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New reporting standards provide insurers with opportunity for finance and actuarial transformation

Insurers drive finance and actuarial transformation

Fresh C-suite interest and new technology enable CFOs to drive finance transformation. And now, with the IFRS 17 standard expected May 2017 some are thinking about how they can use this opportunity as a catalyst to transform the finance function.


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With significant regulatory, accounting and actuarial changes on the horizon, many forward-looking insurers are thinking about how they might use these changes as the catalyst to transform the insurance finance function to become a better business partner and drive value for their organization. 

Business leaders seeks a partner in CFO and finance

Increasingly, CEOs and business leaders are looking to the finance function for
help improve costs and efficiency, drive customer centricity and growth, and to comply with new regulations. But according to a survey of insurance CEOs conducted by KPMG International, few think that the finance function is ready
 to take on the task. 

To be fair, most finance and actuarial functions are struggling to keep up with current demands from the business, as well as outdated technology, siloed policy administration systems, growing competition for experienced professionals, and recent regulatory changes catalyzed by Solvency II in the EU and developments in other jurisdictions. Few have the appetite for more disruption and our discussions with insurance sector finance leaders suggest that past experiences and current perceptions are dampening enthusiasm for new transformation initiatives.

Barriers to finance transformation are crumbling

The good news is that many of the traditional barriers to transformation
are rapidly falling away. CFOs are being encouraged by their executive teams to pursue new finance-driven initiatives such as enterprise performance management. CFOs who can create
a business case for transformational change that demonstrates alignment 
to the organization’s growth objectives should executive support and easier budget approvals. 

In addition, now that technologies are sold as a service, such as cloud infrastructure, companies can vastly accelerate change and avoid fixed-cost hardware commitments via pay-as-you-go arrangements. Similarly, new software applications for data management and self-service analytics make it easier for the business to mine data for insights. 

Welcoming new financial reporting standards

With the upcoming introduction of new reporting standards around the world, insurance CFOs now have a strong motivation and catalyst for transformation. Insurers are starting to recognize that the implementation of these new standards and regulatory requirements will at the very least require significant change in their current finance and actuarial operations. The broad scale and complexity of these operational and technology impacts are helping insurance executives realize that these changes are actually an opportunity to transform their finance function. To succeed, finance leaders will need to take a hard look at their systems and data architecture, business processes, controls and organizational design, to extract the best possible value from the investments to comply with these changes. 

Questions to consider

  • How will the systems architecture need to change given the new calculations and their consequences for data storage (such as grouping contracts into cohorts with similar characteristics in order to calculate the contractual service margin, and deriving details of current interest rates)? What broader opportunities will be created by these systems improvements? What else can we fix — while systems are opened up for change — that will benefit the business more broadly? 
  • How to bring together accounting and actuarial capabilities to build the sources of earnings (SOE) analysis, in terms of organizational design and controls over data?
  • How to create a single source of truth for operational and financial data which will be the common starting point for the business, finance, actuarial and risk and capital management?
  • How to enable the business to efficiently drill into results to understand the drivers of change at a granular level?
  • How to enable what-if scenario analysis for the purposes of business planning, capital and management, alliances, acquisitions and carve-outs?

Success factors for finance transformation

With the stage set for transformation 
in regulation and external reporting, finance leaders should think seriously about how to take advantage of the current environment to become a better partner to the business. We believe a number
of key success factors are critical to designing and delivering successful finance transformation in the insurance sector:

  • Be bold and visionary
  • Focus on the business outcomes 
  • Don’t let technology drive the decision 
  • Break down the program 
  • Deliver quick wins
  • Measure progress 
  • Look at the bigger picture 
  • Expect the goals to shift 

Ultimately we believe that finance leaders and CFOs should be looking at the implementation of these changes as an opportunity to rethink their operating models, refresh their organizational design and create stronger alignment to the business. With the cost, complexity and barriers to transformation rapidly falling away, there is no better time for finance leaders and CFOs to start thinking about finance transformation. 

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