Then, Now, Next: The Evolution of Insurance Finance

I’ve always had the impression that the capabilities of insurers to analyse, understand and report their financial results have fallen short of the aspirations of the CFO and Board. Over the years many projects have tried to deliver tech-enabled user-interfaces and dashboards to deliver real-time information and what-if analysis, but these have been stifled due to the quality and completeness of the data and the slow processing speeds behind the scenes.
 

Perhaps it was the cost and complexity or the competing priorities that prevented these projects from delivering, or maybe the technology just wasn’t up to it. 
 

Where have we come from? 

When I started work at 21 I encountered my first spreadsheet. It wasn’t Microsoft Excel, it was whatever-the-other-one-was-called. Prophet was still the MS-DOS based version and the annual valuation was run on the mainframe early in the New Year (but somehow it still took months to complete the reporting process). Calculations were slow, and the human brain needed to fill the gap. Insight and understanding were as important as they are now, but these were reliant on ‘back of the envelope’ calculations and high-level estimates. 

Where are we today? 

Speed has significantly improved in the last 27 years. Some insurers aim to complete their year-end reporting in single digit working days, including running a comprehensive analysis of change. Substantial increases in granularity requirements from changes to Solvency and IFRS reporting have only partially been met through advances in technology. Despite extensive change and focus on analysis and control improvements the powerful analysis tools required to drive strategic business decisions are still lacking for most firms. Planning and forecasting activity is generally not an area that many firms have nailed, delivering solutions that ‘do the job’ but do not provide real insight. 

Where are we going? 

We all know what the future could look like, but perhaps we don’t appreciate how soon we could get there. The Graphics Processing Unit (GPU) has arrived and many firms are experimenting, while we all wait to see what Quantum Processing Units (QPUs) will become. The faster industrial strength production of accurate controlled asset and liability data equips the business with detailed information and the prospect of delivering more granular results and analysis, more frequently, or even in real time. Coupled with AI we can build predictive models that provide insightful forecasting and help answer the ‘what ifs?’. 
 

Data platforms storing the granular data delivered through Solvency II and IFRS17 coupled with high-power analytical tools will enable the true insight into our financial results that we all expected to deliver as part of those original multi-million-pound projects. But most revolutionary of all will be the use of Large Language Models (LLMs) to explain the results to the Management and support queries.   

Our recent innovation, XPS Orbital, delivers the type of financial insight that management want. By providing faster automated production and analysis, Board members are given the insight they (and their predecessors) have been asking for.