Patient capital, impatient world

Why I believe life insurers should chase continuous close

Opinion | Johan du Plessis

Proof that even the most risk-averse, heavily regulated organisation on earth (and off it) can do doughnuts. (Apollo 16, 1972. Image: NASA)

Last year I started the ByteCat journey with a slightly audacious, slightly naïve ambition: change the world of life insurance. My chosen challenge is continuous financial close, in an industry far removed from it.

Of course many will question the why. The economics of life insurance moves slowly, profit is earned over decades, and day-to-day volatility is background noise. So why pursue continuous financial close?

The simple reason is that the rest of the world doesn’t move at the speed of patient capital. I believe it is vitally important to get a consistent financial drumbeat from the centre which the rest of the organisation can follow. Slow financial cycles encourage big budgets and long projects. Are we increasing investment (or cutting it) when we should, or when the calendar allows? Patient capital can entrench a culture of limited urgency.

Just because the capital is patient doesn’t make brokers, clients or even regulators patient. They expect increasing speed and flexibility. One can design wonderful products and amazing processes but if the organisational culture doesn’t deliver it doesn’t mean anything.

Continuous close is much more than having up-to-date numbers. It is about the culture it drives in a financial services organisation. Finance sets much of the drumbeat in insurance. I believe getting trusted numbers faster will force the organisation to learn and act faster. It will highlight and force out inefficiencies; it will turn focus to what is really important. Give people less time and they rush. Make speed a permanent requirement and we have to redesign the work. And finance functions are the perfect seed for organisational culture change, because they connect everybody and everything within a business.

You can design dashboards and extract information using smart business intelligence (and you should) but I believe the gap, especially in timing, between that information and the actual financials causes a disconnect in businesses. Example – a sales campaign can deliver great volume numbers, but does it deliver quality profitable business? The more we can connect activity directly to visible and material financial impact the better we can make decisions on what to spend our energy and capital on.

I don’t believe culture change occurs due to an instruction, a workshop or even pure will-power. So I see continuous financial close as an Apollo project: a goal so audacious that it will drive culture change by its mere existence, because to achieve it there can be no excuse, no compromise and will require real engagement and real change. I certainly don’t know all the answers and many roadblocks seem insurmountable but if it was straightforward, it wouldn’t be a moonshot.

Of course, a s a technologist I am also excited that this can be a real application with real benefits for new technologies like AI and flexible cloud computing. Why try to justify theoretical savings and advantages on applying these technologies to our existing work processes when we can point to the moon?