By: Leslie Muthen, head of territory for Africa at SSP

As the African insurance industry continues to advance, the reliance on legacy systems is increasingly becoming a barrier to innovation and operational efficiency. These outdated systems, often characterised by high maintenance costs, limited scalability and heightened security risks, challenge insurers’ ability to keep up with rapidly evolving market demands.

“The call for legacy system replacements is driven by the need for improved functionality, regulatory compliance and the ability to meet rising customer expectations,” says Leslie Muthen, head of territory for Africa at SSP.

“Legacy systems in insurance often carry out critical operations,” he says, “but they can hinder progress due to their inability to integrate with new technologies, support real-time data insights, or scale with the business.

“These limitations create operational silos, leading to costly maintenance and inefficient processes that make adapting to digital transformation challenging.”

The urgency to replace legacy systems arises not just from operational demands but also from heightened compliance standards and customer expectations in a rapidly digitising world.

“Insurance companies are under pressure to deliver personalised, efficient services, and legacy systems typically fall short,” he says.

Finding the right technology partner is essential.

“A capable partner can facilitate a seamless transition, ensuring that the implementation aligns with the insurer’s strategic goals and operational needs,” says Muthen. “The right technology provider will also understand the intricacies of the African insurance market, offering tailored solutions that address local regulatory and consumer expectations.”

The African context

Muthen lists several factors that highlight the importance of moving away from legacy systems in Africa:

• Compatibility issues: Many legacy systems were built using older, incompatible technologies, making it difficult to leverage advanced functionalities like AI and machine learning. The inability to integrate with contemporary systems results in siloed information, limiting insurers’ ability to make data-driven decisions.
• High maintenance costs: Specialised skills are required to maintain these older systems, driving up operational costs. Instead of allocating resources to innovation, insurers spend on keeping these systems functional – a misallocation of resources that could be more efficiently spent on modern solutions.
• Scalability challenges: Legacy systems lack the flexibility to scale with growing customer demands. This can hinder growth in dynamic markets like insurance, where demands for digital services and regulatory requirements are constantly shifting.
• Security risks: Outdated security protocols make legacy systems more vulnerable to cyber threats, posing significant risks in a world where data protection is paramount. Compliance with evolving regulations, such as South Africa’s POPI Act for example, becomes difficult with systems that cannot support necessary security upgrades.
• Integration hurdles: Interfacing with newer systems is often complex and costly, with legacy platforms lacking standardised data formats and documentation. This complicates integration efforts, requiring custom solutions that are expensive and resource intensive.

The need to replace legacy systems is driven by three primary factors: regulatory compliance, customer expectations and innovation needs.

“Evolving laws, such as POPIA, demand secure data management and transparency,” says Muthen. “Legacy systems can struggle with these requirements, limiting insurers’ ability to meet regulatory standards and increasing compliance risks.

“When it comes to customer expectations, modern consumers demand personalised, real-time interactions, from instant claims processing to mobile-accessible policy management. Insurers using outdated systems risk losing market share if they cannot meet these digital-first customer expectations.

“And on the point of innovation, insurtech’s rise in Africa has intensified the need for traditional insurers to innovate to stay competitive. Legacy systems limit insurers’ ability to leverage emerging technologies like AI and data analytics, preventing them from keeping pace with fast-moving competitors.”

Muthen says modernising insurance operations in Africa requires careful planning, robust change management strategies and comprehensive training programmes. Insurers must equip their teams with the necessary skills to navigate the complexities of a technology-driven environment.

As the African insurance sector embraces digital transformation, the potential for growth and deeper market penetration becomes more tangible. However, modernisation involves a holistic approach, prioritising adaptability, training and long-term strategy to help insurers remain resilient and successful in a digital era.