While insurers collect vast amounts of data, legacy systems continue to limit its potential. Accelerating digital transformation in insurance becomes crucial to harnessing this data’s value, innovating faster, and staying competitive in a fast-moving market.
For a successful legacy system transformation, insurance providers should adopt phased migration, integrate data, automate security and compliance, and leverage AI-driven tools.
The Legacy Trap: Why Insurers Struggle with Decision-Making
Once the backbone of the insurance industry, legacy systems are now slowing growth, raising risks, and driving up costs. Thus, modernizing technology is key to regaining agility and making smarter decisions.
Aging Systems Drain Resources
Many insurers delay technology updates due to high costs and resource demands. As of 2024, 67% still rely on systems dating back 20 to 30 years that consume 70–73% of IT budgets, require 3.5 times more resources, and slow services by 65%. The result is an annual technical debt of $4–6.5 million that limits innovation in AI, automation, and CX.
This outdated infrastructure worsens the impact of the talent gap. Fragmented processes limit knowledge sharing, increase rework, and divert focus from high-value tasks. With around 400,000 underwriters and adjusters expected to retire in the coming months, the industry faces a widening void in expertise.
Without timely intervention, these operational and workforce challenges will compound, threatening agility, efficiency, and credibility as analytics and AI adoption accelerate.
Slow Tech, Slower Decisions
Many insurers see limited data as a barrier to growth, but the real issue lies in managing large volumes of information to extract actionable business intelligence. This hinders improvements in both operational performance and policyholder experience.
In fact, 82% of executives say that siloed data continues to disrupt workflows, leaving 68% of information unanalyzed. This lack of visibility slows decision-making and prevents insurers from delivering personalized guidance. If left unaddressed, these fragmented systems risk driving away customers, as 75% prefer companies that tailor experiences.
Security Gaps Expose Vulnerabilities
Trust remains critical to policyholders, yet outdated infrastructure leaves insurers exposed to heightened risks. As of 2025, cybersecurity remains a top boardroom priority, with data breaches averaging $10.22 million per attack.
In addition, insurance core systems are more prone to costly errors and time-consuming rework. While these may seem minor, resulting mistakes can easily escalate into legal liabilities, reputational damage, and loss of policyholders.
For instance, HIPAA non-compliance can result in fines of up to $1.5 million, along with mandatory corrective actions for regulatory violators. These risks highlight the urgent need for real-time monitoring and secure systems that empower insurers to make informed, risk-aware decisions.
Bold Ideas, Flawed Execution
As insurers adapt to evolving market dynamics, digital investments are expected to rise, reaching 13%-16% of total IT spending by 2027. Yet most remain hesitant to modernize, concerned that these new systems may not add value to their existing infrastructure.
But true transformation goes beyond adapting the latest technologies. Despite widespread AI adoption, 49% of insurers still fail to realize its value. Without a long-term strategy that addresses operational inefficiencies and policyholder pain points, they risk becoming tactical rather than transformational in their decision-making.
Survival of the Fastest: Thriving in A New Insurance Landscape
Speed and scale matter, but the real power of digital transformation in insurance comes from turning data into actionable insights. Beyond tactical features, strategies must deliver value for both insurers and customers.
Driving Efficiency & Cost Savings
As complexity slows modernization, partnering with experienced CX teams equipped with AI and automation ensures a faster and smoother transition. Their proven expertise reduces resource-intensive updates, ensures regulatory compliance, and delivers significant cost savings.
Beyond cost reduction, these partnerships boost efficiency and scalability. Nearshore and offshore teams lower overhead costs while freeing staff to focus on higher-value tasks. Advanced technology enhances call quality, recruitment, and training, keeping insurers responsive, credible, and efficient even amid rising operational pressures.
Connecting Data for Better Decisions
Data becomes powerful when merged with AI and CX strategies, forming a 360-degree intelligence framework that unifies metrics and insights in one view—empowering teams to act faster, close gaps, and respond to customer needs without the drag of silos. This integration also lays the foundation for a more connected customer journey.
Integrating data at every touchpoint creates a seamless experience across channels, whether online, voice, or in-person. This consistency improves service delivery and strengthens insurers’ authority as experts capable of making timely, informed decisions.
Ensuring Real-Time Compliance
As cyber risks rise, digital transformation in insurance becomes crucial to preserving policyholder trust. By eliminating manual processes, it enables real-time threat detection, proactive issue resolution, and error reduction while reinforcing credibility in a highly regulated industry.
Automated alerts keep policyholders updated, while enhanced oversight enables teams to provide specialized support for complex cases. Overall, automation for insurance drives personalized insights that boost policyholder trust and operational resilience.
Building Insights with Real Value
Today’s AI capabilities give insurers real-time visibility into customer behaviors that legacy systems often fail to reveal. Instead of wasting time and resources extracting insights from disconnected data, AI unifies them into a single source, enabling teams to access and act on information faster.
By turning data into clear, actionable insights, AI enables insurers to anticipate customer needs so they can respond in real-time. This enhances both operational efficiency and customer engagement, delivering proactive, personalized experiences without losing human touch.
From Volume to Value: Using AI for Smarter Thinking
Adopting new technology goes beyond a simple digital upgrade. It requires an agile mindset that leverages AI to drive growth, enhance efficiency, and elevate customer experience in insurance. To begin, consider these key steps.
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Improve the Strategy, Not Just the Tools
Many insurers adopt technology without clear goals and strategies, putting the success of their transformation at risk.
Before modernizing systems, insurers should:
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Set specific targets before investing.
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Ensure tools align with business goals.
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Monitor progress using defined metrics.
When strategy leads technology, AI in insurance becomes a true enabler of focus and measurable business growth.
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Focus on What Drives Results
Because no two insurers are alike, AI adoption should align with business objectives and digital maturity, avoiding deployments that lack clear intent.
To start, insurers can:
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Prioritize high-impact areas
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Link AI initiatives to measurable outcomes.
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Continuously optimize for long-term value.
Insurance providers that seamlessly integrate these elements achieve faster decisions, deeper insights, and stronger operational performance.
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Build Stronger Teams & Smarter Processes
Digital transformation in insurance succeeds when people, processes, and technology work together.
To achieve this, insurers should:
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Enable AI-powered training.
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Foster cross-team collaboration.
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Cultivate agility and innovation.
With empowered teams and the right tools, insurers can turn every process into a competitive edge.
Time Is Ticking: Driving Innovation for Better Decisions
By 2026, sovereign AI laws will force insurers to localize data through multi-cloud and edge strategies. Failure to modernize will expose them to regulatory risks, heavy fines, and reputational damage. Yet without human oversight, digital adoption is expected to reinforce proxy discrimination instead of levelling the field.
Amplifying these risks, scammers will use AI to create deepfakes that falsify claims and evade fraud detection. To safeguard operations and policyholder trust, insurers should streamline compliance and monitoring. Adopting zero-trust security also reinforces constant verification, strict access control, and stronger breach protection.
At Everise, we help insurance providers leverage AI-driven innovation and tailored CX strategies that enhance performance, improve every interaction, and drive lasting impact. Our solutions boost efficiency, strengthen trust, and keep you ahead in a fast-evolving market.
