Insurance companies are under a lot of stress today – customers expect instantaneous and seamless digital experiences, advisors expect tools that provide real-time responses, and partners expect seamless integrations to ease their work. Also, there is a lot of pressure on insurers to grow and expand in the market. Added to this, many insurers run on legacy technology that is hindering their progress by delaying the introduction of new products, disrupting customer journeys, and requiring a disproportionate amount of funds to maintain operations. 

Many leadership teams across insurers have an inclination to replace the core system in a single, comprehensive move. However, there is a lot of risk associated with this strategy, and history indicates that big, complicated technology replacements rarely work out well. An alternative to this big-bang core system replacement strategy is an approach called “Hollowing the Core”. Increasingly, a good number of insurers globally are adopting this “hollowing the core” strategy, which enables them to gradually modernize technology without disturbing their current operations. 

In this article, I talk about what hollowing the core entails, why it is especially applicable to the insurance industry, and how a workable three-year plan can assist insurers in transitioning from a legacy-dependent business to a cutting-edge digital insurer. 

Why Growth is Being Hindered by Legacy Systems 

The legacy systems that insurers use today were designed for a different time period. They placed a high priority on control and stability, which at the time were precisely the right objectives. But those same features – including proprietary data models, batch-oriented processing, and tightly coupled architecture – now work against insurers. Among all the issues that legacy systems face, three of them stand out. 

First, it takes months of development work, testing cycles, and meticulous regression checks to launch a new product or make changes to existing ones. That speed is a strategic liability in a market where consumer demands and competitive dynamics change rapidly. 

Second, there is fragmentation in the customer journey. Multiple interactions, inconsistent experiences, and manual handoffs behind the scenes may be necessary for a query that touches several customer interactions. 

Finally, operating expenses are increasing. Aging systems require maintenance and integration, which consumes engineering work and licensing expenses that could actually be used to finance innovation. 

Research from around the world consistently demonstrates that insurers with data-driven, modern operating models are better positioned to expand and weather market shocks, while those that cling to antiquated technology experience slower product cycles and pressure on margins. 

The Increasing Inconsistency in a Digital Age 

Over the past ten years, there has been a significant shift in the expectations of all parties involved in the insurance value chain. Consumers now come with mobile-first habits influenced by retail, healthcare, banking, and similar apps. They expect clear status updates, prompt acknowledgments, and self-service for most activities from insurers too. Advisors, on the other hand, want to get quotes on a real-time basis and access performance dashboards that do not require them to switch between screens. Operations teams are now turning to artificial intelligence for risk scoring and decision support that can speed up their processing and increase their accuracy. 

While cloud provides flexible capacity, strong design patterns, and access to many data and artificial intelligence services, traditional legacy applications rarely take advantage of these features because they are tightly integrated and hard to update. As a result, insurers pay for modern infrastructure but still deal with the limitations of outdated architecture. 

Why a Full Core Replacement Feels So Risky 

If outdated technology is the issue, then replacing it seems like the clear answer. However, most insurance leaders who have looked into this option closely hesitate to move forward. And their concerns are valid. 

A full core replacement is a significant task. Since the core system affects every part of the insurer’s business, i.e., every policy, every claim, and literally every transaction of insurer, any failure during the cutover can have immediate and serious consequences, including financial risk, regulatory scrutiny, customer loss, and damage to reputation. For publicly listed insurers, a troubled technology program can impact stock price and draw unwanted attention from analysts and regulators. 

The complexity in core replacement is not just technical. Data migration, process changes, staff training, vendor reliance, and business continuity planning all need to be managed at the same time. The period during which old and new systems must work together is very fragile. The longer the replacement program takes, the greater the risk that business needs will change before the new system is fully operational. 

As a result, many insurers delay taking action even when leadership generally agrees that modernization is overdue. This often leads to a slow buildup of technical debt and missed market opportunities. This is exactly what the “hollowing the core” strategy aims to prevent. 

What Hollowing the Core Means 

Hollowing the core is a structured, step-by-step approach to modernization. Instead of replacing the legacy system in one large project, the insurer surrounds the existing core with a modern digital platform. Capabilities are then moved to the new platform in small, clear parts, while the legacy system continues to manage functions that have not yet transferred. Over time, the bulk of the legacy system becomes smaller, each migration reduces its footprint, and the digital platform becomes the main system on which the insurer operates. 

The approach gets its name from the visual it brings to mind: a core that is slowly hollowed out from the inside, weakening its hold on the business without needing to tear down the entire structure all at once. 

The Three Principles Behind Hollowing the Core 

Principle 1: Continuity 

The legacy core continues to operate throughout the process, so normal business is never at risk. 

Principle 2: Incremental 

Each migration is incremental and specific, with its own success criteria clearly defined. 

Principle 3: Progressive Value 

Benefits build up with every completed part of the migration instead of waiting for a major launch. 

The Advantages of the Hollowing the Core Approach 

Hollowing the core helps insurers unlock benefits across Risk Management, Value Delivery, and Technology Access. 

