Finance operating model in insurance and impacts of AI and Generative AI

After having spent several years sorting out regulatory requirements such as IFRS 17 and LDTI  , and adjusting systems and teams to them, insurers now have an ambition to turn their efforts towards a more value-driven transformation.

In today’s volatile context due to interest rates changes, inflation, climate, geopolitical and other challenges, taking a fresh look on  the finance operating model implies considering and balancing out a multitude of requirements and priorities, such as cost-efficiency, regulatory compliance, how to add value, how to manage risk, and how to attract and retain talent. 

Most insurers struggle with similar challenges: non-effective partnering of finance with business units, cumbersome and unharmonized processes, inaccessible and unstable data, and scarcity of talent. When addressing these challenges, five areas of focus emerge related to transforming insurance finance towards a strategic operating model: partnering  more effectively with the business, creating a digital- and artificial intelligence (AI)- powered user experience, redesigning finance processes end-to-end, separating operational activities from the “change” activities, and making centers of excellence more relevant and efficient.

Starting from agreeing and aligning on the strategic vision for the next five to ten years, it is important to analyze the ecosystem to define the right steps for achieving this vision. Ecosystem analysis includes a detailed look-through the organization’s priorities and assessment of the current finance setup and capabilities. In this paper from Deloitte Germany, we define the target operating model (TOM) through three key elements and build it through a series of far-reaching questions on each of these elements: 

• Technology and data
• Processes and work structure
• Organization and people

Even though there is no single, ideal TOM  that fits all finance organizations, an aligned strategy and optimization objectives shared at all levels of the organization are the key to defining it.

For global insurers we see the trend towards a global operating model that aims to achieve twin objectives: scalability, by taking advantage of the insurers’ global presence, and efficient cost management, by, for instance, leveraging lower-cost locations for certain functions. 

Whether it is solely focusing on developing global infrastructure with finance systems packed into a single global core, with industrialized processes and single repositories for data, or creating shared services centers for critical functions, it should always consider all three key elements of an operating model, and all finance functions and areas – from traditional accounting to actuarial, controllers, risk, investment, and tax. Shifting to a sustainable and resilient operating model should also be planned as multiyear journey, not a big-bang, do-it-all-now endeavor, involving the A-team resources, both internal and external, along this journey.

AI and GenAI strategy should be part of this journey and be based on a comprehensive approach that includes identification of the use cases and establishing a set of controls and governance to ensure a responsible application of AI.

To undertake a transformation, selecting an external partner that can advise finance teams around strategic, business, technological, and operational aspects of change is crucial to unlock the true value.

Authors

Christopher Alm

• EMEA Insurance Finance Transformation Lead
• chalm@deloitte.de

Victoria Kreminskaya

• Insurance Finance Strategy and Transformation Expert
• vikreminskaya@deloitte.de

Franck Barbarella

• Global Insurance Finance Transformation Lead
• frbarbarella@deloitte.com.hk

Gareth Evans

• EMEA Insurance Finance Transformation Lead
• gevans@deloitte.co.uk

Darryl Wagner

• Americas Insurance Finance Transformation Lead
• dawagner@deloitte.com

Francesco Nagari

• APAC Insurance Finance Transformation Lead
• frnagari@deloitte.com.hk