Traditionally, the insurance finance function dealt with statutory accounts, regulatory deadlines and accurate audits. And while these functions remain vital, especially in the UK’s tightly regulated insurance market, they are no longer enough. Today, as insurance organisations face unprecedented technological transformation, strict regulatory demands, and greater emphasis on ESG requirements, the finance function must reshape itself from a compliance function to a transformation engine. This will require new tools, new expertise and, most importantly, a new direction for finance leaders.
From compliance to transformation
Today’s insurance finance function is expected to provide insights that inform both growth and strategic direction. Increasingly, boards require their finance teams to provide performance interpretation and future scenario modelling, as well as information that supports strategic decision-making to deliver enhanced value and maintain compliance. This is particularly important for departments that collaborate closely with finance, such as actuarial, risk and underwriting, when they are dealing with reserving assumptions, investment strategy and capital optimisation.
The heightened level of required insight means that finance teams need more analytical skills than previously. In the past, due to slow reporting cycles and a heavy reliance on manual processes, finance teams have struggled to respond quickly. Now, thanks to technological tools that provide real-time data, scenario modelling, and predictive analysis, finance leaders can make faster, more informed decisions.
The importance of new skills
The widening of the finance remit means that the required skills need to change, too. Specific expertise, such as technical accounting and regulatory knowledge, will remain central to the finance function, particularly in light of IFRS 17, which deals with accounting and sustainability disclosure standards, and Solvency II, which outlines requirements for financial resources, governance and accountability, as well as reporting and public disclosure. These core skills must now be supplemented by acute commercial awareness, high levels of data literacy and the ability to communicate effectively with stakeholders.
Today’s finance professional must, therefore, be able to interpret complex datasets and then fluently and comfortably explain to both finance and non-finance colleagues what potential financial outcomes can be expected.
In addition, a wide range of leadership skills are increasingly important – finance leaders today must lead change programmes, exert influence across the whole of the business and help to deliver improvements that extend beyond the finance department’s remit.
These changing expectations clearly have implications for insurers’ talent acquisition strategies. In response, boards are focusing more on upskilling existing teams, attracting people with skills in both finance and technology and offering clear career development pathways.
Transformative technology
Increasingly, technology, in the form of cloud-based platforms, automation tools and advanced analytics, plays a vital role in determining the future of a successful finance function. Its use can significantly reduce the time that teams spend dealing with routine activities and free up space for high-value tasks, such as planning and analysis.
However, these technologies can only add value if they operate within clear departmental structures. Simply adding new tools onto legacy processes can increase operational complexity, rather than reduce it. Therefore, it’s in organisations’ best interests to reform and redesign their finance processes first, before introducing transformation technology
How finance can support ESG reporting
Over recent years, Environmental, Social and Governance (ESG) reporting has become more important for insurance organisations. It’s their opportunity to demonstrate how transparent they are in terms of climate risk, sustainability and social impact, and to reassure regulators, investors and customers that they are conducting their business with integrity. This is particularly important in light of the UK government’s Sustainability Disclosure Requirements, which outline the UK’s ambitions to become the ‘world’s first Net Zero Aligned Financial Centre’.
Finance teams can reinforce this vital work and support their organisations in managing risk, maintaining compliance and increasing investor confidence through the use of data on sales, supply chains, customers and other vital information that they obtain from existing sources and embedding it into forecasting and risk management processes.
The evolving nature of finance
In the future, the finance function will, of course, remain important and relevant. Its role will still be to deliver statutory accounts, maintain financial controls and produce accurate reports. But there will be an increasing emphasis on value creation through enhanced performance. The capture and analysis of financial data will inform an organisation’s financial planning and forecasting, enhance its ability to manage risk and remain compliant and support its strategic decision-making, to build investor confidence, increase investment and encourage growth and scalability.
If they want their finance function to evolve from a compliance centre to a transformation engine, finance leaders must now ensure that their organisations invest in training and development, attract talent with the right mix of commercial awareness, data literacy and communication skills, utilise technology which brings added value and work to put the finance function at the heart of the business.
Next time: Building the Future Finance Team: Skills, Structure and Strategy for UK Insurers
If you’d like more information about how Brighter can support your organisation in taking your finance function beyond statutory accounts and developing its future role, contact us.