Risk Management
• Business keeps running throughout the program
• Each slice of the program is reversible if issues arise
• No single catastrophic cutover event 

Value Delivery
• Each completed slice of the program demonstrates success
• Benefits are visible in months, not years 

Technology Access
• Immediate access to cloud and AI
• API enablement of key business functions such as distribution and claims
• Modern capabilities without full replacement of core 

In addition to these benefits, as old modules get decommissioned, costs associated with licensing, maintenance, and clunky integrations can be reduced substantially. Manual workarounds built to patch gaps in legacy systems can also be retired as the digital platform takes over, bringing efficiency early in the program. 

3-Year Path to a Digital Operating Model 

In my view, a practical hollowing-the-core program can be rolled out over three years. This approach balances the need for early wins with the discipline to build something solid for the long haul. 

Year 1: Laying the Foundation and Achieving Early Wins 

In the first year, the main priority should be to establish the foundational elements of the digital platform. This includes setting up the cloud environment, which is especially important for insurers moving to the cloud for the first time, and implementing key enterprise-wide modules such as hierarchy and identity management, API gateways, and customer communication gateways. Once these building blocks are in place, the focus should shift to identifying customer and partner journeys where digital interventions can significantly improve external stakeholder experiences. 

These journeys may include areas such as obtaining a quote, making a payment seamlessly, issuing a policy without delays, or intimating a claim with minimal effort. It is important to start with one or two high-impact insurance products rather than attempting to cover the entire portfolio in the first phase. After selecting the initial products and journeys, the desired future-state processes must be clearly defined, and the end-to-end experience should be visualized in detail. 

At this stage, relevant modules from the digital platform should be configured and implemented with a strong “hollow the core” approach, which means the digital platform drives all customer-facing and operational processes with minimal or no dependency on the legacy core system. The legacy core should serve only as the system of record. As a result, all product structure definitions, coverage configurations, premium calculations, business rules, workflows, data orchestration, APIs, and payment gateway integrations for the selected products and journeys need to be set up directly on the digital platform. 

If these activities are executed well and transactions begin to flow through the digital platform, the insurer can consider this a meaningful and measurable success in the first year. 

Year 2: Scaling Products and Expanding Channels 

In the second year, the transformation should begin to gather significant momentum. With the foundational setup completed in Year 1 and with at least one product and its key journeys already running successfully on the digital platform, the insurer now has a clear template to follow. This template acts as a proven reference model, which allows additional products to be onboarded rapidly in a factory-like mode. The reason for calling it factory mode is that the product structures, journeys, integrations, business rules, and orchestration patterns established earlier can now serve as reusable moulds into which other insurance products can be fit and taken to market much faster. 

During this phase, the insurer should also focus on unlocking new distribution channels by leveraging the APIs and integration capabilities of the digital platform. These channels may include digital partners, aggregators, embedded insurance opportunities, or even newer internal channels that were previously not digitized. At the same time, the digital platform should be expanded to support all required business scenarios, and access should be enabled for internal stakeholders such as employees across operations, underwriting, finance, or customer service, depending on the insurer’s operating model. 

By the end of Year 2, the insurer should aim to migrate all high-volume and high-impact products and processes to the digital platform. This shift creates the foundation for gradually eliminating manual interventions and reducing dependence on legacy modules, thereby reinforcing the “hollow the core” strategy introduced in the first year. 

Year 3: Operating as a Digital Insurer 

By the end of the third year, the insurer should reach a major turning point. All new business processes run seamlessly through the digital platform, while the legacy core system remains only for managing historical policies and serving as the system of record. With the digital foundation firmly in place and with key products already scaled, this is the stage where the insurer should begin fully leveraging the power of the cloud and implementing GenAI and Agentic AI solutions across critical business functions. These solutions will help the insurer optimize operating costs, improve turnaround times, strengthen decision making, and enhance overall system efficiency. 

A parallel focus during this year should be on structured cost optimization. Redundant modules and customizations within the legacy core must be retired in a phased manner, which should result in measurable reductions in software license expenses, infrastructure and hosting costs, and the human effort required to maintain outdated systems. This rationalization strengthens the long-term financial viability of the transformation while reducing technical debt. 

By the end of Year 3, the insurer should be in a position to operate confidently as a modern digital insurer, with most business activities driven by the digital platform, supported by cloud-native capabilities, and enhanced by AI-driven intelligence embedded across the value chain. 

The Takeaway

A structured three-year roadmap built on strong digital foundations, scaled products and channels, and a shift toward intelligent, cloud-driven operations creates a clear path for insurers to transform themselves into digital-first organizations. By following this staged approach, insurers can deliver superior customer and partner experiences, reduce operational costs, modernize their technology landscape, and build a future-ready business model that can adapt and grow in an evolving insurance ecosystem. 

How This Changes Life for Everyone in the Business 

Ultimately, hollowing the core is not just a technology initiative, it is a meaningful shift in how people across the business work every day. The impact is very real for employees, customers, and partners. 

