According to the 2021 Global Insurance Outlook report by EY: The global insurance industry faces a truly unique moment in its long history. The fundamental disruption caused by the COVID-19 pandemic equates to an opportunity for the industry to remake itself in line with new societal realities and market needs.
An expanding role
The role of the CFO continues to evolve. While one of the key tenets, to manage the financial aspects of the business, has remained unchanged, an equal but more strategic set of responsibilities have been placed on the CFO.
Kim Yeoh, CFO for Sun Life Asia, explained that the role of the CFO is no longer just about accounting.
She explained that these days it is about integrating the experience of governance, valuation, reporting, products, and reinsurance to deliver value for shareholders.
“The role of the CFO is also not just about finance, we are all accountable for ensuring the long-term sustainability of the company and that means developing future leaders, nurturing and coaching new talent, and creating an inclusive environment that encourages people to grow and challenge themselves,” she added.
Unique to insurance
“The insurance industry makes long-term promises to clients and policyholders and the role of the CFO is to ensure that we are providing financial analysis to investors and analysts and explaining what has happened with the value of those promises,” commented Yeoh.
To this end, the CFO works closely with the actuaries, whose job it is to value these promises, to understand them and then explain them in a meaningful way.
Transformation – better late than never
A December 2020 Gartner of 168 Global P&C and life insurers revealed the extent to which insurers are joining the insurance bandwagon. Gartner predicts that through 2023, only 30% of consumers will trust their insurer enough to permit the use of personal data to customize products and services.
Yeoh opined that the insurance sector has not necessarily been thought of as one of the more innovative industries.
However, she acknowledged that the emergence of Insurtech is already forcing the industry to rethink client interactions, find new ways to improve efficiency and break down barriers to make insurance accessible to underserved groups.
Induction into insurtech
The road to digital (for insurers) may be slow but it is happening. The Monetary Authority of Singapore approved a full direct life insurance license to Singapore Life in 2017, making it the first local insurer to be licensed since 2017. In Hong Kong, the Insurance Authority has issued virtual licenses to several companies: Avo insurance (2019), Blue (2018), Bowtie (2018), OneDegree (2020), and ZA Life (2020).
For a traditional life insurance company, Sun Life Asia, the path to transformation is managed by a dedicated Digital Enterprise team responsible for leading the adoption of Insurtech strategies.
Yeoh confided that her role is to advise and consult on appropriate investments and derive benefits from these strategies.
According to Yeoh, a data-driven strategy in the finance function allows it to make informed decisions about areas the business can optimize or where to invest.
“Part of the role of the CFO is to make sense of the data and use the information to inform strategies, rather than relying on the instinct or experience of one or two individuals,” she added. “It can allow us to be far more innovative – Finance teams are normally known for being quite risk-averse but by embrace data-driven strategies, we are able to manage risks much more effectively and make smarter decisions when it comes to innovation and growth.”
How a regional business operates locally
Yeoh acknowledges the challenge regional businesses face, particularly a regulated industry like insurance.
“It’s absolutely crucial to find that balance between ensuring local markets are empowered to do what is best for their clients and meet local regulations, while also ensuring that they are positively contributing to the company’s strategic priorities,” she added.
To get this right, Yeoh said there needs to be a commitment to ongoing collaboration. “Building effective teams and networks that support each other, understand the need to the balance and communicate effectively when things change.
“The second is ensuring that local teams are clear on their responsibilities and remit and are empowered to make decision at a market level, and that from a regional perspective we provide the overarching guidance to align local and global directions,” she elaborated.
Advice for aspiring CFOs
Yeoh says these are exciting times to be working in the finance function, particularly with the growth in technology and the expanding role of the finance team as a strategic partner.
“My advice would be to look beyond your areas of expertise and constantly seek to learn more about the profession and embrace opportunities to use new technology:
"Business acumen: As a CFO you must be contributing to the overall business strategy so it's important to build relationships outside your team or functions.
"Hone-in on your soft skills: Technical excellence is no longer enough, you should be looking at your management and leadership style and how you can personally contribute to developing talent in the profession."
Click on the PodChat player and listen to Yeoh expand on her opinions and ideas about the evolving role of the CFO in the insurance sector.
- What is the role of a CFO inside an insurance company?
- Are there any CFO functions that are unique to the insurance industry?
- How do you see insurtech impacting the insurance sector?
- What role does a CFO play in ensuring the adoption of insurtech strategies leads to a successful outcome?
- How would you interpret a data-driven strategy within the finance function in the insurance business?
- Insurance regulations tend to have local (in-country) interpretations. As a regional CFO, how do you balance meeting local regulations with the company’s regional business priorities?
- What is your advice to finance professionals aspiring to become CFOs?