In an industry facing multiple disruptive forces — including technological, regulatory and competitive pressures — sustaining performance and creating the conditions for future insurance market leadership frequently requires a degree of transformation.
At Willis Towers Watson, we sum up the collective actuarial and risk management response to these challenges as finance transformation. We provide a wide range of interconnected solutions to help you deliver it for your business.
Finance transformation is about improving business performance as a whole. This makes it a matter for the C-suite, with wide implications across nearly all insurance business units.
External and internal forces have been pushing finance transformation to the top of the strategic agenda for many insurers. These pressures are highlighting the fact that many insurers still have a legacy of inefficient, manually intensive processes, disparate systems and data structures that are not well integrated with each other.
Changing regulatory and economic factors are causing companies to revisit their business mix and structure
Externally, firms are facing regulatory pressures for which to plan, such as a reduction in the Solvency II working day timetable up to 2019 and the new International Financial Reporting Standards (IFRS). Changing regulatory and economic factors are causing companies to revisit their business mix and structure, including potential merger and acquisition and consolidation activity, for enhanced capital efficiency.
A number of internal drivers are also evident. Some of these are by-products of the external forces, such as changing performance metrics and management information and a desire to utilise the wealth of information inherent in all the data flowing through the business for valuable competitive insights. Inevitably, cost control pressures also have a part to play, particularly given the growth of the finance function to accommodate Solvency II into business as usual. Looking forward, companies are typically finding changing demands upon the systems, skills and capabilities required to compete and succeed.
Together, these pressures are driving finance organisations to look for more efficient ways of doing things that remove complexity, increase integration and improve performance.
How to achieve transformation?
Addressing such a broad range of factors will frequently involve a delicate balance between conflicting strategic, operational and tactical priorities.
A starting point is a clear vision and strategy that defines a blueprint for prioritising planning and implementation projects.
A starting point is a clear vision and strategy that defines a blueprint for prioritising planning and implementation projects. The blueprint should articulate a quantifiable business case for why undertaking broad-based change is worth the effort. Without this blueprint, and a clear drive from senior managers, real transformation will be difficult to deliver.
Further, it should define a target operating model for the future, identifying components such as:
- A high level design of the target finance systems architecture and tools that support the overall strategy of the organisation
- A well-defined strategy for data management and governance
- Process delivery models, highlighting the interactions between business units required to perform critical processes (such as financial reporting and business planning)
- Organisational models, defining clear roles, responsibilities and ownership along process lines, and in terms of business partnering relationships
- Required skill sets in line with the target operating model, and succession plans for key resources
- An analytics roadmap showing where, in the company value chain, analytics can create growth, quality and service improvements.
Willis Towers Watson has developed an approach to finance transformation projects that comprises three key components:
We believe that all three elements must be working together seamlessly to ensure success. For example:
- Without the right tools, insurers can never achieve operational efficiency, regardless of the quality of people and processes.
- Without the right processes and interactions between business units, whilst the tools may operate well, insurers will not achieve the optimum operational efficiency.
- Whilst the tools and processes can deliver an operationally efficient process, it is the people that add the value through analysing and interpreting the output. This is essential to allow management to run the business effectively.
Willis Towers Watson has an advanced and integrated suite of life insurance actuarial tools, referred to as ‘Solutions for Life’ (see Figure 1).
Figure 1. The Solutions for Life suite of actuarial tools within an integrated end-to-end risk reporting process
our solutions move beyond the traditional actuarial services, encompassing IT integration services and Software as a Service (SaaS) to bring you an innovative solution for your risk technology demands.
Over-arching these tools is Unify, our solution for the governance and automation of software and workflows. Each of the Solutions for Life tools can be used as component tools within Unify, or equally Unify can leverage other third party tools in its workflows. In particular, Unify’s workflows are expected to extend beyond the actuarial team into the wider Finance function to provide governance, control and automation to the full end-to-end process. Our services continue to expand in this area as we react to new challenges and demand in the market. This means that our solutions move beyond the traditional actuarial services, encompassing IT integration services and Software as a Service (SaaS) to bring you an innovative solution for your risk technology demands. This integrated operating model will allow an organisation to save time and money, comply with regulatory demands, optimise legacy systems and facilitate efficient and effective business management.
Organisational structures and skills that may have served companies well for many years may be inappropriate and will certainly need to evolve if the value from technology and tools is to be realised.
