18/01/2021 by Graeme Charters
Business Growth and Improving Resource Allocation
I’ve recently been working with an insurer that has seen rapid growth in new international markets. Their expansion last year was especially strong, so much so that, when it came to their actuarial function, their fees had doubled.
When insurance companies experience such rapid business growth in a relatively short period, they tend to reach a tipping point where they begin to feel less in control over the actuarial function:
Top-rate actuarial services that were achievable at a smaller scale begin to sky-rocket.
If the actuarial function expands in line with the client, the problem of overengineering becomes increasingly apparent.
Roles and responsibilities
Greater workloads mean less clarity around the hierarchy of who is doing what (and why).
In the example above, these wrinkles had started to appear and affect the client’s relationship with their previous supplier, especially given the magnitude of the cost increase. The quality was there, yes, but with it came rates even higher than the Big Four would charge.
The client also expressed concern that the previous supplier was being too conservative in its outlook, which did not match up to the business’s true risk appetite. A more agile and clearly a more affordable approach was needed.
I’ve since been working closely with the business to better understand its various new ‘branches’ around the world. I see this as my responsibility as the client expands into new regulatory territories: it’s only then that the productivity of our actuarial tasks can be optimised to the client’s maximum benefit. Ultimately, client confidence that the fee charged truly reflects the value of the work done is key. We’ve also been exploring a shift in models around charging, given the number of hours involved.
With a sizeable project around IFRS 17 on the horizon, the client is already seeing the benefits of our model:
By being flexible in how we contract and who we use, we’re able to allocate different tasks to the lowest possible chargeable rate, rather than everything being charged at premium level. This also frees me up to work where it counts most.
By working directly with the senior team, I’m personally involved in the business strategy around growth and risk.
While others have been too slow to grasp the expanding business, the client feels more in control over costs, and that chargeable hours are being used more efficiently (and not for familiarisation or learning).
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