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Interest on debt grows without rain

June 22, 2020
What is technical debt, and why is it weighing some insurance balance sheets down like a lead balloon? 

It’s been said that most concepts within financial services should be explainable to a child – otherwise something may be very wrong with your business model.

So, given our industry’s penchant for jargon, why am I banging the drum about technical debt?

It’s because technical debt matters. Technical debt is weighing our industry down, it’s impacting balance sheets and not in a good way. The term was first coined by software developer Ward Cunningham – the idea is that technology, like any financial debt, incurs interest.

This interest is measured in the additional time and mounting costs it takes to implement changes or systems upgrades because of the existing infrastructure beneath it. The layers of “best-in-class” legacy technologies at many insurers mean that the technical debt installments have grown larger as the heap of systems aches and groans under the weight of upgrades and obsolescence.

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