CFOs feel financial modeling needs improvement

“Our survey revealed that despite advances made in financial modeling at many life insurance companies, there are ever increasing demands placed on companies by their stakeholders to improve the speed and usefulness of their financial models,” said Cheryl Tibbits, director and life insurance consultant at Towers Watson.

CFOs surveyed reported that the most work needed to be done on long-term care and life reinsurance models with more than half of the respondents saying that they are not at all satisfied with their long-term care modeling and 36 percent saying that their life reinsurance models needed work.

When asked to chose the top three obstacles they faced in extracting needed information from their financial models more than two-thirds named managing competing priorities while 44 percent responded that run-time requirements were the biggest challenge and 39 percent answered model features and functionality. All of the respondents said that their first priority would be run-time requirements.

The survey reported that CFOs have mixed feelings about how they regulate the results of their financial models in order to mitigate against the risk of them adversely informing management decisions. Fifty-two percent of respondents said that model governance process in their organization is somewhat developed while 22 percent said that it was very developed. Contrary to the findings, 65 percent said that they were going to make changes to the governing process of models this year with only 26 percent stating that they would be making no changes at all.

Only 13 percent reported using an outside vendor for their modeling with many life insurance companies relying on an in-house team.

The survey also examined CFOs attitudes towards the actual features and tools employed by financial models and found that 66 percent had confidence in the value of the tools, saying that they would “extract full value” from them.