“The feedback from insurers on prioritizing day-to-day challenges reflects the importance they’re 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,” said Jack Gibson, managing director, life insurance consulting, Towers Watson.Model Governance According to the survey, life insurance CFOs have mixed views on how they govern their financial models to minimize the potential for model output to incorrectly inform management decisions. Most companies have dedicated resources in place to build and run models, and specialized modeling expertise concentrated in different areas, such as on corporate modeling teams (70%) and business units (61%). Only 13% use an outside vendor. Over half (52%) of participants reported that model governance process in their organization is somewhat developed, while 22% indicated very developed governance. Yet despite these encouraging findings, nearly two-thirds of CFOs (65%) plan to make changes to their governance process, and just 26% do not anticipate making any modifications. “A firm grasp on an organization’s financial modeling process allows a CFO to gain confidence. Strong audit controls and good governance practices are essential to this step,” said Steve Verhagen, senior life insurance consultant, Towers Watson. The survey also examined insurers’ attitudes toward financial modeling tools and how financial modeling competes with other business priorities. Two-thirds (66%) of the participants said their organizations aim to extract the full value of their financial modeling tools. When asked to prioritize areas for further investment, 39% ranked information technology infrastructure as a high priority, yet only 4% considered investment in financial modeling a similarly important objective. Fifty-seven percent of respondents said they would weigh proposed investments in financial modeling against other potential areas before making a final decision on where to spend their budget. “CFOs are dealing with opposing business priorities when it comes to investing in their infrastructure. While they recognize the importance of financial modeling tools, they’re more inclined to procure the latest and greatest in information technology infrastructure,” said Gibson.
CFOs also provided a glimpse of their anticipated financial results, reporting slower growth compared to results from the Life Insurance CFO Survey conducted by Towers Watson last year. The majority of respondents revealed that their new life and annuity premiums, GAAP net revenue and GAAP net income remained flat or declined in the second quarter of 2012, compared to the same quarter in 2011.About the Survey Program Towers Watson’s Life Insurance CFO Survey program provides ongoing research on issues of importance to the North American life insurance industry. The program enables CFOs and financial executives to benchmark their company’s approach to financial issues and challenges against those of their competitors. Participants benefit from Towers Watson’s independent analysis of the survey results, as well as perspectives on key issues facing the life insurance industry. This survey program was first launched in 2002, and includes responses from CFOs and senior financial executives from large and midsize North American life insurers. About Towers Watson Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.