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Financial Transformation or Financial Torment

At this time of year, everyone in accounting, investments, and securities departments who have to close out the end of the month, quarter, and year dread the long days and weekend work. It is a time of high stress for these employees—the pressure is so high, and the fear of making or finding a mistake and of not making the year-end numbers has everyone burned out before the New Year even gets started. I know and understand firsthand because I live with one of these people and have several of them who are great friends. What I also understand even better, again with firsthand knowledge, is that working in these roles within the insurance industry is even worse than in other industries.

A few years ago, the life insurance industry started going through what it deemed “financial transformation.” It began outsourcing certain functions, reorganizing departments, and eliminating jobs, all in an effort to reduce the costs associated with finance operations. I’ve seen major insurance carriers reorganize their financial departments multiple times since the “financial transformation” era started, including the pulling back with outsourcing and then pushing forward again. So much back and forth that it makes my head spin, and I don’t even work in those areas.

But what has all this “transformation” gained? Where do these departments stand now? How much cost has been reduced? Is it really financial transformation, or is it financial torment? While I admittedly do not know the answers to these questions, my hypothesis, based on listening to those I know in these areas, is that it hasn’t gotten any better—it has gotten worse.

Of one thing I am certain: We all agree that “financial transformation” is of great importance to the industry. Carriers’ offshore efforts have their employees taking time to train people to handle financial reporting tasks. Unfortunately, many of these offshore resources are not educated in the insurance industry or the corporate structures, creating challenges internally that have to be overcome by the onshore departments. These offshore resources are typically really good mechanical workers and do well with strict black-and-white instructions. But, without knowledge of how the life insurance industry works, the financial training on the accounting behind the scenes, or the ability to knowingly investigate differences, offshoring has led to more work for onshore employees and increased errors. If carriers plan to make headway in their transformation efforts, they need to evaluate the tasks being sent offshore (if this is the path they wish to use), look to other resources (such as robotics process automation to automate tasks and entries, or data and analytics tools for checks and balances), or invest in cloud technology to manage the data and transactions.

Of course several carriers are working with tools to develop automation within the financial areas—some using RPA or financial reporting tools—but these carriers are few and far between. Carriers are using tools to solve a single problem at a time rather than considering a holistic approach—using technology as an enabler rather than a solution. And  while this transformation needs to happen, the top-down approaches and corporate cultures of most insurance carriers have created low morale and an operational firestorm hindering the good that can come from this transformation. It is time for carriers to change their approach; consider more in-depth design thinking or greenfield techniques to create a transformation strategy that includes input from the bottom up; make an investment in technology, data, and analytics; and assume corporate-wide accountability.

In today’s digital world, people in these positions shouldn’t be using Excel workbooks with 20 tabs, linked cells, VLookUps, and macros to get their jobs done. Running reports, posting to the general ledger, posting journal entries, running calculations, and matching figures don’t have to be this hard.

  1. To my beloved insurance carriers: The tools to help you are out there, though they are limited. Make it your plan to find them, evaluate them, and use them in 2020. RPA is a great tool to solve many of the automation needs in this area; for example, see EXL and its experience with a Tier-1 carrier for automation of journal entries.
  2. And to the solution providers: Make yourself known to the world! Get in front of these carriers, hear them voice their pains, and show them how you can help. Develop a vertically focused path to show carriers where your tools can support their needs to create efficiencies, reduce errors, and reduce costs.

Not only is this area personal for me, but as an industry expert I also want to see each of you succeed and provide the insights necessary to make true transformation happen. Happy New Year to all! Here’s to a making more headway on financial transformation in 2019.