The financial reporting for insurers will change radically now that a new policy line will come into effect in less than three years’ time. In an attempt to make the figures more comparable and transparent, the IFRS 17 – a new reporting directive which compares and interprets insurance contracts differently than before – will come into force on 1 January 2021.
The advent of new reports and calculation models means that, in order to become IFRS 17 compliant, one must, among other things, perform an impact analysis, view current systems and adapt them where necessary, track down (historical) data, and train employees.
Lucien Albers van der Linden, Manager Business Development, and Geert Stomp, Senior Consultant Solutions, of the Redmore Group have extensive experience in implementing complex processes for insurers and offer seven tips on how to make the transition to IFRS 17 as smooth as possible in the coming years.
- Choose a multidisciplinary approach
Involve all sections of the company early on in drawing up a new policy, because everyone will have to work with the new standard. Choose a multidisciplinary approach and form a task force to achieve your objectives, consisting of actuaries, finance professionals, model builders, managers, compliance officers, IT specialists and data analysts.
- Reassess use of (internal) data knowledge
Old and new data must be reassessed for usability, but the insurers’ administration does not go far enough back in time for this. As a result, historical and unstructured data must be reproduced and collected. It is important to make use of (internal) data knowledge, for example from experienced (former) employees.
- Analyse and structure the data
When the data is collected, the information must be assessed for usability. This is easier done if the information is analysed and structured beforehand. By using big data analytics one can see which data is missing and needs to be filled.
- Implement step by step
By implementing new processes step by step and experimenting with them first on a small scale, problem areas can be detected early. Begin by working in short cycles (scrum/agile, especially in the IT workflow) and coordinate ideas with stakeholders. Only later should the working method be expanded within your organisation.
- Keep the transition manageable
Set priorities for the requirements and determine the level of ambition to keep the transition to the new standard manageable. This allows you to gradually get used to the change, making the transition smoother. Be careful that the IFRS 17 project is not used by the organisation to implement irrelevant or different wishes and requirements, which could overload the budget and program.
- Educate your employees
Much of the success depends on how quickly your employees can switch over to the new standard,; since they are your most important asset. Make sure your organisation embraces the new reporting form, is agile and has the eagerness to work with it. Do not let them simply ‘go free’ after training, but keep your finger on the pulse.
- Prevent duplication of work
After the design phase, set up a tight, pragmatic programme organisation in which information is shared correctly and in good time with other parts of the company; this prevents the same problem from being tackled in different departments. Focus on optimising the information and process flow; process-mining techniques can help.
Extra tip: learn from the lessons surrounding the implementation of previous IFRS processes and Solvency II. Even though the models cannot be adopted one-to-one and IFRS 17 requires much more (historical) data, a number of important building blocks, processes and complex implementation techniques are certainly comparable.