A new report from West Monroe highlights a slowdown in technology modernization across the US insurance sector.
The survey found that many companies are struggling to advance their technology strategies due to legacy systems, budget constraints, and internal resistance.
According to the research, 20% of respondents have defined a modernization strategy but have made little progress, while 12% remain in early planning stages and 2% have not started at all.
Nearly half of the surveyed insurers continue to operate core platforms that are between six and ten years old, with some systems exceeding 15 years in age. Two-thirds of executives expect it will take another three to seven years to move core systems to the cloud, and 14% have no set timeline for this transition.
The report also found that legacy technology is limiting innovation. More than half of insurers, 54%, allocate over half of their IT budgets to maintaining existing systems. In the past year, 52% of companies delayed or canceled two to three major technology projects due to budgetary pressures.
When it comes to artificial intelligence, the survey indicates that progress is hindered more by human factors than by technology itself. Twenty-four percent of respondents cited resistance to change or cultural pushback as the main barriers to AI adoption. Another 23% do not see sufficient value in AI, and 20% report challenges with usability and user experience.
Generative AI pilots are becoming more common, with nearly 60% of insurers moving beyond initial pilot phases. However, most deployments remain limited in scale and scope. Claims departments are leading in generative AI adoption, with 30% actively piloting tools, while underwriting follows closely, with 27% in proof-of-concept stages and 17% just beginning to explore the technology.
The broader industry is increasing its technology spending, with Forrester previously forecasting an 8% rise in 2025. This growth is expected to be driven by projects aimed at improving customer experience, claims management, and operational efficiency.
Despite these investments, however, fewer than 5% of insurers are expected to realize direct, tangible benefits from AI in the coming year. Key obstacles include legacy systems, a shortage of AI talent, and difficulties integrating AI into existing processes.
Most companies are expected to focus on internal automation, with the full potential of AI in underwriting and claims accuracy remaining out of reach for now.
Data access and operational bottlenecks are also slowing decision-making. Forty-one percent of executives reported lacking real-time data access. Nearly half said it takes 16 to 30 days to complete a rate indication assessment, and 46% noted that launching even a minor product update can take between nine and 16 weeks.
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