The UK insurance sector is constantly evolving. Digital innovation, automation and operational redesign dominate boardroom discussions as insurers seek efficiency and resilience in a regulatory and economic environment that’s demanding and frequently fluctuating. However, despite the scale of these initiatives, many insurers discover that their transformation programmes deliver uneven results. One key reason is that finance is often involved too late in the process.
Finance has traditionally been viewed as a support function, responsible for reporting, compliance and control. But, in an industry defined by regulation and risk, the finance function is uniquely positioned to define the design and execution of Target Operating Models (TOMs). If insurers are to align transformation with strategic cost reduction, sustainable profitability and regulatory resilience, finance must assume a central leadership role, embedding financial clarity and control at the heart of operating model design.
Finance as the foundation of transformation
Technology and operations typically dominate transformation programmes. But, on their own, digital upgrades can’t guarantee success. Without a clear link to exactly how the business generates and protects value, technology can amplify inefficiency, rather than reduce it.
A finance-led approach ensures that transformation initiatives are evaluated around value rather than process and asks the question ‘why’ change matters, rather than ‘how’ it happens. It can assess how shifts in structure, process or capability will influence the balance sheet, capital allocation and long-term sustainability. It ensures that transformation is not just operationally efficient, but economically coherent.
The approach is particularly relevant given the current regulatory context. Reforms to Solvency II, changes to reporting requirements in IFRS 17 and increased scrutiny of conduct and resilience all require transformation programmes that balance innovation with accountability. Finance, with its wide-ranging view of capital and compliance, is uniquely placed to ensure that decisions about automation, outsourcing or digital strategy take both performance and prudence into account.
Redefining the Target Operating Model
Today’s TOM has evolved from an organisational blueprint into a strategic framework that must integrate financial objectives, operational design and risk appetite to deliver measurable value. Finance can provide the connections between strategic ambition and operational design. By linking front-office initiatives to their capital and cost implications, such as improved underwriting margins, optimised capital deployment or enhanced cost efficiency, finance can help prioritise investments that deliver the most significant financial and risk-adjusted value. Processes, technology and governance structures can then be configured to support those objectives in a measurable and transparent manner.
For example, many insurers are adopting automation and AI to deal with their claims and underwriting processes. While the technology can speed up decisions and reduce manual input, the questions that finance might pose could include, ‘does it reduce the cost per claim per ratio?’ and ‘does it free up capital or simply shift costs from one part of the business to another?’. Without that analysis, transformation risks becoming an activity that’s undertaken simply for its own sake.
Embedding finance into the TOM design phase ensures that these investment decisions are answered early, not after implementation, and are ranked by their contribution to measurable financial performance. It also reduces the risk of fragmented initiatives competing for resources without a unifying financial rationale.
Cost management precision
Cost reduction remains a perennial imperative across the sector, but the traditional approach – cost-cutting or hiring freezes – rarely achieves sustainable benefits. Finance can lead to a more precise, strategic cost agenda, distinguishing between those areas that generate value and those that don’t.
This isn’t cost-cutting for its own sake. It’s about building a cost base that aligns with strategy and risk appetite. Finance can identify areas where duplicated systems, inconsistent processes or opaque workflows inflate expense ratios, and can propose structural simplifications that enhance both controls and transparency.
In an environment where inflationary pressures and narrowing margins persist, insurers need more innovative ways to achieve cost discipline based on data. Finance-led insights into outsourcing, automation and shared services enable decisions that enhance resilience while delivering cost transparency and scalability.
The future of the finance function
If finance is to guide transformation, it must first modernise its own tools and ways of working. Its role must extend beyond reporting performance to interpreting it. This means adopting integrated planning platforms, predictive analytics and real-time reporting to support faster, more informed decision-making, turning financial insight into operational foresight.
By embedding finance professionals into transformation programmes, underwriting functions, and product development teams, insurers can create a more agile decision-making environment. Finance, therefore, becomes a strategic business partner, interpreting the financial consequences of operational choices and ensuring alignment with the firm’s risk appetite and capital strategy.
Such capabilities depend as much on skills as on systems, and elevate the CFO’s role. Instead of simply acting as an overseer of compliance and reporting, the CFO in this instance would become a strategic participant, balancing investment in digital innovation with the need for capital strength and regulatory discipline. Furthermore, finance’s independence also helps to maintain objectivity, creating a clear link between ambition and affordability.
The finance function driving value
For finance to lead effectively, it must evolve its own operating model. This means investing in the capabilities, technology, and data analytics needed to deliver real-time insight. Advanced planning tools, predictive forecasting and integrated risk-finance platforms enable finance teams to model scenarios, stress-test assumptions and guide decision-making with confidence.
A value-driven finance function also emphasises communication. Translating complex capital and cost dynamics into actionable insights is essential for influencing transformation outcomes.
Equally important is the development of talent within finance. The function must combine technical expertise with commercial understanding and communication skills. Only then can finance influence decisions across digital innovation, operational design and customer proposition.
Summary
When finance leads, transformation becomes coherent – investment decisions align with financial strategy, cost structures support competitiveness and compliance is built in rather than retrofitted, ensuring that operating models serve the long-term interest of both the bottom line and the customer.
For UK insurers facing regulatory complexity, shifting capital rules, and competitive pressure, leading on TOM design can transform them from passive observers into the foundation of sustainable change. In doing so, it secures not only the insurance company's financial health but also its long-term competitive advantage in a sector where capital discipline and operational agility are closely linked.
Next time: Closing the reporting gap: How to prepare for CP19/24 and future regulatory reporting demands
If you need assistance with any aspect of your insurance operating model transformation, contact Brighter Consultancy for more information about how we can help.
