For insurance companies, support functions are typically the most common targets for cost-optimisation initiatives. That’s certainly true of tax and finance departments. At the same time, these teams do critical work – reporting accurately, staying ahead of regulations and identifying risks.
Plus, they generally operate efficiently, even if they have limited resources and use older technology. Still, tax functions are often viewed primarily as cost centres, and therefore it’s no surprise that, according to an EY research study, 79% of respondents plan to reduce the cost of their tax and finance function during the next two years.
Despite the persistent cost pressures, finance and tax teams face a great deal of change in the near term. Tax, reporting and regulatory requirements are growing more intense and complex, with greater emphasis on sharing tax data digitally and transparently. Producing more accurate information and returns more quickly is another top objective. Data volumes continue to expand, and technology gets ever more sophisticated. Transformation and technology upgrades make possible more extensive automation and deeper analysis, though tax is frequently left out or considered a lower priority, in front-office and finance transformation efforts.
Compared with organisations in other sectors, these trends may be particularly challenging for insurers, because off-the-shelf software packages are often not practical solutions, given the complex nature of tax in insurance. At some insurance carriers, business stakeholders are looking to tax teams for more precise performance insights, more detailed planning, advice regarding customer-related product taxes and tax risk management. Increasing tax transparency is also a focus for insurers and their stakeholders, with regards to the environmental, social and governance (ESG) agenda.
As a result, tax and finance leaders at insurers face key questions about where to prioritise their investments and energy. We explore a range of key questions as they seek to find a tax operating model that best suits their future goals and strategies. Many of the ideas and recommendations come from our work with both large global carriers and mid-sized regional insurers. These insights are meant to help insurance tax functions think about how to operate efficiently and effectively in satisfying external requirements, as well as to meet the strategic and tactical objectives they set for themselves.