.
- Reinsurance strategy matters: reducing ceded risk can improve margins, but you’ll need underwriting strength and risk models to manage retained exposure.
- Improve climate risk modeling and exposure monitoring to avoid surprise losses, in addition to utilizing analytics, external risk data, and catastrophe models.
- Partner with insurtechs for technology innovation, like getting newer capabilities faster and embedding them alongside existing systems.
- Prioritize governance, data quality, bias monitoring, and regulatory compliance as you roll out AI and automation. These aren’t optional if you want trust and sustainability.
What You Can Do
Major institutional and legacy insurers can no longer rely solely on size, brand, or decades of stable underwriting. The future belongs to those who evolve, those who blend AI, data, underwriting precision, and smart risk transfer strategies. Adapting isn’t just about surviving — it’s about reimagining insurance for a world of faster change and higher expectations.
Whether you’re a large, legacy company or an insurtech looking to gain visibility, getting your name out there is the first step. That’s where an agency like T Palmer Agency can help. From branding to finding modern solutions, they have the expertise to make you stand out. Email suhana@tpalmeragency.com for more information.
