The fifth of our life modeling and techology series
In the previous four articles in this series, we have outlined the issues driving the need for change, and explored the strategies, technology and processes that could drive these changes. You may have now even developed your roadmap to reduce risk, save money and retain talent by refocusing on business process excellence and optimizing your modeling and people resources.
But perhaps the greater challenge still remains: how to actually get there with current projects filling diaries for unending periods and limited budget for the extra headcount needed to reinforce often overstretched teams.
In this article, the last in the series, we’ll outline the steps you can take to realize change, driving on from roadmap to reality.
In a world of scarce resources and scare budgets, there are fundamentally two approaches to driving change. The first is to identify a “save more than you spend” project. These are few and far between, but opportunities do exist such as cloud migrations. Here the aim is to create a virtuous circle where the cost saving funds future projects. The second is to invest in re-platforming or implementing new tooling for automation. For this, you need the sponsorship of senior leadership, and a compelling business case for a project that has a strong, short-term return on investment. There are four key steps to success with this approach.
01
Prioritizing the first project is key. This needs to be a success not only in its own right, but also because it’s likely to be the first of many steps to gain the credibility and trust key to gaining approval for future projects.
In a recent survey of insurers looking to improve their life financial reporting, many teams prioritized projects they understood well in areas that minimized collaboration with other teams. However, these didn’t offer the biggest payback and sometimes didn’t even align with their prioritized challenges.
To deliver your first crucial project, you should appoint a ‘product manager’ for the development process to review and assess your priorities. The product manager needs to have a good understanding of the budget and what’s achievable considering the realistic distractions you’ll face. They also need to ensure that there is margin to deliver what’s expected.
02
As we’re considering how to create value with a limited budget, you’re unlikely to be exploring options at the leading edge of technology. Instead, frequently considered solutions are those already proven by others — so the choice is between buy and build.
Buying a solution to your project needs should be cheaper than building your own. You’re only covering a portion of the development cost and gaining access to a wider range of features than if you’d built the solution yourself. The price will also include future features and support. However, the rate vendors charge for labor may be more expensive compared to your in-house labor costs — and you’ll also be committing to ongoing license payments. So you do need to consider other options.
Building your own solution could allow you to benefit from local resource costs and no future commitment to pay license fees. However, bear in mind you’ll only get the features you specify and finance, which can result in missed opportunities and the future risk of being left behind by your peers. You will also shoulder the cost commitment of having to maintain the solution yourself, including technology updates and ongoing security work. You should at the very least reflect these realities in your business case.
03
In many cases, a new approach requires changes to both technology and working practices. If you improve processes first – the ‘fix then shift’ approach — you may benefit from better results and enhanced savings. But it will likely take considerable time to realize some of these benefits.
By migrating first with a view to cleaning up afterwards — the ‘shift then fix’ approach — you’re more likely to realize a quick payback. But you will have built something that will need modifying later, which can be discouraging and risk descoping your project.
If you run the risk of running out of time on the project, the better route may be to fragment the work and ‘fix then shift’ each piece in turn. This way, you won’t compromise the end point, but can still benefit from innovations in a short timeframe.
04
Engaging in large projects can be daunting, particularly when technology focused. And all too often, teams start with the working assumption that talking to the IT department, or engaging the legal or procurement teams, will significantly increase the stress and work involved in a project, leading to the retrograde step of end-user computing being adopted.
We also frequently find pricing teams being convinced that another department would veto their project. For example, many actuarial teams have assumed either IT or corporate governance would block their goals around, for example, moving to cloud computing. Where, in reality, those teams were already moving the Office Suite to Azure or agreeing outsourcing and security policies to facilitate their own moves to the cloud.
The key takeaway here is that from the outset you should devise your project from a collaborative stance, promoting wider engagement. If you have a compelling business benefit and business case, you can expect IT, procurement and governance teams to help you achieve the best outcome. If your case is properly researched, they’ll facilitate your plans, rather than obstruct them.
To make the changes you need to improve the efficiency and effectiveness of your life pricing and modeling team, there are a range of options. The right one – or ones — for you will depend on the makeup of your team, the demands of your reporting cycle and the size of the insurance business you work for:
Over the course of this article series, we’ve discussed how positive change is necessary for many life modeling and reporting teams, though it is far from inevitable. So, we have also carefully laid out the considerations, decisions you’ll need to take, and the tools and tactics you have at your disposal to deliver the finance transformation you need.
There’s no one solution for all and indeed no one right solution for any individual company. But there are solutions that will deliver the changes you need, with the resources you have available, and that will maximize the return on the investment in finance transformation you make in people, processes and technology.
To find out how we can support your actuarial team drive financial transformation, including modeling, automation and process improvements, please contact your WTW consultant, email us or visit RiskAgility Financial Modeler (FM).
