Learn how insurers may modernize their financial functions and create next-generation service offerings.
In a nutshell, now is the moment for insurers to rethink, reframe, and restructure what and how their finance teams offer.
• Improving insight-led decision-making will enable insurers to capture market possibilities in a strategic, safe, and informed manner by transforming service delivery methods.
• The objective is to help the company compete more successfully and hence contribute more substantially to its bottom line.
Most insurance finance teams today are inward-looking, with a primary emphasis on performance reporting and controls. Enhancing ability to provide predictive insights and act as a strategic business adviser is a fantastic opportunity. Given the volatile market circumstances that are altering the industrial environment, a few leaders have embarked on financial transformation projects that are focused on moving ahead and beyond. The objective is to improve total financial management and company results, not only control and reporting efficiency.
To make this goal a reality, top executives must rethink the services they provide in order to improve overall financial management. On a practical level, this entails:
• More time and money spent on delivering analytical services to help the company make better decisions.
• Rules-based processing and standard, “right-first-time” data sets automate practically all transactional actions, removing the need for human workarounds and changes.
• Sharing knowledge and insights throughout the organization to allow quick response
• Moving beyond financial planning and analytics to a wider enterprise perspective that focuses on business drivers and strategic planning.
The newest paper (pdf) in our Future of Finance Reimagined series looks at the possibility to transform finance and how it might improve the services it provides.
The finance service delivery model of the future will balance the different functions of the CFO organization, from safeguarding the company via strong financial controls and maximizing enterprise resources to producing commercial and customer value and driving strategic change.
Insurers are having difficulties redirecting their efforts. Growing new skills (e.g., swiftly and at scale offering actionable and value-adding insights) requires a clear description of what finance teams perform on a day-to-day basis, changes to the finance organization’s structure, and a major increase of capacity. This is true both in terms of allocating funds for critical expenditures (such as in personnel and technology) and in terms of finding time to concentrate on the new priorities.
Leaders should ask themselves the following questions before committing to any assignment or activity:
• What is the company’s overall worth?
• How does it connect to the company’s main strategic goals?
• What abilities are required to deliver it?
These basic questions, taken together, illustrate the need to find the correct balance between quality and cost-effectiveness. The majority of insurers will create future service delivery models that stress diverse core services with unique mixes of internal centers of excellence (CoEs), offshore operations, outsourcing, and managed services contracts — who does what and why will vary.
1. Alignment and strategy: establishing strategic goals and constructing the operational model
It’s natural to want to be the greatest in the world at everything, but time, money, and resources make it difficult. Unlocking finance’s actual worth necessitates high levels of efficiency and effectiveness in various ways for various activities. As a result, it’s critical to figure out where to strive for greatness and where to seek outside help. Common operations across all services, such as actuarial modeling, data sourcing, routine computation and recording, are often strong candidates for outsourcing since outside organizations may give high-quality results at a lower cost.
When the emphasis is on value creation and strategic change, however, it pays to offer high-quality performance. Success in such jobs may set the company apart from its competition.
Some services should be kept local to the company, while others may – and should – be centralized. CoEs, which often take use of economies of specialized skills, technical experience, and standardization to optimize certain processes or tasks, may be the best way to supply the most complicated services. CoEs are being used by certain insurers to create new skill groups (e.g., data science). Other carriers share their efforts in areas like technical accounting, reserving, sophisticated asset assessment, and tax planning.
2. Using alternative resource solutions in sourcing and service models
Another popular strategy is to expand or alter shared service and offshore capabilities. Insurers with foresight no longer rely on third parties primarily for cost arbitrage. Access to industry-specific insights, deep technical expertise, and sophisticated technology are increasingly included in the business case for managed services. It also applies to more than just basic chores; for many insurers, outsourcing tax, statutory reporting, and actuarial skills has become a viable alternative. Outsourcing is used to outsource whole operations, including forecasting and planning.
While we anticipate that outsourcing will become more popular among top-performing financial departments in the future, not all service providers will have the specialized industry knowledge required to develop end-to-end and cross-functional procedures, for example. Top providers will also have specialized functional knowledge (e.g., actuarial, risk) as well as a thorough awareness of the industry’s particular tax issues. Insurers will see their providers as extensions of their own operations, with shared risks, aligned incentives, and high levels of cooperation, in the strongest and most effective outsourcing arrangements.
3. Culture and talent: developing the appropriate skills and working environment
Finance directors will need to adapt the organizational skill set and knowledge base as finance teams adjust their emphasis – even in the face of fierce competition for limited talent. In addition to recruiting and retention initiatives, many insurers are looking to retrain and reskill their current employees in order to locate the skills they need.
Technologists, data scientists, and business analysts will supplement essential accounting and actuarial abilities in future finance teams. Insurers will also need to encourage cooperation among a variety of talent kinds. Diversity of thought and inclusive work environments, in addition to the proper skills, may assist generate commercial advantage.
Many insurers should consider if their actuaries are their best-kept secret. They usually have a lot of commercial experience and good analytical skills. Finance’s capacity to provide knowledge – and, ultimately, value – for customers and the company may be improved by using this expertise.
4. Optimizing, democratizing, and modernizing data, technology, procedures, and controls
To promote seamless information exchange within the company and with third-party service providers, future service delivery models must be powered by technology and data. Data quality should be incorporated throughout the process, from the original source to the final report, to increase user trust.
Some insurers utilize systems that provide the capacity to develop analytics, various reporting cuts, and data visualization in the hands of more individuals to support continuous improvement goals. Teams can be more agile in reacting to business demands if they have the proper skill sets to use these technologies.
Changes in the service delivery paradigm will demand process changes, particularly for new financial operations. Control frameworks will also need to adapt when new processes are implemented. Controls, in particular, should be simpler, more automated, and intended to be predictive and preventative so that capacity may be expanded to concentrate on new services.