Finance officials at a growing number of insurance companieshave been expanding their traditional role and capabilities beyondbasic balance sheet stewardship and compliance responsibilities toprovide broader strategic decision-making support and advice.

Indeed, the finance function in general is evolving into more ofan internal business partnering role to facilitate the developmentof new products and markets, cost-reduction initiatives, andefforts to achieve appropriate risk-adjusted returns, according toDeloitte's CFO Signals survey.

Business partnering in this context can be defined as the rolethat finance will assume to both support and challenge insurerinitiatives. It is a shift from stewardship to strategic thinking,with finance looking to create value by improving the quality ofbusiness decisions while helping realize the highest financialvalue for a particular initiative at what is considered to be anacceptable level of risk.

The challenge is for finance to develop into an effectiveinternal business partner to enhance strategy formulation andexecution, while maintaining its stewardship and controlcapabilities.

Carriers are also looking to prepare for new financialinformation demands from regulators, likely to be generated by theNational Association of Insurance Commissioners' (NAIC) Own Riskand Solvency Assessment initiative, the European Union's SolvencyII directive, and other such calls for data and analysis. Financewill likely play a major role in scenario planning, stress testing,and other efforts to comply with new oversight requirements.

Yet a number of insurers continue to face challenges in financewhen it comes to adapting legacy systems to meet these evolvingdata demands. Deloitte's research into business partnering among finance leaders in 11 industriesfound that while technology is a key enabler, it can also be anobstacle in effectively supporting the business, thus driving theneed for transformation efforts.

This survey showed that even when finance business partners havethe correct data, they often have to spend significant timerationalizing it to make it relevant for strategic businesspurposes. Indeed, 57% ranked “finance systems inhibiting access todata” as a top-three barrier.

How might carriers move further along the finance maturity curveso they may become true internal business partners, while alsoupgrading their systems and capabilities to provide the data andinsights required to meet increasingly stringent regulatorydemands.

Under Deloitte's “FourFaces of Finance Framework,” “Stewards” tend to emphasizeprotecting company assets and ensuring compliance with financialregulations, while “Operators” generally support efficient financeoperations and service delivery.

However, business partnering likely requires taking the financefunction to another level. “Strategists” help determine businessdirection and align financial strategies, while “Catalysts” look toproactively stimulate behavior to achieve strategic as well asfinancial objectives.

Therefore expect finance functions at a growing number ofinsurers to move towards internal partnering, and in the processbecome a more integral contributor in key business activities —including target-setting, forecasting, capital investments, riskmanagement, and governance.

The drivers are two-fold, one being regulatory demands forstress testing and scenario planning, with the other being the needto better integrate finance into overall business partnering.

To reach this higher stage of transformation, finance willlikely need to collaborate more closely with other functions, suchas risk management, than may have been the case historically. Toaccomplish this, insurers will look to bring together financialwith operational data, which often is not within the current reachof finance. As a result, they will also likely need greaterinformation technology support to produce the types of data beingsought for both business purposes and regulatory needs.

As companies transform financial processes, the lines ofbusiness, risk, and tax departments will look to reevaluate andimprove the availability and quality of information, especially inrelation to non-SEC/financial reporting data, as they seek tobolster business intelligence, predictive analysis, riskmanagement, and capital allocation.

Talent can be a differentiator. Carriers looking to bolstertheir finance capabilities may need to develop or recruit thosewith certain critical competencies, such as commercial acumen anddecision-making skills, strategic thinking, and the ability toinfluence and even challenge enterprise decisions.

In addition, there could be an increased utilization ofoutsourcing in the finance area for more routine activities tofacilitate a greater focus on core strategic, business partneringpriorities in-house.

The bottom line is that insurance players should take a moreholistic approach to their finance transformation initiatives,exploring how finance could create greater value by playing therole of a “Strategist” and perhaps “Catalyst” in decision-making onbroader company challenges.

Without sacrificing their stewardship role, finance leadersshould develop a plan to align with higher value enterpriseactivities so they may become more integral business partners withtheir internal clients.

To evolve in this direction effectively, partnering competenciesshould be built or imported into finance — an area whererecruitment and development efforts have traditionally focused moreon acquiring or developing technical proficiency rather than abroader business skill set.