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    Insurance CIOs can upgrade legacy systems without sacrificing uptime

    JUL. 2, 2025
    5 Min Read
    by
    Lumenalta
    Mid-market insurers can finally modernize their aging core systems without risking business disruptions, gaining new agility and cost efficiency while keeping daily operations stable.
    Nearly 74% of insurance companies still rely on outdated legacy technology for vital processes. Maintaining these aging systems devours IT budgets that could fund innovation. On average, about 70% of an insurer’s IT budget goes into legacy upkeep. Faced with this drag, many IT leaders feel stuck because a “big bang” replacement seems too risky. The good news is that modernization doesn’t have to mean disruption. By taking a gradual, modular approach, insurers can upgrade critical systems step by step and unlock capabilities like AI and real-time analytics without sacrificing stability or customer experience. In other words, it’s a modernization without sacrifice.

    key-takeaways
    • 1. Mid-market insurers can escape legacy limitations without risking their business by modernizing incrementally with cloud-native modules.
    • 2. A phased rollout keeps core operations stable while introducing AI, automation, and faster analytics capabilities.
    • 3. Modular modernization provides cost savings, faster time to market, and better customer outcomes without requiring full system replacement.
    • 4. Gradual upgrades allow insurers to scale digital tools at their own pace while minimizing service disruption and training needs.
    • 5. Partnering with the right modernization experts helps insurance CIOs align each phase to measurable business results.

    Legacy systems hamper innovation, but wholesale replacement carries high risk

    Outdated core systems make it difficult for insurers to innovate or respond quickly to market changes. Legacy platforms often require manual workarounds and costly customizations, causing long delays for new product launches. It’s no surprise that 44% of CIOs cite outdated systems as their primary obstacle to progress. Yet ripping out and replacing core systems in one go is a high-stakes gamble. A failed full-scale implementation could lead to extended downtime, data loss, or operational chaos – exactly what insurers must avoid in mission-critical areas like claims processing. Large technology projects also have notorious failure rates; historically, only about 29% of IT projects are fully successful. This fear of disruption often paralyzes mid-market insurers, keeping them tied to systems that no longer meet business needs. The solution is a phased strategy that upgrades legacy components incrementally, so the business keeps running without missing a beat.

    "Legacy platforms often require manual workarounds and costly customizations, causing long delays for new product launches"

    Phased modernization ensures continuous operations while adding new capabilities

    Instead of a risky all-at-once overhaul, a phased modernization lets insurance firms upgrade their IT infrastructure one piece at a time. This approach minimizes operational risk by ensuring old and new systems run in parallel until each upgrade is proven. Key principles of a successful incremental modernization include:
    • Upfront assessment: Identify legacy pain points and bottlenecks. Set clear goals and prioritize components to modernize first.
    • Modular design: Plan around independent modules or services. Decoupling functions allows one component to be updated without disrupting others.
    • Pilot and iterative rollout: Start with a low-risk pilot (for example, one product line) in parallel with the legacy system. Once validated, expand to other areas in waves.
    • Continuous training and change management: Train and support employees with each new tool introduced so they can adapt comfortably.
    • Ongoing monitoring and optimization: Track performance at each phase and refine the plan based on lessons learned.
    Following these principles, insurers can steadily introduce modern capabilities while core operations remain uninterrupted. For instance, a claims team can run a new cloud-based claims module alongside the old system and only switch over once it proves stable. Customers see no downtime, and employees adjust gradually. Each phase yields improvements, building momentum for the next step.

    Want to learn how data modernization can bring more transparency and trust to your operations?

    Cloud-native modules add AI and real-time analytics without overhauling legacy systems

    Cloud-native components can be layered onto existing systems via APIs. This allows insurers to benefit from modern technologies without a full core replacement. Using API wrappers and microservices to bridge legacy and new applications also reduces integration pain (which 45.5% of insurers cite as a major limitation of legacy systems) and limits risk, since each new service runs independently. Insurers can introduce digital features on top of the old core while the core remains intact.

    Embracing AI for smarter operations

    With a cloud-native footing, insurers can plug in artificial intelligence tools to enhance operations without disturbing legacy processes. For example, AI models can assist in claims triage or fraud detection in real time, even if core data still resides in older databases. Underwriters and adjusters gain AI insights within their existing workflows, accelerating service and reducing costs.

    Real-time analytics and insight

    Cloud-based modules also empower insurers with real-time analytics that legacy systems could never provide. Instead of overnight batch reports, teams get up-to-the-minute dashboards by streaming data from legacy databases into modern analytics platforms. Decision-makers gain instant visibility into key metrics and can act immediately. For instance, if live data shows loss ratios rising in a certain segment, pricing can be adjusted on the fly. All of this is achieved without replacing the old core; cloud data pipelines continuously extract and process the information. The business becomes far more responsive to risks and customer needs, while the underlying systems continue running as is.

    Modernizing at your own pace ensures agility and growth without sacrifice

    When insurers modernize gradually, they not only avoid disruption but also actively position the business for greater agility and growth. The results speak for themselves: companies that upgrade core systems report significant performance gains, with productivity jumping by up to 40% after replacing legacy platforms. Teams can bring new products to market faster and respond swiftly to regulatory changes or customer demands. Faster innovation means seizing market opportunities.
    Equally important, incremental modernization drives efficiency and cost savings that directly improve the bottom line. Cloud-based modules typically lower ongoing maintenance costs and eliminate many manual processes, allowing IT departments to do more with less. Insurers also unlock new business potential by implementing capabilities like personalized policies or usage-based insurance plans. Crucially, all these gains come with no sacrifice to reliability – customers experience no service degradation during the transition, because legacy and new systems run side by side until fully cut over. There’s never a gap in operations or data. By modernizing at their own pace, insurers essentially gain the agility of a tech startup without losing their established stability.

    "Teams can bring new products to market faster and respond swiftly to regulatory changes or customer demands.

    Lumenalta’s approach to modernization without sacrifice

    Building on the idea of gradual modernization, Lumenalta champions a modernization without sacrifice philosophy when guiding insurance CIOs through core system upgrades. This means planning strategic, phased improvements that deliver quick wins while protecting day-to-day business continuity. Its team works hand-in-hand with insurers as an extension of the insurer’s IT team to co-create a roadmap focused on high-impact areas first. By drawing on deep expertise in cloud, data, and AI with a sharp focus on business outcomes, they ensure each incremental change delivers real value, like faster product launches, lower IT costs, or better customer experiences.
    This collaborative approach takes the fear out of legacy modernization. Changes are implemented in an iterative sprint, so there are no surprises or cut-overs. Every step is measured and aligned with stakeholder expectations to keep everyone in sync. With this expert guidance, insurers can confidently modernize at their own pace, knowing that stability isn’t being traded away for progress. The result is an insurance organization that is future-ready and more competitive.
    table-of-contents

    Common questions about data modernization in insurance


    How can I modernize legacy insurance systems without disrupting operations?

    What is the best modernization approach for mid-market insurers like mine?

    Can cloud-native tools really work with my old policy admin system?

    How do I manage risk when replacing legacy insurance systems?

    How do I build a business case for modernizing legacy systems?

    Want to learn how data modernization can bring more transparency and trust to your operations?

    Learn more about how data modernization can modernize your business.