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The Actuary The magazine of the Institute & Faculty of Actuaries

The road to successful finance transformation 

Actuaries are model specialists – and they consider it normal to develop the entire reporting framework themselves, but is this really an efficient way forward?


Insurance company finance directors have seen related costs mounting in recent years because of the historical development in reporting frameworks. These are likely to progress in only one direction, driven by the need to prepare for IFRS17 implementation in January 2022.

However, rethinking business and financial systems, and how they interconnect, can help companies to reduce costs and derive more business value from the large amounts of new regulatory and accounting financial information that insurers have had to generate. To date, system and process evolution has tended to address a small number of needs at a time – often in isolation from other business considerations.

As digitisation becomes real, we believe finance transformation solutions will have to involve new thinking. Changes that would previously have focused on simply ‘faster’ or ‘better’ will now need to encompass ‘faster’, ‘better’ and ‘cheaper’ at the same time, as well as enabling companies to make better and wider use of information in the business.

This applies the same logic that leads consumers to buy production line cars for their reliability, speed and price, as opposed to buying component parts and building it themselves. Our experience emphasises the benefits this brings to reporting and business intelligence frameworks for insurers.

What do you want from business and financial systems?

A first step is to determine what a financial framework should deliver. If asked, most finance directors would like to industrialise regulatory and accounting standards compliance in order to save time and money, work more sustainably and allow their financial experts to add value back to the business. At the same time, if asked whether the investment to date in their systems and processes has delivered those savings, we’d wager on there being a similar level of negative responses.

Figure 1 gives a snapshot of a platform where all financial information, including information needed for regulatory or accounting purposes, would be available to improve product design and sales performance. With the right technology, methodologies and processes, as well as people who have the mindset to deliver them, such a platform can be within reach.

Let’s consider how a company could benefit from a more connected approach for some common business applications.

Figure 1
Figure 1

Product design

With the right connectivity, feedback loops, enrichment of data used and depth of analysis, companies can improve their understanding of issues in the product portfolio and seek to address them. In tandem, better industrialisation of repetitive modelling tasks will also free up actuaries, accountants and controllers to use their expertise to add real value.


Many companies already analyse which parts of their salesforce are the most successful. However, instances where this information feeds in to other parts of insurance operations – particularly to improve sales incentives and in the management of the existing client portfolio – are more limited.

In-force book management (life insurance)

Good sales analysis information can be put to use in many ways for more effective in-force management. From a high-level perspective, it will help determine how incentives and changes to the way policy surrenders and claims are treated – and can therefore reshape the in-force book over time. In the shorter term, it will assist decisions on moving policyholders out of certain types of products, such as those with expensive guarantees.


An effective reserving process needs to interface with the wider business, both from an input and output perspective. The more this can be streamlined and reduce the need for manual processes and transfers, the better. This means having the ability to seamlessly interrogate information such as policy and claims data and discount rates. It should also provide information for use in areas such as reporting and capital allocation.

Profitability reviews

All of this information will contribute to a better understanding of how and where companies make profits, including the influence of factors such as product, salesperson, geography, age, profession, specific risks and general consumer behaviours.

Joining the dots

The people who should be thinking about the insights from analyses are too busy keeping the many moving parts of disparate reporting frameworks going. 

The infrastructure does not allow them to focus on adding value. But it could. 

The components that insurers need, to avoid having to design new add-ons and maintain the complex landscape of existing solutions for financial systems, already exist. Take, for example, our own framework solution for insurers, which uses our Unify portal in conjunction with our Data Validator, RiskAgility and other software. This has been designed with the following principles in mind:

  • A single machine – More revolutionary financial frameworks should be (and can be) delivered through a single system. These should join the multiple dots of the finance and analytics infrastructure to help control.
  • Standardised design – Modern framework solutions should handle a variety of portfolios with all their specifics in the same design landscape, using a standardised structure for managing roles and governance that provides the flexibility to deal with the specialities of particular organisations. This avoids the need to constantly reinvent the wheel, and drives cost down by sharing it among many companies.
  • Plug and play – The technology should be ‘plug and play’ and negate the need for multi-year development projects.
  • Power under the hood – Companies today need processing power, but the need for flexibility to deal with peaks and troughs in the financial calendar means they do not need to own it. The cloud and other on-demand technologies are far more efficient and help manage costs.
  • A reliability guarantee – If companies are going to go down this route, they need assurances about cost, service quality and the ability of the framework to adapt to future needs, including new regulation.
  • Pay-as-you-go – The solution should eradicate huge upfront costs by making the framework technology available as a solution-as-a-service. 


How you use a tool is the key differentiator

Having the components is only half the battle. Insurers looking to do effective finance transformation won’t get very far without good technology to offer speed, control, governance and automation. However, you win or lose the race to an excellent framework based on how you use the technology.

For insurers looking to transform financial information systems to achieve cost, efficiency and business value improvements, knowing ‘how to use’ translates into better conceptualisation of the issues to be addressed. This can then lead to better thinking about how reporting and analysis frameworks could operate and link, which in turn will lead to better results. Our experience shows that typically, the biggest issue is achieving ‘easy maintenance’ – achieving long-term low run-cost through optimal upfront design.

Finance transformation won’t happen overnight, but the eventual risk of constantly putting plasters on the existing reporting framework is that your view on the required levels of value added and running costs deviates more and more from reality – which is an unpleasant competitive disadvantage.

John Morley is global head of business process excellence for Willis Towers Watson and is based in London