How to modernise insurance IT without grinding operations to a halt

The insurance industry is at a critical juncture. While the sector has embraced digital transformation, many existing systems remain a major barrier to innovation. Despite cloud adoption trends, it’s estimated that two-thirds of insurers still rely on outdated systems for core processes. These systems are rigid and expensive to maintain. Crucially, they pose a security threat and limit innovation. 

As such, modernising core systems is no longer optional, but a strategic necessity for insurers to remain competitive. This explains why Gartner has predicted that software spending in the insurance industry is set to reach US$15.9 billion by 2027, with a large share of the money going towards modernising outdated insurance operations. With modern systems, insurers can unlock advanced automation capabilities, real-time data sharing and faster decision-making. 

Investment, however, is one thing - how you spend it is another. While modernisation might be a widely shared ambition, the process of carrying it out can be complex and time-consuming. The wrong strategy can even grind operations to a halt. What insurers need are the tools and strategies that enable them to seamlessly modernise with very minimal disruption. 

Why traditional modernisation approaches break insurance operations

Typically, insurers can use older, generally mainframe-based systems for core activities like policy administration, claims, underwriting and customer relationship management. These applications often run on outdated operating systems (OSs) and therefore lack the ability to integrate with newer tech and modern cloud infrastructure. They can also use dated programming languages like COBOL and assembly which make them hard to modernise and where there is an increasing lack of expertise on. 

As a result, these outdated systems limit innovation. Crucially, this includes successful AI adoption. They also present a major security risk: they can’t participate in modern resilience patterns, and as they lack modern authentication, encryption or patch management, become attack vectors for bad actors. So, they are susceptible to cyberattacks and outages, something we have seen happening far more frequently in the UK with widescale disruption. 

Of course, the benefits of modern systems are the opposite of these limitations. They allow insurers to drive innovation, continually monitor for threats and changes in the IT estate, and integrate the latest technology. They can drive revenue opportunities by transforming services and protecting against damaging remediation costs and operational disruption. 

So, given these benefits for compliance, performance and operations, why haven’t more insurers upgraded their existing applications? 

The real risks insurers underestimate, and overestimate

The perceived time and cost of modernising outdated applications can be a key factor in delaying or avoiding the task. A recent report revealed that 45% of IT leaders said these factors were prohibitive to confronting their technical debt. Crucially, any disruption would have damaging repercussions not only for the firm but also the people who rely on them for emergency compensation and insurance claims. Due to this, the risk of overhauling systems can seem too great. Simultaneously, however, as outlined already, the risk that comes from holding onto these older systems can be even greater. 

There are also technical complications. These bespoke older applications can contain hardcoded dependencies that tie them to their specific and ageing OS. The dependencies are not designed to be portable, so traditional migration processes like containerisation and virtualisation can’t isolate and capture them. Consequently, IT teams can prefer to leave applications as they are so that they don’t “break anything” and end up tackling technical debt after any problems take place.

Modernising without disruption 

So, how can insurers modernise with the least disruption possible? 

The first step is to implement specialist migration software that is able to capture the OS-specific dependencies of their existing applications. Teams can then redeploy the apps onto modern, supported OSs (on-premise or in the cloud) without needing to change the coding of the apps themselves. Pivotally, operating in this new environment, the apps can receive the latest updates and connect with newer technologies. 

The next step is just as important. When risks are ever present, the ongoing monitoring and maintenance of the entire IT estate is vital for performance, security and compliance. Manual processes are not equipped to deal with the 24/7 nature of threats like cyberattacks and outages and can inhibit visibility. As such, insurers should look to use digital tools that can automate the tracking and monitoring of systems across their estate for risks like configuration drift (where changes haven’t been recorded or authorised).

By modernising and maintaining their apps in this way, insurers can then integrate the latest IT maintenance tools like AI-driven observability, predictive failure detection, or self-healing automation, which offer continuous protection against modern threats. This cultivates a proactive mentality of implementing small and steady changes to systems over time that mitigate technical debt building or the need for a reactive, large-scale modernisation project. 

From a business perspective, modernisation means insurers are able to adopt the latest AI tools to help improve their services and workflows. These could be for tasks like policy underwriting or customer service. In driving this modernisation, it’s crucial firms have the skills to manage both outdated technology (the apps) and modern cloud and AI tools. This potentially requires a combination of internal upskilling and using credible external support to help maintain systems effectively and avoid vendor lock-in.

Modernisation the best insurance against risks

In a world where the threat of outages and cyberattacks has never felt greater, the need for insurers to modernise their systems has become a strategic necessity. What’s more, today’s consumer demands mean using the latest technologies like AI are critical for innovating services and maintaining competitiveness. But there’s an issue: any modernisation project can’t grind operations to a halt. 

So, pursuing modernisation requires a shift in mindset. Existing apps don’t need to be completely changed or recoded - they just need to run on modern, supported OSs. Above all, insurers need to adopt an ongoing, proactive strategy that continually monitors for threats and incrementally introduces new tools and upgrades.

Those who modernise in this way will insure themselves against critical risks while tapping into the most advanced tools on the market. A crucial advantage for 2026.