The Hidden Cost of System Complexity
In most (re)insurance organizations, complexity does not emerge overnight – it accumulates quietly over years. What starts as a practical response to growth, regulation, and change eventually becomes a hidden cost that slows execution, increases risk, and makes transformation harder than expected.
[.infobox][.infobox-heading]Executive Snapshot[.infobox-heading]Transformations within the company often run into system complexity, which is the main reason they fail. It is not an unsolvable problem, but it is important to acknowledge it, change the mindset, and adopt a new approach. New market entrants have a significant advantage because they operate with a much lower system burden and can become competitive faster.[.infobox]
Decades of product launches, regulatory adaptations, mergers and acquisitions, outsourcing waves, and “temporary” fixes have created landscapes where 20–40 core and satellite systems support a single value chain. That is a common state we see in (not just) the insurance sector.
Recent industry research points in the same direction. McKinsey describes core modernization as one of the most pressing challenges in P&C (Property & Casualty) insurance, with legacy core systems creating operational inefficiencies, rising IT maintenance costs, and growing pressure for real-time responsiveness.
In practical terms, it means:
- more handovers,
- more interfaces,
- more exceptions,
- more hidden dependencies
Simply, more risk with every change the company wants to implement.
And this matters because legacy density directly shapes what an organization can execute. A 2025 Pegasystems and Savanta study found that the average global enterprise wastes more than $370 million annually through technical debt and inefficient legacy modernization. The study is cross-industry, but the pattern is highly relevant for insurers: legacy systems slow product launches, extend claim cycles, increase compliance overhead, and add integration drag.
Our experience: Transformations fail because of complexity
Many transformation programs fail not because the target architecture is wrong, but because the starting point is more complex than anyone wants to acknowledge. Every new digital initiative, automation effort, data platform, or AI pilot is deployed on top of this accumulated structure. And complexity compounds.
From our experience at Trask, this is not theoretical. In multiple transformation programs across European insurers, the primary delivery risk was not solution design – it was dependency management across legacy platforms. In one case, a claims automation initiative required changes in 12 upstream and downstream systems, turning a three-month roadmap item into a nine-month delivery effort. The technology was not the bottleneck. The landscape was.
— Martin Citron, Integration Manager at Trask
This is why “modernization” in insurance is rarely about replacing one system. It is about navigating an ecosystem.
New market entrants have a structural advantage
New market entrants often start from a simpler position. They do not need to unwind decades of accumulated architecture, historical product logic, manual workarounds, and tightly coupled integrations before they can move.
Digital-native insurers and MGAs typically operate with:
- simpler and more modular technology stacks,
- greenfield architectures,
- lower technical debt,
- significantly lower integration overhead.
So incumbents are not competing on the same terrain. And that makes it even more important to act quickly, but not blindly. Before accelerating transformation, insurers need to understand the real complexity of their current environment.
3 steps to make the transformation successful
What it means is that companies need to focus on the fundamentals first before accelerating transformation:
1) Make complexity visible before trying to “fix” it
Create a realistic map of the current landscape: core systems, integrations, ownership, critical dependencies, and exception-heavy processes.
2) Prioritize by business value chain, not by technology stack
Start with the journeys where complexity has the highest business impact (for example, claims, policy servicing, or pricing changes), reduce handovers, isolate legacy constraints, and sequence modernization in manageable delivery waves instead of enterprise-wide replacement programs.
3) Build integration and dependency management into the transformation model
That represents treating integration as a strategic workstream, not a technical afterthought: establishing clear architecture governance, integration standards, and cross-team dependency management from day one, so delivery teams can move faster without increasing operational risk.
When landscapes are fragmented, tightly coupled, and historically layered, integration becomes the real battlefield – often invisible in strategy decks, but dominant in delivery reality.
Not sure where to start? Trask can help you analyze and offer the best solution for your environment.
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