Insurers seek partners to modernize IT, deploy governed AI at scale and ensure local compliance, ISG Provider Lens® report says
Insurers are redefining technology outsourcing as a strategic capability that supports business agility, resilience and long-term transformation, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm.
Insurance ITO is becoming a foundation for enterprise transformation rather than a traditional technology service. The emphasis has shifted from lowering costs to systematically changing how the business operates in order to create additional value.Share
The 2026 ISG Provider Lens® global Insurance Services — ITO report finds that insurers are responding to sustained cost pressures, aging core platforms, increasing product complexity and heightened regulation by modernizing technology while reducing operational risk. Rather than replacing systems wholesale, enterprises now favor phased modernization that allows legacy and cloud-native platforms to coexist, supporting business continuity throughout long-term transformation initiatives.
“Insurance ITO is becoming a foundation for enterprise transformation rather than a traditional technology service,” said Dennis Winkler, director, Insurance, at ISG. “The emphasis has shifted from lowering costs to systematically changing how the business operates in order to create additional value.”
Insurance enterprises are turning to providers for help running increasingly complex technology environments without interrupting business operations. Together, they are coordinating hybrid cloud environments, legacy platforms and modern applications to improve flexibility and carry out long-term transformation. At the same time, they are strengthening resilience through orchestrated technology cutovers and operating models designed to sustain business continuity amid changing market conditions.
AI is becoming an integral part of insurance operations as enterprises expand its use across underwriting, claims processing, fraud detection, IT operations and customer engagement. As AI becomes embedded in production environments, insurers are increasingly cautious about its potential impact. They are prioritizing providers that can roll out AI at scale within governed operating models with explainability, transparency and human oversight.
Global insurers are also reassessing sourcing strategies to balance scale, insurance-specific expertise and operational flexibility. Many organizations are adopting hybrid delivery approaches, including global capability centers, build-operate-transfer models and hybrid onshore-offshore operations to maintain greater control while accelerating execution. They seek ITO providers with both global scale and a deep understanding of local regulations, ISG says.
“Successful insurance modernization depends on embedding AI into core operations while preserving business continuity and compliance,” said Ashish Jhajharia, lead author of the report. “Organizations will increasingly seek providers that combine insurance expertise, AI capabilities and modernization experience to support long-term business objectives.”
The report also explores other insurance ITO trends, including the growing use of outcome-based commercial models and the increasing adoption of agentic AI automation to modernize core policy administration, billing and claims systems.
