Potential for Cloud in an Insurance Finance Function

As insurers look at various ways to enable innovation and reduce cost, that pace of change has intensified over the past year and a half. This is no different in the finance function, long burdened by chronic underinvestment in data and technology. Now with ESG and new standards of regulatory reporting such as IFRS 17 and Solvency II on the horizon, that squeeze is beginning to feel very acute.

The finance function needs to get on the front foot, tackling these challenges by fully embracing technology and all its possibilities. In particular, cloud technology offers a route to reinvention into a high performing function. And most importantly, cloud technology offers a way to address four of the key barriers to achieving a high performing finance function.

1. Rationalising complexity in systems and data architecture

In our work with finance functions, notably those in insurance organisations, we’ve found that the way their data and systems are structured are a legacy of the organisation’s history. Multiple business lines, product lines, intermediaries, past M&A activity have led to fragmented parts being built and developed over time - often not in sync with growth. It is not uncommon for insurers to have legacy systems hosted on mainframes from the 1970s. And those systems have to integrate with the rest of their data and technology estate. This results in operational inefficiencies and misalignment of functions across various business units, and often incur additional operational costs.

So how can cloud help simplify this architectural complexity? Cloud enables organisations to more easily simplify their systems and data architecture and develop better integrations across their technology landscape. Organisations can embrace an Application Programming Interface (API) led modular architecture to standardise their architecture. This enables plug and play capabilities, allowing them to better integrate with a variety of vendor solutions rather than creating limited bespoke solutions.

Cloud also allows organisations to start small. They can experiment with low cost and low risk solutions, finding ways to get from strategy to execution faster and, in doing so, demonstrate the value of a move to cloud in a reduced time.

While organisations can certainly migrate their legacy systems to the cloud, many may find there is a better, more streamlined, solution. Migrating their data to PaaS or SaaS based services instead will eliminate on-going application maintenance and quickly gain new functions and capabilities.

2. Improving insights with higher quality, faster reporting and analytics

Much like the tapestry of differing systems and data structures mentioned above, we have similarly found a proliferation of reporting platforms and spreadsheets within finance functions. These end user developed applications (EUDs) vary in style and quality of outputs, causing inefficiencies to align results, increasing costs and weakening control. This results in poor data quality and integrity that typically requires manual data processing and multiple reconciliations to resolve. All of which leads to mistrust in the information shared both internally and externally to investors, partners, third-parties and customers.

Cloud enables low-cost consolidation of data, automated reporting and the application of pre-packaged data governance mechanisms. This helps reduce the upfront effort for reinvigorated manual reporting and organisational MI and helps democratise access to data across the finance function and open up information sharing with the rest of the organisation. Teams and departments are able to acquire, store, manage and share granular data in a much more efficient way by using the tools and services readily available in the cloud.

The finance function traditionally has had to settle for highly aggregated and summarised data, often encountering reconciliation issues and limited integration with other business units. Ready access to transaction level data and easy to use advanced analytics, such as pre-packaged machine learning, means that finance gains operational insights typically prioritised for customer services and product R&D teams. The wide range of data storage solutions e.g. data lake, data warehouse, data store, data mesh means that ALL data can be exploited with low barriers to entry and then enable data led operations.

3. Focusing business partner support time where it adds the most value

Finance Business Partners are a costly and valuable finance resource. So it’s disheartening when most of their time is spent on activities like gaining access to platforms, finding and gathering data, quality assessment, data manipulation, reconciliations and reports that do little to add measurable value to the business.

This is another area where the analytics provided through the cloud can help. In this case through creating an efficient, and ideally seamless, Business Partner support function. Cloud enables organisations to reduce the effort and cost in wrangling data and frees up time to focus on partner needs and innovate with new ways of working, new interfaces (ideally APIs) and new products. Self-service by partners empowers them, brings them closer to your business and stimulates more active participation. No more complaints about delayed reports or poor quality data or being kept at arm's length.

Cloud vendors offer services, simple building blocks, for user interface development, mobile app development, API development, backend-integration, data catalogues, single-sign-on access controls, security controls and monitoring alerting. The finance teams can try new approaches with trusted partners, new data feeds, experimenting, following a fail-fast approach, and then quickly rolling out proven new capability to the full partner network.

4. Automating manual payment operations

Many sub teams within the finance function operate manually. For example, credit control and cash management teams typically operate multiple cash solutions which are frequently a unique solution and process by administration platform. As a result, they need to dedicate a significant effort to managing query resolution with the intermediary/broker, and reconciling payments (money in and out) to policy and ledger leading to a large volume of manual payment processing (i.e. cheque processing rather than using BACS).

Cloud as a marketplace enables organisations to automate their back office operations by choosing fully-rounded, SaaS based, enterprise grade accounting solutions such as ERP and EPM. These provide out-of-the-box capabilities and plug-and-play integrations with minimal IT effort. This is complemented and enhanced by a diverse range of finance and actuarial tools and services that can plug-into the core ERP application that can perform Process Mining, Execution Management Systems (e.g Celonis) and RPA (e.g UIPath, Blueprism). This means that the finance team can automate many of its low-value, high-volume and time intensive tasks e.g., Manual payment operations, Balance Sheet and Income Statement Reconciliations, Account Payables and Account Closing and other, again with minimal IT support.

Achieving a more agile and efficient function for the future

In summary, as the finance function embarks on a journey to meet greater demands and regulatory needs, the cloud will play an important role in their technology and data strategy. Cloud computing provides a wide range of solutions to address the needs of the finance team. Finally, when new solutions are operational, the new modular designs can be adopted by managed service providers who can step in to support on-going operations. As a result, the finance teams never need to concern themselves about IT infrastructure again.

Contact us to learn more about identifying opportunities or addressing challenges in your finance function by unlocking the potential of cloud.

Potential for Cloud in an Insurance Finance Function

1. Rationalising complexity in systems and data architecture

2. Improving insights with higher quality, faster reporting and analytics

3. Focusing business partner support time where it adds the most value

4. Automating manual payment operations

Achieving a more agile and efficient function for the future

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