Technology Trends Shaping the Future of Finance in Insurance
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This article explores game-changing technological factors that have the potential to transform the CFO’s role and create a culture of excellence and success in tech-led transformations within the insurance industry.
Technology Trends Shaping the Future of Finance in Insurance
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Market dynamics are currently stressing corporates and control functions, with finance at the forefront:
- Geopolitical tensions make it challenging to manage international groups.
- Dynamics of prices demand better control of costs and their drivers.
- IFRS17/9 displaying impacts beyond accounting.
- Focus on ESG in non-financial disclosure will require additional data integration and changes in reporting.
- New emerging risks, such as cyber and natural disasters call for higher responsiveness.
- Digital accelerators — automation, AI, GenAI — are reshaping the industry as we know it.
- Boards and Regulators now increasingly require CFOs to provide scenario analyses and simulations, tasks that were less common in the past and often done using unstructured tools like Excel.
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Against this context, top-tier CFO functions are developing certain differentiating traits:
- Strategic advisors: helping organizations gain competitive advantage, for example in M&A or product development, with insights and steering.
- Data custodians: under disciplined, unified governance, they leverage data to support business units and functions, and establish company-wide methodologies for managing financial data, of which the CFO is the true owner.
- Efficient operators: focusing on value, running lean, automatized operations.
- Future managers: combining traditional background with business, technology and client-service culture.
- Tech masters: leveraging innovation for efficiency and effectiveness.
In this journey of transformation, technology will be an ally to achieve strategic objectives across all dimensions of finance.
This article examines four tech mastery game-changing factors that BCG believes can transform the CFO’s role — creating a culture of excellence and achievement in tech-led transformation for the insurance sector.
Game-changer 1: GenAI-driven transformation
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Smart automation (i.e. robotics, AI, GenAI, …) favors CFO re-organization towards efficiency, grouping activities by nature, with specialization, no redundancy, and a high level of standardization.
The adoption of GenAI-driven smart automation is not only enhancing functions efficiency, but it is also redefining the role of human capital in finance functions, channeling efforts towards more strategic, value-added activities. As developed by BCG, GenAI-driven smart automation impacts three key CFO functions:
- Specialized functions, such as actuarial, investor relations and tax are supported by GenAI with more precise actuarial reserving, strategic financial hedging, and insightful investor relations, facilitating better capital allocation, risk management, and transparency.
- Decision support functions, such as financial planning and controlling, and business intelligence, are aided by GenAI in critical activities such as budgeting or sensitivity analyses.
- Finance operations will be also transformed: automating repetitive and manual tasks and streamlining processes for efficiency
Game Changer 2: Data explosion
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The magnitude of data has become a defining characteristic of the digital age, profoundly impacting the insurance industry and the CFO function as well. This shift is not only about managing huge volumes of information, but also leveraging it to drive strategic decisions, enhance customer experiences, and foster innovation.
To achieve this, it is imperative to define:
- Clear taxonomy, hierarchy, roles and responsibilities enabling data lineage and traceability.
- Integrated data domain frameworks with deep granularity, including internal and external data.
- Group-wide architecture, centralized (e.g., data lake/data platform) or distributed (e.g., service mesh architecture).
- Common reporting framework, reducing redundancy and time-consuming data preparation.
Game changer 3: Cloud
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Cloud adoption represents a paradigm shift in the insurance industry’s approach to IT infrastructure. With the promise of a future-ready, scalable infrastructure, insurers are increasingly embracing cloud and cloud-driven paradigms (e.g. as-a-Service platforms) to simplify their application landscape.
This trend facilitates agility, cost efficiency, and the ability to rapidly deploy new services, ensuring that finance also can respond more swiftly to market changes and internal customer needs.
Game changer 4: Low-code/no code development
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The rise of low-code/no-code development applications is democratizing the creation of digital solutions in several industries. Such a trend, also enabled by ease of access and availability of extensive datasets, is also empowering finance experts to become citizen developers, enabling them to build applications that meet their specific needs without requiring extensive programming knowledge. The result is a more versatile and reactive finance function, capable of adapting quickly to change and innovating at a faster pace.
The combinatorial effect of these changers will impact the CFO function across the entire value chain, by enhancing operational efficiencies, driving innovation, and by better meeting the evolving needs of customers.
There won’t be any CFO’s tech transformation without a talent pool capable of managing these technologies, a strong collaboration between IT and Business functions and a wise selection of strategic partners. This integrated approach ensures that the finance function not only adapts to the digital era but thrives, driving innovation and efficiency across operations.
In the journey towards digital finance transformation, we envisage 6 key steps that encompass our approach:
- Identification of a long-term Finance Tech North Star (FTNS) (e.g., Enabling high level of efficiency using digital technology at scale) and a future-state operating model (e.g., from a decentralized to a convergent, lean and efficient setup) over a three- to seven-year horizon.
- A rigorous health-check to assess current digital capabilities against the FTNS and operating model (e.g., processes, organization, technologies, people).
- Detailed design of the TOM that incorporates outcomes from the health-check.
- Assessment, planning and prioritization of relevant use cases and opportunities.
- Agile implementation of selected use cases, evaluating them on different levels such as strategic alignment, impacts (e.g., customer, financial, risk impacts), feasibility, scalability, time to value.
- Continuous improvement, requiring adjustments to the TOM based on execution outcomes.
A few key guidelines emerge as the basis for a successful transformation in this sector:
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Plan for the future
Ensure your team designs a target state scenario that encompasses short, medium, and long-term periods.
Connect initiative to tangible results
It’s essential to commence with cases that liberate capital, reduce costs, and free up valuable resources. This focus ensures every action taken has a direct impact on efficiency and profitability.
Align with company-wide initiatives
In the quest for innovation and success, it’s key to stay aligned with company-wide initiatives. This means capitalizing on ongoing evolutions across the company — a good example of which would be the recent explosive development of data platforms.
No compromise
Lastly, it’s key to adopt modern development principles and leverage automation at scale, ensuring the company remains at the forefront of technological advancement and operational efficiency.
