Digital Insurance Agenda

Finance Function Leading the Way in Insurance Automation

Written by Roger Peverelli and Reggy de Feniks - Founders The DIA Community on Nov 30, 2021

The finance function has evolved towards being the front runner of automation in insurance organizations. Several factors contribute to this evolution, among others strict regulation. This has implications for the role of the CFO. Finance transformation expert Frédéric Moinier shares his views on the insurance business and the value of automation.

Frédéric Moinier has extensive experience as a CFO in insurance, including the set up and management of Shared Services Centers. He will be participating in one of the upcoming round tables by the CFO Automation Experience (CFOAX) on automation in the insurance industry. This industry faces some unique challenges. Moinier: “The finance function in insurance organizations has never been at the forefront of digitization. It was almost always last, when it came to investing into new systems, new processes, and new technology such as robotic process automation (RPA). Client facing systems always had priority. “Excel has always been our best friend.”

He continues: “What has really driven change and the move into more modern and automated systems is the strict regulation of the insurance industry. In the last ten years we have seen many changes in reporting and accounting rules. First all European companies had to move to a new solvency framework, which has led to a lot of investment in putting the right data into the right reports.”

Streamlining and standardizing processes and systems to increase efficiency gains
“And what we are seeing now is investment in automation because of International Financial Reporting Standard (IFRS) 17, which is a huge accounting challenge for listed companies. Not all companies have to move to IFRS 17 obviously, all those who are not listed are not obliged to go there. So this will create a disconnection between the small ones and the large ones. The large ones have invested hundreds of millions of euros into new systems to be IFRS 17 compliant.”

These two major changes in the industry have led to more modernization and better data systems, says Moinier. “Another factor has been the aftermath of the financial crisis in 2008. Until then insurance companies were making huge profits, even without doing anything from a pure technical point of view. Suddenly the profit dropped. This led to a drive to reduce operational costs.”

“At this moment, the need to exchange data more efficiently between systems has become more important than ever. One of the means to streamline IT was setting up shared services centers. The combination of increased data volumes and the need to reduce operational cost, has made RPA an interesting solution for many to consider. He explains: “When you suddenly have a lot of common data processes, you can start to streamline and standardize processes and systems.”

Finance at the forefront
“To do this effectively, is not just a responsibility for IT, but for the whole business, not least of all the CFO.” says Moinier. “There is no one size fits all-solution. Each company has its own organization and changes. But the need to be compliant in a lot of cases, has led to finance taking back the lead, for example in deciding which tools should be used, even though in the end it is an enterprise decision. With the need for compliance, has also come an increased focus on data management for example. The person in charge of automation is now also in charge of finance and data management, where it used to be separate.”

“Step by step people understand that we need a comprehensive view of all the information that has an impact on the financial reports. And that starts with the quality of the data. In the past the same data was used differently with different names for different purposes by different departments. Now there is more need for standardization, and IFRS 17 has probably helped quite a lot there.”

What is the role of the CFO?
“There is discussion sometimes about the role of the CFO. Should the CFO be in the lead for all automation? For me, this is not the case. In the insurance industry the CFO needs to be leading all his or her own projects, everything that touches with finance. But I don’t think the CFO should have a direct responsibility for things like claims management, the underwriting process or where to find prospects.”

“The CFO needs to be involved when it comes to the business case, to make sure all these projects are aligned with the strategy. They have to contribute to bringing the returns that the company has agreed to, to be delivered in the next three to five years. But that is from the financial point of view. Nobody knows better than the Head of Claims or the Head of Underwriting, what should be done in his or her department. Therefore, the CFO should limit his or her scope to the Finance function and return on investment.”, according to Moinier.

RPA and AI to improve accuracy and control – and free up time
RPA has proven its value as a tool in insurance to manage debit or credit, and accounts payable and accounts receivable, not only in procurement but also on premiums and claims.  All key processes that need to be automated to achieve STP in the end-to-end customer journey. “All these transactions where you have millions of movements, when it comes to invoicing, at the end of the process, at the end of the value chain. Robots function in the transactional part of the finance process. In processes around closing and reporting we see much less robots.”

RPA is helping Finance teams, willing to move away from their beloved Excel spreadsheets with automation providing more accuracy, control and audit trail. It helps to free up time for financial experts, to provide the value-add insights their business is expecting.

In a recent CFOAX round table it was discussed how automation can enable ESG (environmental, social and governance) initiatives and reporting. The desire to integrate it with financial reporting will become an imperative, as reporting standards and regulators set new standards.  Collating this data which is decentralized, or even held outside of the organization is a real challenge,.  Also here, automation can help with the workload.

Moinier: “Automation in insurance has not reached its full potential yet. Today, organizations do not use the tools that make robots intelligent. Only when you know what makes sense to automate, and when robots can reason over data, and use artificial intelligence to make decisions, the insurance industry can unleash new transformational opportunities. There are also tools like process mining, Natural Language Processing and Intelligent Document Processing. but I’m sure these are the next steps.“

Click here to register for the next round table with Frédéric Moinier.

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