Chief financial officers (CFOs) from large and midsize life insurance companies agreed that financial modeling, an increasingly important tool for their business, remains a work in progress, according to a new survey by global professional services company Towers Watson (NYSE, NASDAQ: TW). The survey explored pressing financial modeling issues for life insurers, including model governance, business priorities and how insurers use financial models.
Survey results offer a view into where life insurers see limitations with their financial modeling. All respondents reported a certain level of confidence regarding their financial modeling results, though nearly two-thirds (65%) recognized the need for improvement. When CFOs were asked how satisfied they are with the timeliness of their models’ results, only 13% said extremely satisfied, and 17% said not at all. Most CFOs (91%) expressed uneasiness with the time required to interpret model results before their teams could actually begin acting on the information.
“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,” said Cheryl Tibbits, director and life insurance consultant at Towers Watson. “However, new technologies are available, allowing for more improved and efficient approaches to financial modeling.”
Uses and ChallengesThe survey assessed respondents’ varying levels of satisfaction with their organizations’ financial modeling capabilities by life insurance product type. Given a grouping of product types to choose from, CFOs indicated that long-term care and life reinsurance products need the most work, with half (50%) not at all satisfied with their modeling capabilities for long-term care products, while 36% expressed dissatisfaction with their financial modeling capabilities for life reinsurance products. Insurers were asked about the biggest challenges they face in getting what they need from financial models and instructed to choose the top three. More than two-thirds (70%) named managing competing priorities as their biggest challenge, followed by run-time requirements (44%) and model features/functionality (39%). When asked which of these challenges they would address first, run-time requirements (22%) ranked as their most pressing priority.