Thought Leadership | April 3, 2025
Life insurance carriers face growing pressure to modernize their distribution strategies, improve customer experiences, and streamline operations. But one factor that can hinder innovation is Not Invented Here Syndrome (NIH Syndrome)—a reluctance to adopt solutions that weren’t developed in-house.
This phenomenon has been widely studied in innovation research. Ralph Katz and Thomas J. Allen first identified NIH Syndrome in R&D teams in a 1982 study, finding that long-tenured teams often rejected external ideas, leading to stagnation and reduced innovation. The bias against external technology has also been linked to higher costs and inefficiencies, as seen in research on organizational routines and knowledge transfer.
A cautious approach to adopting external technology makes sense given the industry’s regulatory complexity and legacy infrastructure, however it can hurt carriers in the long run, resulting in higher costs, slower time to market, and missed opportunities for growth.
Let’s explore why NIH Syndrome still persists in life insurance, how it impacts the industry, and what steps can be taken to embrace a more strategic, balanced approach to modernization.
Why NIH Syndrome Persists in Life Insurance
It’s easy to say that NIH syndrome is holding life insurance carriers back. But the fact of the matter is that carriers have legitimate concerns when it comes to external technology solutions.
Heavy Investment in Legacy Systems
Many carriers have spent decades refining proprietary technology, making it difficult to justify additional investment in external solutions.
Part of this hesitation comes from a desire to avoid disrupting existing infrastructure, especially when legacy systems remain functional. However, modern solutions can often integrate seamlessly rather than requiring a full-scale replacement.
Another factor is the sunk cost fallacy—the belief that past investments in proprietary systems justify continued use and investment, even when more agile, scalable solutions could offer greater long-term benefit. By adopting a phased, modular approach, carriers can maintain their core systems while incorporating external innovations where they add the most value.
Control Over Compliance and Security
Life insurance is a highly regulated industry where compliance and data security are paramount. Naturally, some carriers hesitate to bring in external technology due to concerns about regulatory alignment, data privacy, and security risks.
However, today’s purpose-built solutions often come with pre-built compliance frameworks, automated reporting capabilities, and stringent security measures. Many external providers specialize in meeting or exceeding the industry’s regulatory requirements, making them valuable compliance and security partners.
Industry Conservatism
Life insurance has traditionally prioritized stability over rapid technological change. While this cautious approach ensures risk mitigation, it can also lead to slower adoption of tools that could drive growth and efficiency.
Rather than viewing digital transformation as an all-or-nothing proposition, many carriers are taking incremental steps toward modernization—leveraging external solutions to augment, not replace, existing processes.
Misconceptions About Customization
A common concern is that external technology won’t align with a carrier’s specific operational needs. In reality, modern API-driven platforms allow for extensive customization, integrating seamlessly with existing workflows without requiring a complete system overhaul.
By embracing flexible, scalable solutions, carriers can maintain the control they need while also future-proofing their operations.
The Impact of NIH Syndrome in Life Insurance
Carriers are well aware of the trade-offs that come with maintaining proprietary systems. Still, it’s worth acknowledging how Not Invented Here Syndrome can quietly influence broader business outcomes.
Relying solely on in-house development often leads to slower time to market, as internal teams juggle competing priorities and longer development cycles.
Maintaining legacy systems also consumes valuable internal resources—time and budget that could be redirected toward other initiatives that could drive growth or improve customer and advisor experiences. For distribution partners and advisors, outdated tools can create friction in the sales process and limit their ability to deliver the experience clients expect.
And perhaps most importantly, when innovation is limited to what can be built internally, carriers may miss out on broader advancements—like AI, digital application experiences, and automation—that are already reshaping the life insurance landscape.
The Benefits of Looking Beyond In-House
Rather than viewing external technology as a replacement, carriers can use it as an enabler—a way to expand internal capabilities, streamline operations, and accelerate growth. Here’s how looking beyond internal technology can drive impact.
Faster Implementation and Scalability
Pre-configured, cloud-based, API-driven platforms allow carriers to expand distribution channels, automate workflows, and integrate seamlessly into existing tech stacks—all without the need for long development cycles or expensive infrastructure upgrades.
Improved Advisor and Consumer Experience
Today’s advisors and consumers expect frictionless, user-friendly experiences. Modern platforms can provide them.
From a distribution standpoint, they enable omnichannel capabilities, make it easier for advisors to sell policies, and can provide more seamless application processes for clients– from advisor-assisted flows to self-serve models.
Incremental, Modular Transformation
Carriers don’t have to undergo a complete system overhaul to adopt newer technology. A modular approach allows for incremental improvements, integrating new capabilities in a phased manner. In this way, carriers can mitigate risk, control costs, and gradually modernize their infrastructure without disrupting existing operations.
Breaking Free from NIH Syndrome
Overcoming NIH Syndrome isn’t just a strategic shift—it’s also a communication challenge. For those championing innovation within a carrier organization, the key is in how the message is positioned. It’s not about abandoning what works. It’s about strengthening existing capabilities with targeted, scalable enhancements.
Here are practical steps to help carriers take action and drive meaningful transformation.
1. Start Small with a Pilot Program
Recommend piloting an external solution in a low-risk, high-impact area. A quick win helps build momentum and demonstrates value without threatening existing systems.
2. Shift the Narrative from Ownership to Outcomes
Frame the conversation around business impact. Emphasize how external solutions can reduce costs, improve speed to market, or support advisors—rather than focusing on who built the technology.
3. Position IT as a Strategic Integrator
Help teams see that they don’t need to build everything from scratch. Instead, IT can focus on orchestrating best-in-class solutions that work alongside internal systems.
4. Embrace a Hybrid Mindset
Present “buy and build” as a modern, balanced strategy. This allows your organization to retain control where it matters, while still taking advantage of innovation happening outside your walls.
The Future of Life Insurance is Collaborative
Ultimately, NIH Syndrome can negatively impact not just carriers, but distributors, advisors and their clients.
By balancing proprietary strengths with strategic external partnerships, carriers can gain a competitive edge in speed, efficiency, and customer experience. Instead of asking, “Can we build this?”, ask “Should we build this—or is there a better way?”
By shifting to a collaborative innovation mindset, life insurance carriers can modernize operations, strengthen advisor relationships, and ultimately, better serve the families who rely on them.
Considering looking beyond in-house technology? Discover how Lavvi can help you transform your distribution strategy. Get in touch today.