Recently I had the pleasure of moderating a short but insightful discussion on our first episode of the Frontiers for insurance insight series. Joining me were KPMG in Canada partners Alison Rose, Dana Chaput and Zaid Hoosain to talk about strategies that are relevant to all insurers—small and mid-sized organizations in particular—on where they should focus when transforming their finance function. Here are some of the key points that emerged from our discussion.
Drive incremental improvements, even on a small budget
For Zaid, who's led successful transformation projects for insurers around the world, it's notable that many of the bigger transformations and modernization programs have succeeded precisely because they have focused on delivering value incrementally. For smaller and mid-sized insurers, it gives them the capacity to create further change, because the modernization can happen with a smaller team and organizations can see the benefits of these change activities in their daily work. It also builds strong momentum for the change program as a result. It is very important that organizations concentrate on pain points that exist right now and, by addressing them early, organizations can also point to successes from the project that demonstrate incremental improvements that can create additional capacity.
Zaid also noted that smaller companies need to be disciplined when monitoring their improvement against stated objectives. Adopting incremental value delivery can help them do this, giving them a chance to change course and correct mistakes earlier, easier, and at a reduced cost. Finally, Zaid pointed out that setting the pace of change is essential. Because change can be uncomfortable, especially for smaller and mid-sized companies working with smaller teams, managing the sentiment around change is even more important. You can read more about Zaid's perspective on the Future of Finance and Actuarial here.
IFRS 17 as a catalyst to modernizing the finance function
As the date for implementing IFRS 17 approaches, many companies are using it as a catalyst to modernize. Dana, who has been leading KPMG in Canada's IFRS 17 teams, has seen many organizations take a compliance-based approach that considers only the end result. During our discussion, Dana noted that while this approach is focused on getting organizations to the finish line, it also has a downside, in that organizations may be missing out on opportunities also to modernize processes quickly and efficiently as part of the program. For Dana, the focus for many organizations over the next six to 12 months should be on setting up parallel processes and doing those dry runs, so they can get a better understanding, beginning to end, of how much more intense the reporting and compliance process under IFRS 17 is going to be.
Dana also pointed out that making these incremental changes also presents a great opportunity to look for ways to automate and simplify. There are lots of opportunities in the finance function that may not have been identified yet. For more information about IFRS 17 implementation, look at Testing times, where we share insights from a survey of 18 insurers in the Forbes 2020 Global 2000 that have had IFRS 17 implementation programs running for several years. This information will be useful to companies of any size as they work to make IFRS 17 a reality.
Actuaries as business partners
For insurance organizations, the actuarial function is one of their core strengths. Alison has worked with insurers as their Actuaries progress toward becoming full business partners. She has seen leading institutions successfully empower and pivot their actuarial teams but noted in our discussion that some of the smaller and medium-sized insurers tend to trail the larger institutions in this regard.
Insurers undertaking a finance transformation, Alison said, will also need to transform the actuarial function. Removing the number crunching is essential: smaller teams that rely on spreadsheets to pull the numbers together will need to develop an appropriate infrastructure. By moving away from numbers production and into more robust analysis, organizations can unlock the potential of their actuarial teams and focus on the insight that's essential to strategic decision-making.
Critical factors for success
For companies looking ahead to their finance transformation and the adoption of IFRS 17, our panelists offered their top advice for teams to maximize their effectiveness.
Zaid: "Support from senior leadership is essential, and all the functions need to work together to achieve a common goal."
Dana: "Don't be afraid to experiment and fail. It's always easier to make changes than to build something new from scratch, so acknowledge that not everything will work and build in enough time to make the incremental changes along the way. And by the time the solution is up and running, you'll find that the fear and stigma associated with failure has disappeared, as well."
Alison: "Focusing on delivering incremental wins helps businesses build the internal support that is critical for a successful transformation."
I hope this helps you zero in on some of the most important areas to focus on when you're planning to transform the finance function at your business.
Feel free to reach out to me directly for more information and to continue the discussion.