Revolutionizing insurance planning and forecasting: A new era of profitability
AUTHOR
The insurance sector has long been considered a critical part of the U.S.’s “safety net”, providing peace of mind for businesses, individuals, and households by protecting against risk and loss. But fulfilling this role — while sustaining profitability — has never been more of a challenge.
Insurers are under pressure. Claims inflation has been a catalyst for an alarming surge in underwriting losses over recent years for property and casualty insurers. Added to this, an escalation in both the severity and frequency of claims (e.g., due to severe weather events and natural disasters) has coincided with heightened risk in the form of cyber-attacks and data breaches.
At the same time, insurers are challenged by changing regulatory requirements, while customer expectations for value and quality of service are growing higher and higher.
The result? An erosion of margins that were already razor thin.
To safeguard overall profitability and improve their combined loss ratios, insurers must be able to accurately forecast claims, anticipate change, and quickly adjust plans where necessary. However, recent Anaplan research amongst U.S. finance leaders has revealed that many insurers are still some distance from achieving the required level of financial insight and business agility.
The barriers to data driven planning
86% of finance leaders in the insurance sector say they lack confidence in the accuracy of their own forecasts.
Effective forecasting depends on the rapid a nalysis of relevant and timely data to generate insights that will inform strategic decisions. This capability requires real-time access to high-quality, integrated data.
However, the reality is that finance leaders in the insurance sector must manually extract and manipulate data from multiple separate systems and spreadsheets. These processes are labor-intensive, prone to error, and lead to lengthy planning cycles that put the business at risk.
90% of insurance finance leaders admit that their forecasts are outdated by the time they reach stakeholders. Only 6% are currently able to forecast in real-time.
This disconnect between forecast and actuals means that strategic business decisions are being made on unreliable and fragmented information. As a result, insurers may face a host of issues including higher than expected claims or the over- or under-allocation of capital.
Advanced tech such as AI promises finance leaders the ability to rapidly harvest actionable insights from complex datasets — for example, to proactively identify and minimize risks before they even materialize. However, organizational readiness to embrace and benefit from AI is in question.
97% of respondents say their data infrastructure and analytics capabilities will need to improve before adopting AI or other technologies.
The finance leader’s role is changing fast
In parallel with tackling these obstacles, insurance finance leaders are finding that more is being expected of them, with many seeing their remit and responsibilities expand.
98% of insurance CFOs have taken on additional duties outside of their traditional role in the last five years.
They are being called upon to support critical decision-making across the organization, far beyond the financial purview. The U.S. finance leaders who responded to our survey told us they are now becoming more broadly involved in areas such as innovation, customer experience strategy, and workforce planning.
Inaction is not an option
Finance leaders within the insurance sector have seen first-hand the impacts of disconnected and inaccurate planning, budgeting, and forecasting — at both an organizational and professional level.
100% have witnessed a negative impact on business performance because of poor decision-making. Consequences reported include delayed deliverables, lost opportunities, low productivity, and staffing issues.
What’s more, 100% have experienced personal consequences, including loss of credibility, criticism from stakeholders, and delayed career advancement.
Extrapolate this impact across the entire finance team, and their ability to perform effectively is damaged, leading to ramifications such as increased workloads and layoffs.
The need for greater visibility and agility
Rapid change is now business as usual for the insurance sector. The volatile landscape has made traditional financial forecasting, budgeting, and planning methods obsolete. To protect margins, minimize risk and remain competitive, you must evolve and modernize the way you operate.
Building a more agile and connected finance approach requires the breaking down of silos to align data and priorities across the business, providing real-time access to ntegrated information. It also means closely linking your corporate and business unit finance teams to drive stronger outcomes through improved collaboration.
A Connected Planning platform like Anaplan will integrate disparate data sources to create a single, unified view for corporate and business unit financial performance reporting and modeling. Using this holistic view and dynamic scenario modeling, you can enhance decision-making to minimize risk, better allocate resources and capital, reduce costs, and boost productivity.