Insurance company finance departments facing increased number of regulations

Insurance company finance departments are under pressure to adapt to an increasing number of regulatory changes while at the same time they are morphing from the role of “number-cruncher” to one of strategic contributor, according to a recent report by KPMG.

In its report, Insurance Insights 2007, KPMG International’s research suggests that 50% of a finance department’s time in an insurance company is focused more or less exclusively on transaction processing.

“Many institutions are still struggling to get their core activities largely automated to free up time and resources required to evolve into a true strategic role,” the report says. “In fact, the amount of time spent on manual adjustments, reconciliations and management by spreadsheet (and related risk of control failures) has increased with every new regulatory requirement.”

KPMG’s survey cites a 2003 IBM survey, in which chief financial officers said their top priority was to achieve the changes necessary to improve contribution to business growth, including better decision support, performance management, forecasting and risk management.

“The 2006 [IBM] survey shows the same set of priorities,” the KPMG report notes, citing United Kingdom examples. “Little progress has been made. It is hard to escape the conclusion that compliance initiatives [IFRS, Basel II, Solvency II] have been taking priority and hindering the desired change towards adding value.”