German insurers have been working on digitizing their internal processing systems for over 50 years. The overarching goal has always been—and still is—near-complete straight-through processing to further increase efficiency and speed. At the same time, market pressure is growing: customers expect better service, faster response times, and maximum data transparency—driven in part by large international players.
In principle, insurers are well positioned to meet these demands. They have decades of experience in digitalization, vast data assets, and deep market knowledge—sometimes spanning more than 200 years. Many are also financially stable and open to innovation. As a result, existing systems have been continuously expanded, for example through chatbots and self-service portals.
However, this is precisely where the problem lies: due to this organic growth, many insurers are now reaching their limits. Integrating new functionalities into existing legacy systems is often complex, time-consuming, and costly. Even seemingly simple changes—such as adding a second email address—can require disproportionate effort, as data is redundantly stored and must be adjusted in multiple places.
The root cause lies in the structure of these systems. Legacy systems that have evolved over decades have rarely been fundamentally modernized; instead, they have simply been extended. The result is highly complex, difficult-to-maintain system landscapes that no longer meet today’s requirements for flexibility, speed, and collaboration with external partners.
The industry has recognized the need for action. Modernization and replacement of legacy systems are now among the key IT challenges for the coming years. In some cases, more than 90% of IT budgets are already being allocated to this transformation—a clear indication of its strategic importance.
From Monoliths to Modern IT Systems
Transformation is no longer an option—it is a necessity. In many organizations, system complexity has reached a point where it can no longer be fully understood. At the same time, valuable knowledge is lost when experienced developers leave the company.
This creates risks—not only technical, but also regulatory. Requirements such as compliance with generally accepted accounting principles (GoB) or regulations set by BaFin must still be ensured.
There is also a structural issue: many insurers are only able to release a few major updates per year. This is mainly due to tightly coupled systems and dependencies between interfaces. Individual components can no longer be updated independently—ultimately slowing down innovation.
Why Transformation Pays Off
Modernizing legacy systems is complex—but unavoidable. The benefits are clear:
- Faster time-to-market through increased adaptability
- Lower maintenance and operating costs
- Improved ability to integrate with partners and platforms
- Greater attractiveness for talent through modern technologies
In short: those who fail to transform will lose market share in the long run.
