Why Old Tech Brings New Risks 

For insurers, innovation is no longer a luxury but a necessity. The industry is evolving rapidly, with customer expectations having shifted to digital-first experiences and regulatory demands becoming more complex. However, many insurers remain tied to outdated legacy systems, which create significant barriers to growth, agility, and compliance. These ageing platforms not only slow product launches and system updates but also bring substantial risks that threaten an insurer’s long-term competitiveness. 

The Product Development Bottleneck 

Launching new products and modifying existing offerings should be seamless, but legacy systems make this a tedious process. These older platforms were not built for the agility required in today’s market, making changes time-consuming and expensive. Insurers relying on outdated systems often struggle to introduce innovative products tailored to changing customer needs. As a result, they risk losing market share to competitors that can pivot quickly and swiftly deploy new offerings. 

Insurance penetration rates highlight significant opportunities across EMEA and APAC. In 2023, these rates stood at 3.6% in Asia, 5.6% in Denmark, 10.6% in Sweden, 11.8% in the UK, and 14.1% in South Africa, demonstrating the potential for insurers to expand by offering tailored and accessible solutions to underserved markets. However, legacy systems hinder the ability to capitalise on these opportunities, as they impede the rapid development and deployment of new products. 

Modernising core systems is critical to leveraging these opportunities, enabling insurers to efficiently design and launch products that address emerging risks and evolving consumer demands. 

According to PwC, approximately 70% of an insurer’s annual IT budget is spent on maintaining legacy systems rather than investing in forward-thinking digital transformation initiatives. This ongoing expense drains resources that could be better allocated to tools that modern insurers use to gain a competitive edge – automation, artificial intelligence, and data analytics. AI-driven insights enable insurers to personalise offerings, optimise pricing, and predict customer needs more accurately, ensuring that product innovation aligns with market demand. 

Beyond product development, legacy systems also slow down key processes like underwriting and claims. AI and automation are transforming these areas, driving efficiencies and improving accuracy. In underwriting, data-driven algorithms can assess risk in real time, streamlining decision-making for both direct-to-consumer (D2C) and business channels (B2B/B2B2C). In claims processing, AI-powered fraud detection and digital self-service portals enhance efficiency and customer experience. However, the most effective approach combines AI with human expertise, ensuring that complex cases receive expert attention while routine tasks are automated. 

Regulatory Compliance and the Cost of Inaction 

The regulatory landscape is constantly changing, with new mandates requiring insurers to improve transparency and data security. Legacy systems lack the flexibility to adapt to these changes efficiently. The result is a reliance on costly, manual workarounds that increase operational risk and compliance burdens. 

Failure to comply with new regulations can lead to significant financial penalties and reputational damage. A study by EMC estimated that legacy system inefficiencies and workarounds cost organisations $1.7 trillion annually.  

As stringent regulatory requirements apply to data management, insurers with multiple legacy systems face challenges in ensuring compliance, as these systems often lead to data silos and inconsistencies. This fragmentation hampers effective data governance and increases the risk of non-compliance. 

Legacy platforms also struggle with data integration, creating silos that make regulatory reporting more complex. Without real-time insights and analytics, insurers face delays in responding to compliance changes, leaving them vulnerable to audits and legal repercussions. 

The Right Time to Modernise 

For many insurers, the question is not if they should replace their legacy systems, but when. The right time to make the transition is when core platforms start to hinder business growth, customer satisfaction, or regulatory compliance. Key warning signs include: 

• Growing maintenance costs: When IT spending is disproportionately focused on maintaining outdated systems instead of innovating  

• Slow product launches: When bringing a new product to market is excessively delayed by system constraints 

• Regulatory hurdles: When compliance requirements become increasingly difficult and expensive to meet  

• Customer dissatisfaction: When policyholders experience slow processing times, limited online services, or poor user experiences 

• Data silos and inefficiencies: When integrating with third-party applications, AI, or cloud-based solutions is a major challenge 

The Final Word 

Legacy technology is not an insurmountable liability. By modernising core systems, insurers can position themselves for sustainable growth, competitive advantage, and resilience in an increasingly digital world.  

Modernising core systems is not just about replacing outdated technology – it’s about future-proofing an insurer’s operations. A modern, cloud-based digital solution such as Sapiens CoreSuite, provides agility, scalability, and real-time analytics that drive smarter decision-making. It enables insurers to streamline policy and claims management, accelerate regulatory compliance, and ultimately enhance customer engagement.