As regulatory and management expectations for information to be delivered in a shorter time continue to rise, firms see cloud technology benefits but also adoption barriers.
In its 2021 EMEA-wide Life Financial Modelling Survey, WTW (Willis Towers Watson, NASDAQ: WTW), a leading global advisory, broking and solutions company, reveals that many life insurers are under significant pressure from regulators and management to improve their financial reporting, exacerbated by key barriers to adopting cloud technologies capable of transforming their modelling capabilities.
While participating firms said they were satisfied with their current financial modelling, the demand for ever increasing and faster reporting is causing concern for many insurers, with this pressure being most evident for multinationals. Firms taking part in the survey highlighted three barriers in particular that they will first need to overcome in order to meet this demand for improved speed and efficiency:
Managing costs – Companies are under constant pressure to improve operational efficiency and meet the demand for real time services, but at ever decreasing costs.
Shortage of skilled resources – Having the right skill set and software is essential said survey respondents, particularly compared to the situation for companies still using old, obscure, or bespoke toolsets.
Improve governance and auditability – The challenge of updating financial modelling practices that not only deliver faster but are also capable of delivering a greater level of control and auditability.
More than 90% of survey respondents recognised that the application of automation technology – including business process automation, elastic cloud computing and Software as a Service (SaaS) – is a key priority to address these challenges. At the same time, a number of participating firms were cautious of the changes needed to implement new technology, naming transition cost, data and IT policies, and technical challenges as the main barriers to adoption.
Mark Brown, Global Product Leader for Life Financial Modelling at WTW, said: “Ever shortening deadlines and ever increasing workloads mean insurers are having to find new ways to maximise the benefits of their financial modelling programme.
The survey also revealed the need to increase frequency of reporting and outsourcing as the key areas for improvement that life insurers will be prioritising over the next two years. According to WTW, this directly reflects a wider market trend of firms moving towards faster, simpler and more frequent interactions, enabled by better technology and richer data. Meanwhile, the outsourcing of non-core activities continues to be driven by the long-standing need for insurers to build their digital capability, reduce complexity and overall cost base to support a more streamlined, sustainable and competitive operation.
Mark Brown said: “This survey highlights a number of internal barriers making it difficult for some insurers to step up to the plate and adopt best-of-breed cloud technologies. The concerns reflect a natural sense of caution and risk aversion to selecting new and sometimes unknown solutions. The reality is often less frightening with the technology already well established and the industry at a pivot point as future success is likely to rest on today’s technology decisions and strategies.”