3 minute read 11 Feb 2019
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How tax directors can seize opportunity in a time of change


Jeff Soar

EY Global Insurance Tax Leader and UK FSO Tax Leader

Global Insurance and UK FS Tax leader. With EY for 16 years. Big rugby and cricket fan, both playing and watching. Live in the countryside with wife and son and loves the great outdoors.

3 minute read 11 Feb 2019

Tax leaders recognize the need for transformation, but face barriers in adopting advanced technology. It’s time to promote productive change.

Across the insurance industry today, tax departments face political and regulatory uncertainty, resource constraints, sub-standard data quality and legacy technology ­– to name a few of the most pressing issues. Because of this, it’s also an opportune time to promote productive change, and for tax teams to focus on:

  • Understanding the challenges and opportunities presented by transformation and innovation programs
  • Seeking opportunities to improve data quality and access, while automating key processes and workflows
  • Identifying how regulatory compliance can lead to business value 

Emerging themes for 2019

At our insurance tax roundtable at the Insurance Tax Conference in Chicago in November, these key themes emerged: 

  • Changing consumer behaviors and technological advancement are fundamentally altering the insurance business; tax teams are preparing for the long-term impacts of these changes.
  • Tax leaders recognize the need for transformation but face significant barriers in adopting advanced technology, integrating data sets and rethinking their operating models. 
  • The risks of managing multiple ledgers and cutting/pasting data are well understood, but barriers to getting better data are pervasive. Tax teams feel hampered with the numbers the business gives them, knowing they are often inconsistent or inaccurate. 
  • Automating data gathering and manipulation could help alleviate cost and resource pressures, and drive the organization to a single version of the truth. 
  • Standardizing data flows used by tax, finance, risk and actuarial has proven to be effective and valuable at some insurers. 
  • From Brexit and US tax reform to the EU’s mandatory disclosure regime and global indirect tax controversies, the regulatory environment is evolving rapidly and is a source of great uncertainty. 
  • Though countries and jurisdictions are experimenting with different approaches, the trend is toward direct access to company data, faster reporting cycles and increased transparency. The day when tax authorities know more about the business than tax directors is fast approaching in some markets.

Megatrends and market drivers reshaping the industry

Changing consumer behaviors, demographic shifts, new technologies and intensifying regulations are fundamentally altering the insurance business. Millennials don’t view the need for, or value, of insurance in the same way as previous generations. Their decreased interest in owning cars and homes – and thus the responsibility of insuring them – is an ominous sign for the industry’s future. 

At the same time, the rise of sensors connected to the Internet of Things (IoT) offer great promise to insurers seeking to price more accurately and offer next-generation products, including so-called “pay as you drive” and “episodic” policies. Consider how connected cars and smart homes generate massive quantities of data, but change the risks that insurance policies are designed to protect. Commercial and life insurers would benefit from clearer real-time insights into risks provided by connected and/or wearable technology. 

Machine learning, artificial intelligence and distributed-ledger technologies may be the key for insurers to manage the massive new data streams that will revolutionize the industry. What’s becoming clearer is how “digital” transformations are not about any one specific technology advancement or systems upgrade, but rather a combination of technology-enabled and data-driven innovations that will impact the business from end-to-end.

Based on the engagements with global carriers of all types, sizes and industry sub-sectors, we recommend that insurers focus on three areas:

  1. Optimize current business models
  2. Innovate around new customers, products and channels
  3. Continually review existing portfolios

Impacts on tax: tomorrow matters today 

Tax leaders are tracking megatrends and recognize the need for transformation. Certainly, the broader market drivers impact tax organizations; for instance, tax operating models need updating in response to the common business mandate to “do more with less". More effective use of technology, data and automation may hold the key. The steps tax leaders take today will help determine their success tomorrow, even if each step forward on the transformation path must generate incremental value. 

In evaluating technology, many insurers face the “buy vs. build” conundrum. Tax leaders, and their colleagues across finance, recognize the transformative power of the latest technology, but it’s unclear whether new platforms can connect with legacy systems or offer the customizations to handle unique workflows and processes of individual companies.

And, new technology won’t solve the problem of inaccessible data that’s hidden in the business, thanks to non-standard technology or unclear organizational reporting lines. Experienced tax leaders understand that the more they look for relevant tax data, the more they find. Too many expenses are still captured in non-standardized ways. Shadow tax and finance groups exist at far too many insurers. 

There is the bigger strategic question of automation and sourcing. One way to add value is to focus human resources on high-value analytical tasks, rather than on data gathering and the dreaded (not to mention time-consuming) high-risk task of cutting and pasting data from different sources into multiple ledgers. However, enhanced toolsets and higher standards for data quality and access are necessary to automate it.

Globalization and digitization are forcing insurers to choose between evolution or revolution in all parts of the business. Within tax, technology and talent top the agenda.
Scott Guasta
EY Americas Insurance Tax Leader

Like the insurance business, the tax function is driven by data. Its success is determined to a significant extent by access to and quality of data. That’s why our insurance tax team recommends asking four questions in mapping transformation or performance improvement strategies:

  1. Do you have a data transfer strategy?
  2. Can your data predict anomalies?
  3. Is your data an asset?
  4. Can you talk to your data?

When it comes to the organizational model, some insurers have had success by integrating their finance, risk and actuarial teams. This has resulted in increased data sharing among these groups – a necessary step given the imminence of standards such as IFRS 17. 

It’s worth noting that tax leaders may feel limited in their ability to lead the organization forward in adopting advanced technology, integrating data sets and rethinking the tax operating model. For tax leaders, these questions arise:

  • How do we properly connect or link into transformation-driven investments?
  • How do we define the tax business case for technology investment?
  • How do we engage the organization in a commitment to transparency in full data sharing?

The regulatory view 

From Brexit and US tax reform to the EU’s mandatory disclosure regime and global indirect tax controversies, the regulatory environment continues to evolve, and remain uncertain. In some ways, tax has never had a higher profile. It’s an issue in political elections worldwide and constantly in headlines of both the business and general press. Tax reform is not just happening in the US but around the world. 

Insurers’ business models and organizational footprints were designed for an increasingly redundant international tax framework. The new system of rules that has emerged post-Base Erosion and Profit Shifting (BEPS) and post-US tax reform, as well as impending digital tax reform, requires an entirely fresh look at business model design. Certainly, tax functions need to review their organizational structures, tools, technology and talent. Understanding how the trends are likely to develop is necessary to support the design of a future state model that manages cost, reduces risk and shortens what could otherwise be a painful transition period. Tax directors need to ask: how do you navigate your way through one set of rule changes without falling foul of another?

There is tremendous regulatory change underway around the world, and much of it points to greater transparency, more standardized data and faster reporting cycles – all of which enable tax teams to add more value to the business.


Megatrends, new technologies and regulation are reshaping the insurance industry. It’s an opportune time to promote productive change. Tax teams need to understand the challenges and opportunities of transformation and innovation; improve data quality while automating key processes and workflows; and identify how regulatory compliance can lead to business value.  

A recent insurance tax roundtable highlighted that consumer behavior is altering the insurance industry. Significant barriers to adopting advanced technology will require integrating data and rethinking operating models. We propose that insurers optimize business models; innovate around new customers, products and channels; and continually review existing portfolios.

About this article


Jeff Soar

EY Global Insurance Tax Leader and UK FSO Tax Leader

Global Insurance and UK FS Tax leader. With EY for 16 years. Big rugby and cricket fan, both playing and watching. Live in the countryside with wife and son and loves the great outdoors.