Insurance companies are replacing or augmenting legacy systems in search of product innovation and technology integration, according to a new Information Services Group (ISG) Provider Lens Insurance Platform Solutions report.

Upgrading systems and adopting advanced technologies to overcome the limitations of decades-old IT platforms are a high priority for insurance companies across the nation, the research report from the global technology research and advisory firm indicated.

The report for North America finds that evolving policyholder demands and rapid changes in practices and methodologies are forcing insurers to replace legacy technologies with new core systems and software-as-a-service (SaaS) platforms.

To compete, firms need new ways to provide quotes, underwrite risks, process and settle claims and carry out other processes.

“Outdated systems are holding North American insurers back,” said Dennis Winkler, director, insurance industry, for ISG. “Those that have moved decisively to modern IT infrastructure and SaaS are unlocking their full potential.”

In the property and casualty insurance industry, inflation and bigger losses from natural disasters are likely to drive aggressive cost-cutting and efficiency efforts, the report noted.

Modern technology frameworks enable companies to better manage risk, acquire customers and serve current policyholders’ needs, said ISG.

Integrating new technology with legacy core platforms often requires extensive hard coding, so some insurers are operating new and old side by side when it is too risky to migrate existing insurance policies.

Integration issues also complicate cloud migration if older systems cannot match the performance of cloud-native software, the report noted.

North American property and casualty insurers are the most aggressive adopters of SaaS for core systems, the report stated.

Most larger insurers keep older systems but adopt SaaS for new policies. Smaller companies have largely migrated to SaaS already, especially for faster product rollouts.

Insurance companies in North America are at the forefront of experimentation with generative AI (GenAI), but the technology is still in limited pilots, ISG said. If integrated into core workflows, GenAI may help insurers improve efficiency and productivity throughout the life cycle of a policy.

“AI as a whole has a significant potential to improve insurance operations,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “Modernizing core systems is the first step to enable AI adoption, so providers are helping insurers get started on that transition.”

The report also explores other trends related to North American insurance platforms, including the growing importance of data modernization and the elimination of data silos.

The 2024 ISG Provider Lens Insurance Platform Solutions report for North America evaluates the capabilities of 50 providers across two quadrants: Life and Retirement Insurance Platform Solutions and Property and Casualty Insurance Platform Solutions.

The report names EIS and Majesco as Leaders in both quadrants.

It names Accenture ALIP, BriteCore, Duck Creek, EXL Life Pro, FINEOS, Guidewire, Infosys McCamish, INSTANDA, Insurity, NTT DATA GIDP, OIPA, OneShield, Sapiens, Verisk FAST and Vitech as Leaders in one quadrant each.

In addition, Origami Risk, Sapiens and Zinnia are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.