Guest Blog - Learn the language of Finance

We are delighted to introduce a series of Finance related blogs, written by Ted Wainman. Ted is a trusted partner of the LMA, bringing a wealth of knowledge and experience to our delegates. We hope you enjoy these blogs, published weekly.

Paul Davenport
Finance Director

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12 March 2021 | 10-minute read 

Why is finance important?

“Finance is a simple subject, made complicated to justify the fees”. If you sometimes feel that the language of business finance is made up of impenetrable jargon, then you are not alone. And yet, the ability to speak the language of business finance is a crucial skill of any aspiring business professional. For while we can leave underwriting to the underwriters, claims handling to the claims-handlers, loss adjustments to the loss adjusters and HR to the HR professionals. Everyone in your organisation needs a fundamental understanding of the financial drivers of the business. Often, our first exposure to finance comes when we are asked to put the budget together for our team or department (or even an event we are organising). But this is only the start! I have lost count of the number of times I have sat in on the board meetings of various clients and watched the eyes glaze over as the Finance Director starts to speak.

I remember running a finance workshop for a company based in the midlands. “Can I introduce the workshop?” asked the Finance Director. “Be my guest” was my immediate reply. It is always nice to have the finance team ‘sponsoring’ my workshops. After a brief 20-minute presentation the FD finished with “any questions?”. There were none, so he left. Now, during the presentation I made sure not only to pay attention to the key messages that he was trying to impart (I was going to reference these during the workshop), but also to observe his audience. Their glazed and bewildered faces told me everything I needed to know.

“What did he just say?” I asked (after the FD had cleared the room)
“No idea” was the general reply
“So why didn’t you ask him questions like he asked you to?” I enquired
“We don’t even know what questions to ask!”

What does it all mean?

From Gross Premium Written to Net Premium Earned, from Combined Ratios to IBNRs, the world of insurance has more than its fair share of technical financial jargon. But what does it all mean?

For any aspiring insurance professional, understanding the language of insurance finance is crucial to career progression. I have sat in on the presentation of company performance by the board to the rest of the company, I have discussed quarterly reports on the website with team leaders and I have examined the financial results of insurance companies with various senior leadership teams. The fact remains that those who are ‘close’ to the numbers end up speaking a language that is alien to most others – whether inside the business or outside. Whether they are discussing the COR or GPW, releasing reserves or just ‘net net’, those not in the know are usually left behind.

How can I make a difference?

It is therefore never too early to getting a grip on the essentials of insurance finance. Being able to ‘read and interpret’ a set of insurance company’s (or syndicate’s) financial report and accounts is a skill that will benefit everyone – from being able to discuss the financial performance of their own company or those of their competitors, to being able to actively contribute to the conversations about the financial strategic direction of the organisation.

Learning the language of finance – particularly in an industry such as insurance, is an essential skill to have to be able to progress.

I am delighted to be partnering with the LMA to deliver several new programmes being delivered virtually as part of the Finance Academy.

To find out more about the Finance Academy and the new offering, please visit the Virtual Academy website.

Ted Wainman
Talk Financials Ltd