In the third article in our series for life actuaries, we outline four key steps to optimizing your model development to boost the business value of your reporting outputs and retain modeling talent.
In the first two installments of this series on life modeling and reporting in life insurance, we have explored the challenges facing insurers and the impact of these challenges, as well as outlining an holistic and impactful approach to reviewing your technology and model development, which will ultimately drive reporting process improvements you need. In this article, we'll discuss why life insurers need to shift their focus from pure automation to business process excellence (BPE), where the focus is on streamlining rather than encapsulating the work.
Regardless of the size of the model, your organization, or the reporting regimes you face, the reporting cycle will be demanding and stressful. For many years, companies have used automation and end user computing to shore up their processes.
Rather than streamlining the process, these were typically technology solutions — often Excel and macro tools – which were employed to achieve quick wins, such as replicating human tasks. However, such end user computing is a double-edged sword. Actuaries can become attached to their tooling and the processes evolve to fit the capabilities of the tools. And if the developer leaves, these tools become a cryptic black box that everyone is too scared to touch.
While bigger and better tools now exist, such as PowerBI and PowerAutomate, the question remains: do the tools complement the process and add value, or do they simply entrench existing working practices?
Focusing on business process excellence (BPE) is about moving beyond merely automating tasks to streamlining entire business processes so they're more efficient, effective, delivering consistent, positive outcomes with minimal variation. An emphasis on BPE can help you optimize workflows, and the goal should be to enhance the process itself, not only the tools you use.
So where should you be investing your time and resources to refocus on business process excellence?
1. Automation
While not the only facet of BPE, automating human activities is a key element. Having a robot do the work means nothing waits until the morning; varied tasks can be interleaved with no overhead; and nothing is missed and no mistakes are made. The robot takes the data it needs, passes it to the right calculation, then passes the results on to the next step. This could result in an estimated 70% saving of human effort and delivery time.
However, a good automation framework should also incorporate humans in that process, with the option to pause a workflow pending appropriate review and sign-off. Of course, all the information needed to do those checks can also be pre-prepared by your robot to streamline that sign-off.
Equally, the process should allow for the delivery of necessary inputs during the workflow; not everything needs to be ready on day one. This would allow, for example, the period-end reporting to start before the period end, potentially saving a crucial day in publication.
2. Progress reporting, audit and governance
Armed with a list of tasks and dependencies — essentially a Gantt chart of activities — we know what's been done, what's in progress and, with upcoming bottlenecks identified, whether we're on track.
This workflow can also tell you exactly what data went into which calculations and what results were produced — the full reporting story from start to finish. This is exactly what an auditor wants to see: the ability to demonstrate the right things were done with a high level of certainty and the capability to track back from results to source.
The best solutions in this space, such as WTW's Unify, take this a step further. As the robot is passing data through stages of the process, it can take snapshots of what data files are being used. Knowing that the valuation was run using the data file called "year-end extract" is good; knowing what was in that file and hence that it hasn't been manipulated is great, but being able to reproduce that calculation if needed and being certain to get the same results is excellent. Gone is the risk that the opening position of the next reporting cycle doesn't coincide with the closing position of the previous cycle.
3. Flexibility
Your automation solutions should be flexible enough to accommodate different models and processes so you can avoid standardizing all processes into a single framework. Flexibility in automation protects you from ending up with restrictive and inefficient automation, instead promoting simpler, more tailored workflows that are both easier to manage and report on.
Further, even in the most robust reporting framework, changes will need to be made, for example following the acquisition of a business or the introduction of new models, reporting guidelines and corporate standards. Adapting to these shifts should have proper governance in place, but equally it should be for the actuaries to define the new processes without requiring a formal IT project. So your automation solution needs a way for the workflows to be edited and published.
4. Integration
As has been made abundantly evident by IFRS 17, the reporting cycle doesn't operate in isolation. No longer is the start and end a human process. Instead, there's an expectation of seamless integration and reporting to accounting timelines measured in days not weeks.
The data comes from admin systems and databases. The results will end up in sub-ledgers and data warehouses. Ideally, you don't want humans or an extract, transform and load process (ETL) at those boundaries. Instead, there should be APIs on the BPE tooling that can be called by the source, or time-based pull-requests from within the BPE. Likewise, the results delivery should trigger downstream processes. With this in place, you have the potential to deliver truly same-day results.
If you can deliver same-day results to accountancy systems, then you also have the potential to deliver real-time management information. The benefits of being set up to meet, for example, IFRS 17, can be realized in many other areas, making it possible to add real value to your business.
So what next?
End user computing and automation have made enormous contributions to actuarial reporting and processes. However, the challenges facing Life companies now mean you need to seek solutions that go beyond pure automation and that are flexible enough to adapt to changing business needs. Embracing stop-gap measures for the short term will be at the cost of effectively addressing longer-term needs. Now is the time to actively investigate the business benefits to be gained by refocusing pure automation on BPE. So your next steps should be:
- Evaluate and select advanced, flexible tools
- Integrate automation with flexibility
- Implement robust governance
- Ensure seamless integration
- Design to adapt to change
- Continuously monitor and audit
Further information
To find out how we can support your actuarial team drive financial transformation, including modeling, automation and process improvements, please contact your WTW consultant, email Insurance Consulting and Technology or visit RiskAgility Financial Modeler (FM). You can also find out more about WTW's Unify — our enterprise-wide-systems integration, automation and governance platform designed specifically for the insurance industry — at Unify.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.