Unlocking the Potential of Finance for Insurers

The role of the Finance function has become increasingly important as insurance companies seek to respond to uncertain and volatile business conditions, as well as comply with new regulatory requirements. In addition to its traditional responsibility of “preserving value” through reporting, controls, and risk management, Finance is increasingly expected to “create value” by developing and executing business strategy in such areas as profitability analytics, mergers and acquisitions, capital management, and integrated performance management. At the same time, companies are likely to place the Finance function under close scrutiny as they search for cost savings.

Many insurance companies may need to change their Finance organisations to meet the demands of today’s marketplace. Insurers should begin by clarifying the priorities they assign to each of the four principal roles Finance can play:

• Steward: Accurately report on the company’s financial position and operations.
• Operator: Provide high-quality finance services at an effective cost, while maintaining the flexibility to respond to the changing needs of the business.
• Strategist: Help set the strategic direction of the company by providing decision support through actionable insights and by conducting forward-looking analyses that improve the predictability of business performance.
• Catalyst: Help provide the business with valuable insight and analysis to support decision-making creating a risk intelligent culture.

Achieving the potential of Finance to add value often requires companies to take a holistic view—considering which capabilities should be targeted for improvement based on the importance of the various roles that Finance plays in the organisation. Finance, IT, and the businesses should be committed to the effort and work cooperatively, typically supported by full-time resources.

Transformation projects should have bold goals but should also establish a limited number of high-impact objectives. While these principles may increase the likelihood of success, in many ways, the first step is the most important one: Beginning with a clear strategic vision of the different ways that Finance can help the company achieve its business objectives.