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Today's insurers are enduring a perfect storm of converging challenges amid the global pandemic's sudden disruption and the ongoing impact of game-changing digital technologies and automation capabilities. The industry is facing significant changes to deliver competitive new business models, meet evolving customer and employee expectations, recruit new skills, manage to change regulatory demands and more.

Welcome to the new reality - and with it a significant new role for the insurance finance function. Finance is poised for a shift from its traditional reporting, monitoring and planning duties to a significant new role as a strategic partner to the business - driving informed, data-based decision making and helping to execute strategy, maximise growth and enhance profitability.

Doing 'more with less' - the way forward

The journey forward is expected to include a new capacity to 'do more with less' and underpinning this transition will be modern workforces and new skills that can help drive innovation, agility, growth and future profitability. Accomplishing more with less on the road ahead will require:

Create capacity to do more for less, illustration

Embarking on the journey

The journey for insurers in today's new finance reality will require a significant shift from a 'task-based' to a 'capabilities-based' orientation. Businesses are typically working on spot solutions to evolve siloed financial processes and integrate strategic planning, budgeting, forecasting, teams and capabilities. Unfortunately, significant duplication of efforts can result during processes such as data extraction, manipulation and analysis, while limited time is dedicated to deriving informed data-based insights and generating the advantages of predictive capabilities.

What we see in the majority of finance and actuarial functions today is that a lot of effort is associated with the production of financial reporting and planning and that most of this effort involves manual tasks associated with the production of numbers and exists in a series of silos within the finance function. This often creates additional manual effort around reconciliation and duplicated checking of results.

As finance and actuarial functions move into the future, we expect to see an increasing focus on the automation of much of this manual production activity to help create the capacity to deliver on the capabilities surrounding the delivery of insights into the business. Additionally, more integration of data and alignment of metrics between the various areas of the finance and actuarial functions (valuation, planning, forecasting, capital) can help eliminate significant effort around reconciliations and provide a stronger foundation for the analytical capabilities that would allow finance to support business decision making

Getting it right begins with a consistent data and systems architecture. Building an integrated finance and actuarial data and systems architecture is a core capability in helping to deliver agile financial reporting that's fast and cost-efficient.

Modern data and systems architecture can allow rapid expansion and efficient incremental change. Businesses adopting a modular architecture and cloud-based infrastructure can experience easier future expansion. By reimagining how to deliver data and systems, businesses can adopt an agile, prototyping-based delivery model. This can allow you to implement with smaller teams, improve quality of delivery and reduce delivery risk. However, it does require the adoption of a philosophy of accepting failures during prototyping and learning from them.

Success will require a seamless 'data backbone' to provide one source of data that can help drive speed, standardisation and consistency. Ultimately, the right data and systems architecture and 'data backbone' should integrate all business data sources and domains beyond the finance and actuarial, including:

  • Product development and pricing
  • Underwriting, marketing and sale
  • Operations and policy management
  • Claims management
  • External data sources

Linking diverse data sources can unlock better driver-based analysis, timely insights and proactive responses. How to integrate? Keep in mind that data does not need to be compiled within a single monolithic database. The key is to ensure that data can be linked through a common interface.

Finance can certainly act as a catalyst to kickstart the development of an integrated data backbone and will ideally take a leading role in controlling sensitive financial information. In other aspects, finance will be an equal 'data citizen' - drawing on diverse data sources and enabling other business functions and processes to do the same.

Going forward, we believe automation and artificial intelligence will play a key role in enabling this improved environment. KPMG professionals estimate that through automation it is possible to have 60 to 70 percent of internal controls automated. This will play a critical role in pricing and underwriting, reserving, reporting and decision making.

Automation and AI - Enabling an improved control environment, illustration

A modern workforce for new ways of working

As noted, doing more with less is the way forward, so do not underestimate the critical importance of how the traditional finance workforce should change.

We expect the finance function of the future will require a revaluation of teams and their current roles. Managing how people perform and interact with technology such as automation and AI will also be crucial.

Ultimately, we believe the future state requires a fundamental redesign of the finance organisation in order to establish and foster close collaboration among teams across the business, with a clear focus on capability delivery. Collaboration teams will be needed as finance organisations become more agile, allowing resources to move between teams to deliver enhanced value.

Along the way, phased deployment will likely be necessary, moving to the future state in phases as new capabilities emerge. As technology modernisation occurs, teams should be reorganised as needed to meet evolving requirements or challenges. Core skills like accounting and actuarial will still be required - but the finance function of the future will possess a deeper business understanding, greater commercial acumen and the ability to communicate and drive change.

In conclusion, we believe the new reality has arrived for today's insurers and future-focused organisations are already moving forward to reshape the finance and actuarial functions. The future is positioned to be data-driven and automation enhanced - and there is little time to delay for businesses that want to remain relevant, competitive and profitable in a fast-changing environment. Going on this journey will enable finance functions to remain relevant and responsive to the demands of the front office. Finance can become a true business partner and help deliver profitable growth for your organisation.

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