Challenge to CFOs and CUOs: Maximising technology to benefit insurance business

Having attended the recent Asian Insurance CFO Summit 2017, organised by Asia Insurance Review, we see there is now, a clear demand and wish for a greater degree of interface across both the transactional and back office operations.

The Asian Insurance CFO Summit in many ways was a litmus tests for the feeling of the finance departments of major underwriters across the region and internationally.

While, quite naturally, there remains a significant focus on the areas of pricing and product development, it has to be remembered that insurers rely on capital to drive their business. Too little and they fall foul of regulators and the threat of being unable to meet their claims. Too much and they need to decide how best to utilise that excess to meet the expectations of their shareholders.

Therefore, we expected much of the concern to be over the issues surrounding capital. Surprisingly, the core issue was not dissimilar to that which is occupying the minds of the chief underwriting officer.

Both CUOs and the CFOs are fully aware of the potential benefits that technology can bring to the business. It’s clearly not rocket science but what might surprise many is that whole technology may well deliver benefits to specific task both believe where technology can really deliver benefit is creating far greater integration across the business and with it the ability to better understand the bigger picture and with it enhance their own abilities to contribute to the bottom line.

For CFOs that means the ability to better understand the risks the company is assuming and the price they are charging to do so.

The matrix for the finance department is a lot more complex than that. The growing influence of the regulators is having an effect. CFOs need to understand the risk portfolio and the direction of travel the underwriting department is undertaking so that it can map that route against current and future regulatory requirements.

If the rules on capital requirements change for specific risk classes the CFO needs to be able to readily understand the company’s exposure to those classes and match that with the capital needed to support the CUO’s plans.

Asia by its nature is more exposed than other regions of the world to the issues around currency and foreign exchange fluctuation and regulation.

Regional hubs such as Hong Kong and Singapore wrote business across a significant number of territories with different currencies and as such changes to foreign exchange rates needed to be understood and factored into financial planning and for the underwriters pricing.

In recent months, the political decisions taken in the United Kingdom and the United States have impacted in the foreign exchange rates for the US Dollar, Euro and British Sterling. All of these changes have to be understood, forecast into the financial planning and communicated to the underwriting department if there are pricing changes to be made.

In Asia, we are also seeing some nations which have specific rules when it comes to currency, be it set exchange rates, or limits on the ability to move currencies across borders.

Insurers need to have the ability to quickly assess the bigger picture not only about physical risks but also FX, and regulatory changes and the ability to react quickly and then communicate any changes to their distribution partners.

The conversations I have been having with the CFOs revolve around the ability to bring the various departments, underwriting, claims and finance close and speed the ability for the integration of information to give those across the company a broader understanding of the operations and the dynamics across each.

The use of our RuleBook hub in the London market and its subsequent roll out into Asia has been very well received. The nature of the London subscription market and need for any system to be easily accessed, quickly updated and segmented to allow various stakeholders access only to the areas that affect and benefit their role has been seen as a step forward in the moves towards realising the aim of greater integration.

In many respects, Asian underwriters face the same challenges as their London market peers. No two insurers are the same, and neither are their underwriting operations and portfolios in class and geographic terms.

Therefore, any solution needs to have the ability to be adapted to the bespoke needs of the individual internal and external systems and cultures.

It is clear the ability for CFOs to access and share information is seen as one of the most pressing concerns for many. In conversations with the CUOs they have the same issue and are seeking solutions.

It may well be time for insurers to look at how they can adopt and adapt market leading technology to benefit the wider business. It has been a case for too long that the various operational silos have implemented their own individual systems with little thought to the wider benefits integrated systems can bring.

For more information, or to discuss how technology can bring benefits to your business, please contact patrickrozario@moorestephens.com.hk