How insurers can build the finance function of the future

While core finance, accounting and actuarial skills remain an important foundation (especially in light of new accounting and regulatory standards), a number of “must-have” capabilities have emerged for finance to transform successfully and deliver more value with a lower headcount. EY market research indicates that up to 60% of current administrative and reporting tasks undertaken by non-manager finance roles can be automated, freeing up capacity for higher-value analytical and business advisory work.*

Our study found that market intelligence, business acumen, strong data and behavioral analysis were top of the list for future capabilities of finance teams. Finance teams need to provide management intelligence to guide strategy execution and decision-making, and support driver-based planning and analysis, rather than simply measuring the outcome of these drivers through KPIs. In a function enabled by better data, it is the people interactions and engagement across the business that will differentiate and ultimately help drive competitive advantage.

Insurers should also be looking for non-technical skills, such as, communications, emotional intelligence, and decision-making. Specifically, finance should be looking for professionals who:

• Can translate key accounting and actuarial concepts into language that business stakeholders can understand and engage with
• Are comfortable with disruptive change and can manage shifting reporting and regulatory requirements (e.g., ESG) and evolving business priorities
• Possess strong relationship management skills; can collaborate closely with actuarial, risk and business teams, as well as other stakeholders to provide holistic views of performance and capital
• Are technology savvy – finance professionals won’t need coding skills (thanks to the latest generation of tools), but they need to have the knowledge to take advantage of automation, self-service reporting, data visualization and other “citizen developer” tools
• Have curious and problem-solving minds that seek out the “why” behind market and performance trends, to generate relevant insights for innovation and business improvement

Building teams with these capabilities will take time, but forward-thinking insurers are looking at a range of options – from recruitment and retention efforts, to retraining and reskilling existing workers, and engaging external partners for specific skills.

Finance needs to become more flexible in the way it operates to promote collaboration, innovation and diversity of thinking. It’s important to quickly form pools of talent (e.g., accounting, actuarial and data analysis) to respond nimbly to changing demands of the business and support innovation and change. Temporary reporting lines and agile ways of working can empower these teams to make decisions and solve problems creatively.

Finance is on a pathway from purely transactional relationships to advisory partnerships with stakeholders. Closer collaboration across finance, actuarial, operations, and underwriting teams is driving better long-term results, fulfilling reporting requirements more efficiently and enhancing visibility into performance in ways that benefit decision-makers across the organization. Data analysts and data scientists are key enablers in this process, helping generate more insights and value to the business.

The key questions to ask:

• What is the critical information required for board directors and senior executives to understand business performance and make key decisions?
• How do we ensure we have a commonly defined set of performance metrics that people and teams own?
• How do we proactively engage the business to bring deep analytics skills to rich data sets?
• How can we break down barriers across functions and create a culture of collaboration around common goals, rather than siloes of thinking and activity around specific skills?

Joint accountability models will become even more important, as insurers embrace ecosystems and platform-based businesses, involving outside partners and multiple lines of business to deliver broader and personalized offerings to clients. The ability to deploy small, cross-functional teams to accelerate innovation will also be key to success in the ecosystem era.

With these changes and new talent on board, finance executives will need to modify their leadership styles to be more adaptable, balancing the need for oversight with the value of empowered teams with more autonomy. Managers may consider adopting agile practices and the concept of disciplined freedom, where experimentation is encouraged amongst team members in line with clearly defined goals, incentives, and a common set of values. Emotionally intelligent leadership to support teams and connect them to the vision is critical especially during times of transformational change.

When redesigning finance, leaders must consider the dynamic employment market and ask how to make the employee brand more attractive to new workers, especially for those entering the employment market for the first time. There is a need to evaluate whether the employee value proposition and experience are compelling and differentiating. A strong people experience – with clear career progressions, development opportunities, effective employee communication and feedback mechanisms, and an environment where people feel valued – holds the key.

The clearly defined, linear career paths of the past will be replaced by career experiences tailored to individuals. Those insurers that can clearly align the work of finance to a higher purpose and societal need (e.g., shrinking the protection gap, increasing financial well-being) will improve their chances of attracting the capabilities they need. 

There will be new entry points for careers in finance. Finance operations was the traditional starting role, but many of these junior positions will go away as straight-through processing becomes the norm. Change management, process optimization, data analytics and behavioral analysis will emerge as new entry points. There will also be opportunities to transfer to finance from business roles for workers with the commercial acumen to generate insight and provide decision support.

Conclusion

How to move forward: Think big, start smart, realize incremental value

Adopting new finance skills and ways of working requires a transformation approach designed around near-, mid- and long-term milestones that can produce value along the way. In setting off on this journey, the keys are to:

• Start strategically: define a clear vision for the future of finance talent, why change is necessary and where a shift in capability is required to deliver new services.
• Define the target people framework: create a tactical action plan to define how finance can rapidly form pools of the right talent in partnerships with key stakeholders and external firms where necessary.
• Embrace new ways of working: empower workers who provide the new capabilities to rapidly respond to changing business demands and market conditions and to make decisions..

Finance leaders should also keep in mind a number of practical issues as they shape their transformation plans

• Carefully consider who you choose as your agents of change, and ensure they have the mindset to challenge the status quo and inspire those around them.
• Promote bold and innovative thinking so that people think about what they can optimize today, rather than what they need to report on.
• Create a working environment that inspires your team to think about what, why and how to change – hackathons, hot houses, innovation days and flexible collaboration spaces are all proven tactics for fostering change and creativity.
•  Be prepared to evolve along the journey, with clarity on target outcomes, flexibility to experiment with different ways of working and collaborating across the function to achieve them.

Richard Parker, Partner, EY Lane4, Ernst & Young LLP and Rachel Collins, Director, People Advisory Services, Ernst & Young LLP also contributed to this article.