Business analytics for insurance

Of all the various roles Finance can play in an insurance company, the two most necessary to balance are (1) complying with legal, tax and regulatory requirements and (2) dispensing sound advice on the efficient allocation of capital and resources. In the first, Finance must focus on enterprise risk management and regulatory standards. In the second, Finance must lend expertise in understanding what resources are required to generate which types of premium and investment income to maintain the capacity to write new business.

It is uniquely positioned to play this second role because, while most commercial functions push as far as they can in a single direction, Finance must evaluate the insurance company's contrasting economic realities to manage capital adequacy in a world of increasing catastrophic risk and underwriting uncertainty.

Barriers to better financial performance management can include:

• Lack of information needed to regulate what has happened and shape what will happen.
• The relevance, visibility and credibility of what you measure and analyze is designed for accounting rather than business management.
• Finance must balance short term and long term, detailed focus and the big picture.
• Finance must find the path between top-down vision and bottom-up circumstances.

The information Finance uses to report what has happened and shape what will happen is critical to the rest of the organization. Dynamic tools that allow Finance to balance compliance and performance, accounting and business structures, short term and long term, top-down vision and bottom-up reality, are more important than ever. Information sweet spots can support Finance's responsibilities and decision areas.

The new book "The Performance Manager for Insurance" will show you ways IBM Cognos performance management software can help in decision areas such as:

• Balance sheet: How do we balance and structure the financial funding options, resources and underwriting risks of the business to incorporate investment accounting and portfolio analysis requirements?
• Income statement: How did the business team score? Where was performance strong or weak?
• Drill-down variance: What causes changes in financial performance?
• Operational plan variance: How do we best support, coordinate and manage the delivery of meaningful plans?
• Cash balances: How do we monitor cash use effectively?
• Capital expenditure (CapEx) and strategic investments: What are the investment priorities and why?
• Treasury: How can we efficiently manage cash, investment income requirements and cost of capital decisions for surplus targets?