Towers Watson published the results of a survey initiated to learn about the financial modeling issues facing life insurers. These include model governance, business priorities and how financial models were leveraged by insurers.
Chief financial officers (CFO) covered in the survey from both medium-sized and large insurance companies opined that financial modeling was imperative for their business, but was still in the development stages.
Cheryl Tibbits, director and life insurance consultant at Towers Watson said, “Our survey revealed that despite advances made in financial modeling at many life insurance companies, there are ever-increasing demands placed on companies by their stakeholders to improve the speed and usefulness of their financial models. However, new technologies are available, allowing for more improved and efficient approaches to financial modeling.”
All life insurers surveyed had a certain level of confidence with respect to their financial modeling results. About 65 percent felt the need for further improvement in the modeling. About 13 percent of the CFOs expressed extreme satisfaction with the timeliness of their models’ results, while 17 percent disapproved.
Also, around 91 percent of the respondents were not happy with the time required to interpret model results, and put their teams into action based on the information.
Considering life insurance product type, the CFOs were asked about their satisfaction with their organizations’ financial modeling capabilities. Long-term care and life reinsurance products required more development of modeling capabilities, said 50 percent of respondents.
About 36 percent were not satisfied with their financial modeling capabilities for life reinsurance products.
According to 70 percent of insurers, the biggest challenges from financial models were managing competing priorities. About 44 percent of insurers felt run-time requirements was a challenge, while 39 percent felt it was model features/functionality.
The highest priority to be dealt with, however, was given to run-time requirements.
Jack Gibson, managing director of life insurance consulting, Towers Watson, remarked, “The feedback from insurers on prioritizing day-to-day challenges reflects the importance they are placing on finding solutions to reduce run time, which in turn allows them to create an environment that yields a faster and more confident decision-making process.”
Recently, Towers Watson, a global professional services company, announced the launch of OneExchange, which offers employers both private and public exchange-based health insurance options for their full- and part-time workers, and for all retirees, building on Towers Watson’s 2012 acquisition of Extend Health.
Edited by Braden Becker