Insurance carriers are leaking millions through technical debt. Here’s how they can stop.
New global research highlights a problem most carriers feel every renewal cycle but rarely quantify: The average enterprise is wasting more than $370 million annually because legacy systems and technical debt slow modernization, derail projects, and inflate maintenance costs. For insurers, those dollars show up as slower product launches, longer claim cycle times, rising loss adjustment expenses, compliance overhead, and frustrated agents, employees, and policyholders.
The study, conducted by Savanta for Pegasystems, surveyed over 500 IT decision-makers worldwide. While not insurance-specific, the patterns map directly to the realities of P&C and L&A carriers operating with decades-old policy admin, billing, claims, rating, and back-office support systems.
Where the money goes in insurance terms:
- Time-to-modernize: The largest waste – estimated at $134M per enterprise per year – comes from drawn-out transformation projects that rely on brittle, resource-intensive approaches. In insurance, think multi-year PAS replacements, claims administration overhauls, or finance transformations stuck in parallel runs because extracting business rules from mainframe code takes longer than expected.
- Failed initiatives: Another $58M annually reflects projects that stall or miss objectives. Large scale non-core migrations, attempts to re-platform rating engines without a rule-by-rule blueprint, or L&A illustration redesigns that never exit pilot are familiar examples.
- Maintenance and integration drag: Carriers spend an extraordinary amount each year just keeping legacy applications alive – updating COBOL batch processes, reconciling nightly feeds, sustaining on-prem ESBs, and hand-coding interfaces between claims, fraud, SIU, reinsurance, and finance systems.
Beyond the dollars: Operational and competitive impacts for carriers
- Product agility: P&C carriers struggle to introduce new coverages or implement state rate filings quickly when rating logic is buried. L&A carriers face similar friction launching new annuity products or modernizing underwriting rules when risk stratification lives in spreadsheets or black-box code.
- Claims and servicing: FNOL triage, straight-through processing, salvage/subrogation, and complex injury workflows suffer when rules and data are fragmented. For L&A, new business STP, eApp adoption, and in-force servicing are hampered by duplicate entry and missing APIs.
- Compliance and reporting: IFRS 17/LDTI, ORSA, DORA, Model Audit Rule, privacy, and state-level regulations demand traceable data and decisions. Legacy systems often lack lineage, controls, and scalable reporting, increasing close times and audit effort.
- Experience and distribution: Agents, MGAs, and bancassurance partners expect modern portals, APIs, and real-time status. Policyholders expect digital claims, instant proof-of-insurance, and self-service for loans, withdrawals, and beneficiary updates. Technical debt turns routine interactions into exceptions.
Carriers recognize the problem but remain stuck
- 78% of respondents say the time, money, and effort spent maintaining legacy applications would be better invested in initiatives that make the business more effective.
- 36% haven’t removed legacy support because it’s too time-consuming, 29% are too busy firefighting legacy-caused issues, and roughly a quarter say leaders don’t prioritize it.
- 63% depend on 1–10 legacy applications daily across front and back office; 29% depend on 11–20.
- Only 9% report that digital transformation has fully enabled them to retire all legacy applications.
A modernization playbook exists that balances risk mitigation with agility. And it goes something like this:
- Model business logic before code migration.
- Use an incremental strategy, not a big bang.
- Wrap and expose legacy with governed APIs.
- Automate controls and compliance by design.
- Apply AI where it moves metrics – and with guardrails.
The direct and indirect costs of legacy inefficiencies are now large enough to determine winners and losers. The research’s $370M figure is an average across industries. But for insurers operating on thin underwriting margins, even a fraction of that waste can negate years of expense ratio improvements.
Modernizing isn’t about wholesale PAS replacement overnight. It’s about systematically unlocking business logic and data trapped in legacy systems, moving rule execution to a governable layer, and iteratively replacing what no longer serves. Approaches like Pega Blueprint™ can help carriers quickly visualize processes and rules, generate modern, cloud-ready, AI-enabled applications, and de-risk the journey with co-existence patterns.
The bottom line for carrier CTOs, CIOs, COOs, and CFOs: Technical debt is already on your P&L – masked as delay, leakage, and overhead. Balance big outcomes with incremental decommissioning to avoid transformation fatigue and measure relentlessly and reinvest savings into the next modernization slice. The carriers that treat technical debt as a managed program – not a one-off project – will launch faster, settle smarter, comply with confidence, and grow profitably in the next cycle.
Source: Global research by Pegasystems and Savanta, October 2025. Methodology defined technical debt and legacy transformation as outdated hardware, software, or platforms kept in service due to critical operations despite scalability, security, cost, and compatibility challenges. Estimates combine respondent inputs with industry benchmarks and Pegasystems’ enterprise experience.