The insurance industry is known for its stability. But in many cases, that same stability has bred stagnation. For decades, many insurers and agencies have operated on legacy systems — mainframes and policy administration tools — that were once cutting-edge but are now quietly sabotaging growth.
According to Insurance Business America, more than 74% of insurers still rely on legacy systems to run critical operations, up to 70% of IT budgets are spent just maintaining outdated infrastructure. (Insurance Business America)
And while this waste of energy and resources may not be obvious, the result is a slow bleed that kills transformation by a thousand missed opportunities.
The Hidden Cost of “Good Enough”
Legacy systems aren’t broken — they just weren’t built for the world we live in now. In an era where customers expect instant quotes, real-time updates, and seamless digital experiences, older systems creak under the weight of new expectations.
Deloitte reports that modernization efforts can yield up to 40% operational cost reductions through automation and workflow digitization, but many carriers are still stuck patching legacy code. (Deloitte: 2025 Insurance Industry Outlook)
These systems create what McKinsey calls “technical debt” — the accumulated cost of using outdated technology that requires more work to fix later. Every hour spent on maintenance is an hour not spent building new products, improving customer experience, or integrating data analytics that could unlock predictive insights.
Capgemini’s World InsurTech Report highlights that insurers who modernize core systems outperform peers by up to 30% in customer satisfaction and 25% in profitability growth. (Capgemini)
In short, modernization isn’t just a cost-saving measure — it’s the foundation of future revenue. If your tech is “just working,” your business probably isn’t growing.
Legacy Systems Create Invisible Bottlenecks
The most dangerous thing about legacy systems isn’t their age — it’s their opacity. Here’s how the problem hides in plain sight:
- Siloed Data:
Customer data is trapped in separate systems that don’t talk to each other, making it impossible to get a 360-degree view of the customer or to automate personalization.
- Manual Dependencies:
Routine updates often require human input because old systems lack modern integration capabilities. It’s not uncommon for agents to rekey data across multiple platforms — a nightmare for accuracy and time efficiency
- Integration Resistance:
New software tools (like digital claims platforms or CRM integrations) often can’t interface directly with outdated architecture making seamless connections impossible.
- Talent Drain:
Fewer IT professionals today know COBOL or AS/400 systems. As those specialists retire, maintaining these systems becomes expensive and risky.
These aren’t just technical problems — they’re cultural ones. When innovation feels hard, people stop trying.
Why “Rip and Replace” Isn’t the Only Answer
Most insurers hesitate to modernize because they fear the cost, complexity, and downtime. It’s understandable — no one wants to risk a multi-million-dollar migration.
But modernization doesn’t have to be a leap off a cliff. The “Strangler Fig” approach, coined by software architect Martin Fowler, offers a gradual way out. Think of it as planting a new system around the old one, letting it take over functions piece by piece until the legacy core quietly retires.
This approach works especially well when paired with API layers — lightweight bridges that let modern software interact with legacy systems without rewriting them from scratch. Over time, these layers form the backbone of a new, flexible architecture capable of scaling with innovation.
As McKinsey notes, insurers that prioritize modular, API-based modernization see faster time-to-market and reduced long-term maintenance costs. (McKinsey & Company)
The Cultural Shift That Makes Modernization Stick
Technology change means nothing without mindset change. Successful insurers aren’t just upgrading code — they’re upgrading culture. That means:
- Cross-functional collaboration: IT, underwriting, and operations teams should co-design modernization priorities.
- Agile implementation: Smaller, faster releases allow organizations to test and learn rather than commit to multi-year overhauls.
- Leadership buy-in: Modernization isn’t an IT project — it’s a business strategy. When executives treat it as such, results follow.
The Payoff: Agility, Speed, and Competitive Edge
Once modernization begins, the benefits compound fast. Modern systems let you:
- Launch products in weeks instead of months.
- Automate repetitive workflows to reclaim thousands of labor hours.
- Enable digital customer experiences that rival fintech startups.
- Integrate advanced analytics and AI models to forecast risk and detect fraud in real time.
The Way Forward: Practical Modernization for Real Organizations
At InsuraTec, we understand that legacy isn’t just a technology problem — it’s a trust problem. Agencies and IMOs need transformation partners who respect the systems that built their business while helping them reach the next chapter.
Modernization doesn’t mean burning the past. It means building bridges to the future. Start with what you already have, wrap it with what you need, and iterate your way to innovation.
Because the real risk isn’t change — it’s staying the same.
