The insurance industry is often described as slow to innovate. The diagnosis is familiar, and so is the prescription: better portals, better dashboards, better user experiences. Every year brings a new wave of front-end solutions promising to "modernize" an industry that has existed for centuries.
And yet, despite sustained investment and genuine ambition, meaningful change rarely sticks.
The problem isn't that insurance resists innovation. It's that innovation is often applied in places where it has limited ability to succeed.
Insurance is not a software business in the conventional sense. It is a network business.
That reality fundamentally shapes how innovation succeeds or fails.
What does successful innovation look like?
An individual organization can modernize its own platform, streamline internal workflows, and
In a networked industry, you are only as modern as the weakest link you depend on.
This is where the industry's most overlooked opportunity, and its biggest constraint, comes into view. Real innovation in insurance does not live in the glossy, visible layers. It lives in the unsexy ones: payments, treasury operations, settlement, reconciliation, approvals, controls, and visibility over money and data as they move between parties.
These layers rarely generate headlines. They are difficult to demo and even harder to explain. But they determine whether innovation can scale, interoperate and endure.
Front-end innovation promises speed. The operational layers determine whether speed is actually possible.
Finance leaders already understand a closely related concept: counterparty risk. Traditionally, it refers to balance sheet exposure, the risk that another party cannot meet its financial obligations. It is carefully measured, monitored and managed.
What receives far less attention is operational counterparty risk.
Measuring outside influences on internal systems
Operational counterparty risk is the drag created when external partners' processes, systems, or controls limit your ability to move as fast, as safely, or as efficiently as you intend. It doesn't appear on a balance sheet, but it quietly shapes outcomes every day.
Consider a common scenario. An insurer or MGA invests heavily in modern internal systems that might automate treasury, strengthen controls or enable real-time reporting. On paper, the organization is well positioned to move faster and operate with greater confidence.
But the moment funds move outside the enterprise, to brokers, TPAs or other third parties, visibility drops. Processes become manual. Approvals fragment. Settlement slows. Risk increases. The innovation still exists, but only inside the walls of the organization. At the edges, where real complexity lives, progress stalls.
The bottleneck is no longer internal. It is structural.
This is why large, top-down transformation efforts so often struggle in insurance. Sweeping change imposed on a fragmented network rarely survives contact with operational reality. This pattern has played out repeatedly in attempts to standardize digital claims handling, settlement, and messaging across the industry, where well-intentioned initiatives are often shaped less by technology than by the uneven operational readiness of participants.
Small improvements bring big results
By contrast, smaller, incremental improvements that focus on shared operational foundations, built with multiple stakeholders and designed to work across the value chain, tend to be far more durable. They may look modest at first, but they compound over time. They don't fight the network; they strengthen it.
For insurance leaders, this suggests a shift in perspective.
The most important question is no longer, "How do we modernize our platform?" It is, "Where are we constrained by the operational readiness of others?" Which partners define our speed, risk and customer experience? Where does a lack of shared infrastructure quietly undermine the progress we've made internally?
Innovation that ignores these questions is far more likely to disappoint. Innovation that starts with them has a chance to stick.
None of this is glamorous. Improving settlement processes will never generate the excitement of a new digital interface. Strengthening financial plumbing does not feel transformative, until it breaks.
But in insurance, real progress has always been cumulative rather than explosive. It has always depended on coordination rather than disruption. And it has always required attention to the layers that make everything else possible.
The industry does not suffer from a shortage of innovative ideas. It suffers from a shortage of focus on the operational foundations that allow ideas to become reality.
In the end, the most important innovations in insurance rarely look exciting at first. They look boring, incremental, and unremarkable, right up until they're the reason everything else finally works.
