Analytics for Insurance

Chapter 2Analytics and the Office of Finance

Some readers may be tempted to think that analytics in the office of finance need not be industry-specific or indeed insurance-specific, believing that all finance officers and accountants are more or less the same and undertake the same functions. To some degree they are right in that accounting practices by necessity have a degree of standardization to enable organizations to be benchmarked against each other. Often they also believe that financial analytics are too complex to be understood and managed by other than professionally trained accountants – an attitude which is arguably unhelpful to stockholders and non-executive directors.

Many industries necessarily have distinct characteristics. Insurance falls within that grouping especially by virtue of the fact that insurers need to allow in their books for payments not yet made and where perhaps there is a degree of uncertainty in the payments required. This particularly shows itself in complex or lengthy (‘long-tail’) claims which may take many years to settle. Similarly, in the life and pensions sector, expert accountants and actuaries constantly need to consider events, i.e., usually death, which may not happen for 20 or 30 years and allow for this in their calculations.

It is also important that the office of finance in insurance companies consider the breadth and depth of their organization. They need to consider multiple and often diverse products and offerings, multiple ...