Gorillas that we missed and other process improvement pitfalls – Part I

Gorilla with a number 1

Inhibition of Flexibility: Not flexible? Not future-proof.

How inflexibility can stifle progress in the insurance sector.

‘The only constant is change.’

‘Whatever can go wrong, will go wrong.’

‘You have to roll with the punches.’

These may be clichés, but it is vital to have a strong focus on future-proofing since I am very conscious of how true they can be in the insurance industry.

A lack of foresight and flexibility during a transformation project can lead to duplication of work and an accumulation of hidden costs.

Two birds, one stone

Understandably, large projects can almost totally consume a company’s resources. When there is a deadline looming, it is difficult to take a step back and consider the next major hurdle after the project’s completion.

It is a worthwhile exercise, however, as it may be much more efficient and cost-effective in the long run to develop a project plan which is flexible enough to harness the similarities of multiple future projects and avoid scrambling later.

An example of this is seen throughout the insurance world. Insurance companies have been eating and breathing IFRS 17 for the better part of several years, and before that Solvency II. These regulatory regimes have led to major transformation projects around Europe as insurers have tried to meet the daunting sets of requirements.

The implementation of IFRS 17 has again presented significant demands on insurance companies, yet how many fully considered the need to cater for IFRS 17 when designing their Solvency II models and processes.

If flexibility is emphasised where it makes sense, regulatory changes may have less of an impact on business operations than they do currently – and any changes introduced could cut costs in the medium to long term as well.

People need to be flexible so their processes can be too

Actuaries are notoriously attached to their spreadsheets – so much so that they often fail to recognise that their monthly reporting exercises are actually processes and not standalone, absolute and untouchable methodologies.

Processes can be improved and aligned with other teams in the department. One of our clients has a finance department consisting of three teams with each responsible for reporting on a different valuation basis. Each team believed it necessary to develop and maintain their process individually, but in reality, each process followed the same steps and used the same model, with only the input assumptions differing.

Our approach to this reengineering project was to build flexibility into the department’s processes, which allowed each team to follow the same steps, but tweak them to suit their needs.

This made the workflow and output comparable across teams, and afforded each level of management better insight into the workings of the entire department.

Next week I will be looking at how the involvement of the Human Resources department can make or break a process improvement project.

If you would like to improve the processes within your actuarial team, contact us to speak to one of our actuarial consultants.

Andries Beukes
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