There are several key areas where this evolution must take place:
- Governance – Actuarial teams are notorious for performing excessively detailed and time consuming reviews. A robust and enforceable materiality and governance framework must be employed to minimise this and ensure time is being spent on the most important aspects.
- Culture – With the coming of new technology to automate and streamline processes, the mind set within the finance function must be aligned or the desired efficiency and timetable gains will not materialise. This may involve a culture shift and a move away from the typical over reliance on spreadsheet heavy processes.
- Review process – Particularly in large organisations, there is a tendency for multiple layers of review and approval being required for even the most minor of changes to the financial position.
Again, the appropriate materiality and governance framework must be in place to allow senior managers to focus on the real business issues. Managing and delivering on this change alongside the systems-related transformation is challenging, and requires proactive engagement from senior stakeholders to deliver success.
Complementing longer-term strategies for developing in-house skills and fostering more integrated ways of working between departments, outsourcing can provide further service
efficiencies, vendor commitments and innovations not easily found in-house. But a poorly planned or executed outsourcing strategy can result in more problems than it solves. It requires a specialist team with complete focus on delivering a high quality service, both now and for the long term.
Willis Towers Watson delivers high quality actuarial outsourcing solutions through well trained, professional, member-focused teams.
Willis Towers Watson delivers high quality actuarial outsourcing solutions through well trained, professional, member-focused teams. Global solutions tailored for the local market place and our industry leading technology provide clients with a range of integrated finance transformation solutions built upon a robust internal control environment and mechanisms to continually improve services and minimise the risk of error.
Demanding regulatory reporting timescales and governance requirements, the need for capital efficiency and earnings stability, cost pressures and new technologies are forcing insurers to work smarter and achieve more. However, for many companies, the processes which support this may not have kept up, with legacy systems and processes having evolved in an ad-hoc fashion, resulting in inefficiencies, lack of governance and exposure to process failure.
Future process needs will need to:
- Integrate and align with new technology, rather than work against it.
- Be well defined and documented so no unnecessary interactions between business units take place, which can be a real burden on the working day timetable.
- Capture data at relevant points in the reporting process to provide insightful analysis.
- Be robust and well governed to minimise risk and occurrence of errors. Be flexible to respond quickly and adapt to internal and external requirements.
In our experience, improving the processes and defining the interactions is key to an efficient operating model and critical to the success of finance transformation.
Finance transformation at work – case study
Willis Towers Watson has performed outsourced actuarial services for Chesnara plc since October 2014. Throughout 2015, there was a heavy focus on developing models and processes ready for Solvency II reporting ahead of 1 January 2016. Once live in the new regulatory world, attention turned to the systemisation and automation of these actuarial processes with the aim of delivering a higher quality service. The following headline benefits were delivered to the client:
- A significant reduction in the working day timetable, with 32 working days reducing to 10, representing a 69% improvement (see Figure 2).
- A 50% reduction in the resource required to perform a quarterly valuation.
- An improvement in the quality of service provided, as actuaries spent almost all their time on value-add activities rather than production.
- Stronger governance and complete audit trails through Unify automatically capturing, and enforcing, all the required steps.
By employing certain elements of the Solutions for Life portfolio, Willis Towers Watson reduced the working day timetable, as well as both the operational cost and risk associated with delivery, by streamlining processes and removing manual work.
Figure 2. Solvency II production schedule
Click to enlarge
Achieving finance transformation in practice – why Willis Towers Watson
Willis Towers Watson has a unique combination that makes us the best partner for any finance transformation project. We combine:
- Software solutions and tools from our Solutions for Life platform.
- An accomplished and dedicated consulting practice, which has a wealth of experience delivering change with insurers throughout Europe.
- An actuarial outsourcing unit, where we routinely deliver transformational change to actuarial processes to deliver a high quality service to our insurance clients. This has given us a comprehensive range of practical real world experience and, most importantly, the know-how to make sure the change is delivered into business as usual effectively.
Finance transformation projects can be daunting and there is no one path to guaranteed success; Willis Towers Watson can help guide you through to ensure your vision for change
If you would like to discuss how we can support finance transformation in your organisation, please contact your regular Willis Towers Watson consultant or:
+44 161 833 7260
+44 1737 274 391
+44 161 833 6211