Financial planning for insurance companies during COVID-19

Developing a more dynamic planning organization

The times we are living in are historic and unprecedented. With some health professionals equating the current scenario to the 1918 Spanish Flu pandemic, there is a lack of recent historical business context to look to for guidance. This lack of context can make the already challenging task of predicting future market and consumer behavior even more difficult. The world will be remade by the COVID-19 crisis, and resilient leaders are assessing different economic, political, and health scenarios that may emerge. How should organizations approach financial planning given the level of uncertainty? This perspective will not prognosticate on the future of the economy or how plans will change based on different economic scenarios. Rather, it will identify strategies and techniques to help organizations execute the planning process in a valuable and efficient manner.

Insurance organizations leverage annual financial planning for many purposes: aligning organizational priorities and strategic investment opportunities, identifying staffing levels and related expenditures, projecting policy counts and associated loss and benefit levels, and identifying economic goals by which leadership and the broader organization will be compensated. The planning process is lengthy, requiring both art and science—numerous interactions between organizational leadership and individual business units translate high-level goals into detailed, bottom-up financial plans while coordinating across functional groups to align on operational drivers.

In a normal year, planning is a complex effort. With the instability of the current world, many organizations are facing additional discomfort and lack of confidence in future projections, driving a near-constant need to develop and model scenarios. Reliance on excessive manual iteration within the process can drain resources and cause strain in the face of urgent need for decision and courses of action. This process of prediction is especially crucial in the current environment. In response, CFOs and financial planning and analysis (FP&A) leads should look to take immediate action that can help mitigate uncertainty during the current cycle while enhancing processes over time to develop a more dynamic, effective planning organization.