Insurance companies have been operating in an environment of low premiums rates, high costs, high competition and poor investment returns. Some companies have struggled to differentiate their service offerings because they are unable to fully and effectively utilise their greatest asset – data.
On the one hand, most insurance companies still have legacy data systems that may not interact well with each other or be obscured from teams that are seeking to drive the most out of data. On the other, InsurTech companies are squeezing insurers by utilising the latest technology to drive self-service analytics and management information, attracting a loyal following who regard the InsurTech offering as more in keeping with the times.
IFRS 17 is the new insurance contract standards for companies who operate under the IFRS accounting regime. The standard comes into effect on 1 January 2022 and replaces the existing IFRS 4 standard. IFRS 17 will make the insurance industry more transparent and comparable to other industries, allowing investors to make informed choices when investing.
IFRS 17 fundamentally changes the way insurance contracts are measured and therefore how profit is recognised. It also stipulates additional reporting requirements to improve the level of transparency and disclosure of insurance firms. Importantly, the standard applies to the assessment of all insurance contracts, regardless of whether the firm who sells the contract is an insurance company or not.
In practice, most companies would tend to react to a new regulatory change like IFRS 17 by starting a specific team, working to the sole objective of achieving IFRS 17 compliance. This team is likely to work in a silo, independent of other regulatory implementation teams. This may lead to inefficiencies as wheels may get reinvented and lessons relearnt from past implementations.
We believe the right approach is to take a holistic look at the regulatory landscape and work out how to implement a system that complies with all the requirements faced, at the same time. The system should be regulatory agnostic, so that you will be ready when new regulations are introduced.
It is likely that this will involve implementing a data system with best in class governance, transparency and processes that will help you channel the right data to the right teams, while unlocking future potential in your existing data sets. It may also involve a transformation of the processes your actuaries and finance teams have in place, to reduce the amount of manual effort required in meeting these regulations. This transformation may also involve helping senior management understand the position of the business.
We are proud to be a member of a consortium of companies, including Collibra, EDMWorks, Hitachi Consulting and Xceptor. We supplement the expertise of our partners by bringing our actuarial insight and our detailed understanding of insurance operations to the consortium.
We can help insurers understand the implications and design a data system that will work to drive value for your business. As an added bonus, we can also help you design a system that complies with IFRS 17.
We have a track record of assisting our clients through regulatory transformation in the past as well as with large scale process transformation. The partners of our consortium are also best in class and, together, we can help you unlock the true potential of your data.