This post is based on an excerpt from the new eBook from Aptitude and KPMG, The paths to a digital-first mindset in Insurance, which highlights why Midmarket Insurers and Insurtechs must innovate their finance functions to meet existing and future challenges and stay competitive.
United in industry challenges
At first glance, the finance department profiles of a Midmarket Insurance company and an Insurtech might look different. But peel back the curtain on the challenges, opportunities, and goals in both of these types of insurers and you will find many similarities.
Both are facing a constantly changing industry with new entrants and significant pressure to consistently innovate. Continued high expectations from regulators and other stakeholders and the expected rise of Environmental, Social, and Governance (ESG) mandates will put additional pressure on the finance department. And like other industries, CFOs and their teams must prioritize a shift away from looking in the rearview mirror at historical performance to focusing on the future. This requires Finance to provide timely access to finance data, insights, and mechanisms to support new products, bundles, and business models with agility.
The unique histories and growth patterns of Midmarket Insurers and Insurtechs are evident in their finance architectures and result in various challenges and opportunities for each type of insurer:
- Midmarket Insurers have likely been in business longer than most Insurtechs. They are more established in the market, but face competition both from new entrants and from large, global players. They also have more established finance processes – and likely more legacy systems to contend with.
- Insurtechs are highly innovative and focused on exponential growth but may lack established finance processes and systems. They are more likely to have a digital-first mindset and new customer engagement models. In addition, they may have a newer finance architecture, free of legacy systems.
Why digitalization now?
To stay in the race, Midmarket Insurers and Insurtechs must innovate to meet existing and future challenges including:
- Providing the agility to grow and scale either organically or through acquisitions
- Lowering the overall cost of finance and supporting growth without constantly adding headcount
- Playing the role of transformation enabler (Midmarket insurers)
- Addressing Environmental, Social, and Governance (ESG) considerations
- Meeting high expectations from regulators and other stakeholders to constantly improve return on investment (ROI)
Defining a digital finance mindset
Digital finance departments can be defined by a set of capabilities that allow the CFO and team to use data and technology to operate in an automated, efficient, controlled and data-driven way.
In the insurance space this means:
Access to real-time data: Centralized, trusted data and dashboards to support scenario planning, forecasting and decision-making
Dynamic close: Processes that enable dynamic, continuous and automated execution to accelerate the speed of close
Scalability: Capacity and processing power to handle increasing volumes of data and growth without adding cost through additional headcount
Agility: New businesses or acquisitions can be seamlessly added into the existing finance architecture through the integration of data
Finance-user controlled: Flexibility to account for new business models or products
Automated compliance: Access data, generate calculations and automate the processes required to comply with existing and future regulations
Equip finance to add more value: Increase automation to retain talent and allow finance to focus on value-adding tasks
Reduced cost of finance: Do more with less and at a lower cost
For more, download the new eBook from Aptitude and KPMG, The paths to a digital-first mindset in Insurance. Our next blog will look at the first of three paths that Insurers can take to create a digital finance department.