| The Three Pillars of Corporate Performance | | | | and budgeting process is laboriousness, costly and |
| Management for the Insurance Sector | | | | rapid obsolete. This is because operational managers |
| "Change" is the watchword for the insurance sector. | | | | first model the demands facing their department to |
| Increasing customer churn and pressure on premiums | | | | identify their resource requirements and then calculate |
| are eroding profitability, highlighting the need for | | | | the cost of these resources; all of this done on |
| significant cost reductions in the areas of customer | | | | spreadsheets outside the core budgeting application. |
| acquisition and service. This threatens the traditional | | | | Incorporating this off-line modeling and joining the |
| operating model as organizations re-evaluate current | | | | pieces together with rules that span departments and |
| routes to market and redesign internal processes in | | | | time-periods transforms planning and budgeting. |
| the never-ending search for greater efficiency. | | | | Managers simply review and update non-financial data |
| Faced with the need for change, many insurers | | | | such as sales conversion rates, loss ratios, staff |
| recognize that they are ill equipped to provide | | | | productivity ratios and unit resource costs and the |
| executives with the management information required | | | | model predicts their line item expenses; they can either |
| to restore and maintain the desired level of profitability. | | | | accept them or amend them. This approach is called |
| For insurers there are three core financial | | | | ‘driver-based budgeting’. |
| management processes: | | | | Corporate Performance Management in a Single |
| Cost and Profitability Analytics | | | | Solution |
| Many insurers are not able to report on product, | | | | Despite being inter-related, these three pillars of |
| customer and channel profitability with the frequency | | | | corporate performance management [ are typically |
| they desire, even though this information is critical for | | | | carried out in disparate systems. The correct |
| decision-making at both strategic and operational levels | | | | approach for insurers is to use a single performance |
| Long-Range Financial Planning | | | | management system for strategic planning, budgeting, |
| In today’s markets, strategic planning models | | | | and activity-based costing. This system needs to allow |
| need to be refreshed and evaluated with increasing | | | | users to develop linked models that cover different |
| frequency. This means routinely updating assumptions | | | | functionality across different parts of the organization |
| about both the external and internal drivers of | | | | that can easily be consolidated for enterprise-wide |
| profitability. Because many of these critical pieces of | | | | reporting. |
| information such as customer attrition rates and unit | | | | Delivering this functionality seamlessly in a single |
| costs reside in other applications, this is not always | | | | solution both reduces the administrative overhead in |
| easy. Stand-alone, long-range planning models | | | | the Finance function and improves the transparency, |
| therefore compromise an organization’s ability to | | | | timeliness and integrity of management information. |
| continually review and test assumptions that underpin | | | | With one version of ‘the truth’, Finance |
| strategy. | | | | can reconcile the strategic, financial and activity-based |
| Operational Planning and Budgeting | | | | views of the organization into one over-arching |
| Many organizations recognize that their annual planning | | | | performarnce management framework. |