Employees 

Employees now access the right data and the next set of actions from a single place, without switching between outdated screens or searching endlessly for information. Routine and repetitive tasks get automated, which allows underwriters, claims handlers, and servicing teams to focus on activities that genuinely require their expertise and judgment. Since the underlying data becomes consistent across systems, nobody loses time re-entering information or correcting errors caused by manual handoffs. 

Customers 

Customers experience the same level of service regardless of their chosen channel, whether it is mobile, web, a call centre, or an advisor, because all interactions run on one unified platform. Simple requests such as downloading a policy certificate or making a policy change are handled immediately through self-service. For more complex needs, customers stay informed with real-time updates, which means they no longer need to follow up repeatedly or wait without clarity. 

Partners and Advisors 

Partners receive instant quotes, real-time status visibility, and timely commission processing, which makes their work smoother and strengthens long-term engagement. Onboarding new partners also becomes faster, taking weeks instead of months, enabling insurers to scale distribution without increasing technology overheads. 

How to Get Started in a Practical Way 

To begin the hollowing-the-core journey in a practical and achievable manner, insurers should focus on a few early actions that are simple, low-risk, and powerful enough to build internal momentum. These steps help leadership teams gain clarity on what truly matters, demonstrate value early, and set the stage for structured modernization. 

• Start byidentifying one or two business areas where legacy constraints visibly slow down growth, such as product launch timelines, partner onboarding, or customer service delays, because this helps ensure the transformation begins in places where the impact will be quickly understood by the organisation. 
• Form a small cross-functional team that includes business, technology, operations, and distribution leaders, so that everyone has a shared view of the current pain points and can collectively evaluate where a modern digital layer would create the most immediate wins.
• Select a single, meaningful customer or partner journey that can be improved without changing the legacy core, such as quote-to-policyfor a simple product or real-time policy servicing for advisors, because this allows insurers to experience the benefits of hollowing the core without any disruption to ongoing operations. 
• Run a short, structured assessment toidentify which modern capabilities are missing today – for example API readiness, customer communication, product configuration flexibility, or workflow automation so that the insurer knows exactly what the digital platform must deliver in the early phase. 
• Align leadership on a principle-based operating modelthat clearly states that the legacy core will continue as the system of record, while all new journeys, rules, and customer experiences will move to the digital platform gradually, because this alignment prevents future conflicts and decision delays. 
• Set measurable, simple success indicators for the first phase, such as reduction in processing time for one journey, improved partner satisfaction, or fewer manual steps, because early success stories play a crucial role in building organisational confidence.
• Pilot a small digital layer around the legacy system for the chosen journey, without touching the core, so that the insurer canvalidate how quickly modern capabilities can be introduced while business continues as usual. 
• Create a transparent communication rhythm within the leadership team, sharing learnings from the pilot, early efficiencies, and challenges, because clear communication reduces resistance and prepares the organisation for larger steps in the future.
• Use the success of the pilot to create a repeatable playbook that defines how future journeys can be moved to the digital platform, allowing the insurer to shift from experimentation to a predictable and scalable model of hollowing the core. 

These practical starting steps do not require major investment, long planning cycles, or operational risk. Instead, they help insurers gain confidence that hollowing the core is not only achievable, but also a safer and more controlled way to modernise without disrupting the day-to-day business. 

Where iNube Fits in This Journey 

Many insurers recognise the importance of partnering with a platform provider who understands the subtleties of the insurance business and also has deep experience in hollowing the core. This is exactly where iNube brings value. iNube is a technology company focused exclusively on insurance, offering solutions that span the full value chain. These solutions have been successfully implemented, integrated, and made to co-exist with multiple legacy core insurance systems across different insurers. 

Drawing on years of experience in deploying and integrating its solutions with legacy environments, iNube has developed a modern and advanced digital insurance platform called the iNube Digital Platform. Several insurers have already adopted this platform to hollow their core, enabling them to shift key processes, configurations, and customer journeys away from the legacy system. As a result, they are already realising tangible benefits from the flexibility and speed that the iNube Digital Platform provides. 

Closing Thoughts 

The insurance industry is standing at a critical turning point. The need to modernize is growing stronger each year, and delaying the shift only increases the cost in the form of lost opportunities, lower margins, and gaps in capability. At the same time, it is important to acknowledge that large technology transformations still carry a significant risk. 

This is where hollowing the core offers a practical and balanced path forward. It is not a quick fix, and it requires clear decisions and sustained effort. However, it allows insurers to modernize step by step, create measurable value along the way, and move towards a future-ready architecture without placing a single, high-stakes bet on a massive overhaul. 

For insurers waiting for the ideal moment to begin, this approach provides a clear message. The right time is not far in the future, after everything else aligns perfectly. The right time is now, by taking a thoughtful, well-planned first step that sets the foundation for long-term transformation. 

Ramprasad Sanjeevi

Co-founder and Executive Director