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Mirror, signal, maneuver – An IFRS 17 delivery perspective



To maximize the opportunity IFRS 17 presents, insurers need to use a clear business lens to look forward at how they want to operate under the new standard. Here's how…

"One's destination is never a place, but a new way of seeing things."
– Henry Miller

. It brings with it a significant change in the way insurers account for contracts.

Check your rear-view mirror

A lot of experience and business expertise will be focused on achieving IFRS 17 compliance and outcomes. The end-to-end impact of this standard is more than just updating financial statements and disclosures. So, is IFRS 17 just like structuring any big program? In my opinion, organizations should draw on their experience or previous data-centric programs such as Solvency II or GDPR. Insurers need to look at their programs with clear business lens to look forward to how they want to operate under IFRS 1

7.

Looking forward and navigating through the bumps in the road

IFRS 17 means that leaders will need to look at their business through a new lens of profitability and also consider the associated operational impacts. They will need to ask themselves:

  • Will my business, investors and market respond to changing measures of profitability?
  • Will IFRS 17 trigger broader industry transformation to enhance competitiveness, and how does this align with my strategic plan? 19659010] Should I fix, amend or transform? The road ahead will reveal complexity across full-end finance and actuarial processes.
  • How can I use this opportunity to drive incremental benefits during this long journey and maximize my investment and business case?

Overhauling insurers' financial Statements and disclosures will not be a smooth journey. There will be bumps to navigate and detours to take in order to comply with IFRS 17. In this series of blogs I will address these questions and draw upon my team's delivery experience in supporting a wide range of insurers. To support your IFRS 17 journey I'll focus on number of key decision points and resultant challenges, and explore how the decisions and delivery approach of IFRS 17 programs leaders can help bridge them

Looking left and right

So Where, by now, should insurers be on their journey? Most, if not all, will have undertaken high level impact assessments.

  • Shall we update, build or buy?
  • Shall we update, build or buy?
  • Do we use this as an opportunity to transform?
  • How do we achieve benefits beyond more compliance?

And, most importantly, we have the time to achieve these ambitions?

How many miles do you have left on the clock?

There are strong arguments to use IFRS 17 as a catalyst to transform, particularly to strategically improve the overall management of data and analytics. But this may be constrained by both funding and schedule restrictions. That said, the IASB's decision to extend the compliance deadline to January 2022 might now provide additional opportunity to transform and drive more substantial benefits than just becoming compliant. I think it also gives insurers more time to address the cultural and business implications of IFRS 17.

Whilst the IFRS 17 'transition' period might seem a long way off, this should be front and center of project leaders' thinking when planning their delivery roadmap, their approach to structuring releases and their approach to data migration. They need to keep track of sight of these objectives through each key design decision. And they'll need to maintain integrity across the chosen solution to meet compliance and finance and business strategic objectives.

Lift up your bonnet – data is central to informing your journey and performance

Achieving data compliance is at the heart of IFRS 17 change. A high level impact assessment should already have identified that data granularity will increase in parallel with associated data volumes. There are compelling reasons to develop a 'fact-base' of data and analytics to support key design decisions and to provide stakeholders, both internal and external, with early insight into how changes will impact the organization.

Insurers will need to decide which method and calculation model will be applied to each line of business. This not only needs to be done as a one-off exercise within the change program, but also re-visited for each accounting period. Data, systems and reporting processes should enable this and provide adequate management information and analytics to support decisions in an auditable manner. During Solvency II, several insurers seriously underestimated the complexity of their organization's data structure. As a result, many are still resolving data quality issues and having cumbersome data and systems architecture which may require revision. This is just one example of where IFRS 17 can be used to evolve the data landscape to benefit the wider business.

Don't just take your passengers for a ride… involve them in the journey

To avoid re-work through misunderstanding or misinterpretation on a program, it really important to have everyone understand the project's goals, to communicate clear business outcomes and to de-mystify technical jargon. As with any requirement and subsequent translation into system build, configuration and associated process implementation, there needs to be a clear opportunity for business users to test and accept the change. Through transition, ‘expected’ vs ‘actual’ results may also differ. This opens up questions about how requirements have been with. There will be bumps and potholes in the road, but they can be avoided through careful planning.

but it is the journey that matters, in the end. ”
– Ernest Hemmingway

As with any program, sponsors and delivery teams expect predictability, clear risk identification and management of on-time delivery two budget. As insurers, IFRS 17 journeys evolve, there will be opportunities to be added in additional benefits, but these should be managed properly via change requests, benefit realization and ownership.

In my next blog I will take a deep dive into data: the requirements, challenges and opportunity.


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