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Insurance reserving transformation: How you can create momentum

May 23, 2023

The third of our five-part article series on reserving transformation.
Insurance Consulting and Technology
Insurer Solutions|InsurTech

Part 3: Insurance reserving transformation: how you can create momentum

In Part 2 of this article series, we talked about the characteristics of emerging reserving best practice. However, given the time pressure on reserving teams, insurers typically need to move forward towards best practice in controlled, manageable steps. So, in this article, we present two potentially more digestible options for achieving reserving transformation – ‘fix and shift’ and ‘shift and fix’

Even where insurers recognise they would benefit from updating the way they go about reserving, a common perception is that time and resources are against them. The task of completely transforming technology and processes in one fell swoop, with the resource implications involved, can seem just too daunting. So, often, serious attempts at redressing the situation continue to get kicked down the road.

But, ask yourself, for how long are patchwork solutions going to be sustainable and are they going to add more time and cost in the longer run?

Most insurers need to find a different, more palatable way to kickstart their journey towards a more modern reserving function. If you’re in that situation, a path we advocate is to identify how and where new technologies and processes may need to coalesce in the long run, but prioritise which bits – technology or process, with some inevitable crossover – you tackle first.

Fix and shift

Option one is to ‘fix’ the processes up front, by redesigning the structure, methodology and monitoring to better fit the reserving workload, and then shift the supporting technologies over time.

As an example, one WTW client was working with a complex, Excel-based process, which needed to be updated for all segments on a quarterly basis (regardless of whether or not those segments were undergoing review).

The Excel modelling tool was heavily reliant on VBA scripts that contained thousands of lines of code, involving a multi-day process to update them even if they wanted to maintain assumptions between reviews. Something needed to change.

The company defined its reserving transformation objectives as follows:

  • Phase out the Excel reserving tool and better use other existing technology
  • Be more agile around the assumption review:
    • Carry out a deep dive on specific segments each quarter, whilst holding assumptions on other segments
    • Be able to easily flex the chosen segmentation, without loss of granular insight
  • Facilitate monitoring of key reserving diagnostics on a more regular basis than quarterly

Following the fix and shift approach, the initial process redesign and technology input allowed specific classes to be identified for modelling up-front, with automated control of the approach for other classes. Expanding the use of WTW ResQ to cover all reserving calculations and the use of an automated SQL process to produce allocated results at a granular level accelerated the whole revamped process.

This focus on initially fixing the existing reserving process provided a solid foundation that would enable a much smoother shift onto an overarching automation and governance platform, such as WTW Unify, in the future.

Regardless of the specifics though, the key thing of fix and shift is to take a step back, reassessing why you do certain things in the reserving process and simplifying where you can to do more in the future.

Shift and fix

The second option is to shift the process to new technology first to take advantage of speed and efficiency gains and refine reserving capabilities later.

This puts the focus on tooling and technology and automating the existing process to reduce manual effort before looking at how to improve the process down the line, although naturally a shift-first strategy also yields process fixes along the way. The key thing is to do things better using the new technology, not change the underlying methodology.

This was the approached recommended to and favoured by a WTW client who was aiming to:

  • Reduce the amount of manual effort required each quarter
  • Reduce the time taken to run the reserving process
  • Standardise the reserving process across all regions
  • Address data handling issues linked to version control, manual checks and inconsistent usage across regions
  • Automate controls and governance
  • Improve visualisations and metrics captured by the system (removing Excel)

A key element of this approach is to ensure the internal reserving team understand and can maintain the technology solution going forward as a pretext to freeing up the time necessary to continue to develop processes and metrics in the future.

Create momentum

No one of these approaches is better than the other. The ‘fit’ of each to an insurer will depend on the business and its circumstances.

The crux of both is that they are essentially about creating momentum. Momentum for transforming and improving reserving capability that, in many cases, could otherwise fall into the “too hard or impractical” category given the strenuous day-to-day demands on many reserving teams.

Coming up:

The fourth article in our reserving innovation series will look at how people, processes and technology need to come together to achieve your goals.


Dan Joseph
Director, Insurance Consulting and Technology
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Holly Layton
UKI Reserving Transformation Lead
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Sam Bright
UKI Reserving Innovation Lead
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