Lee Thorpe, Head of Risk Business Solutions for SAS UK & Ireland, weighs up the advantages and disadvantages surrounding the new International Financial Reporting Standard 17
The upcoming International Financial Reporting Standard 17 (IFRS 17) could well be a blessing in disguise for the insurance world. While it’s sure to disrupt the industry, causing headaches for many, it’s not all doom and gloom. To focus on the positives, achieving compliance can open the door to a new competitive advantage for companies whilst also keeping the regulators at bay.
IFRS 17 will end the current era of financial reporting standards in insurance. Even though the compliance deadline has now been pushed back to 2022, early preparation is still paramount to making these adjustments, as well as considerable investment. However, IFRS 17 also provides a perfect opportunity for insurers to reassess their approach to automation and analytics. Upgrading systems and capabilities for readiness with IFRS 17 will have a broader positive impact on the business, and potentially the industry as a whole.
Survival of the fittest
Compliance with IFRS 17 is not just necessary from a regulatory point of view, it’s key to being able to thrive competitively. Indeed, our recent research shows that 40 per cent of insurers believe the standard is crucial for the industry’s survival.
Insurance has long been seen as fertile ground for disruption. The investor community has been quick to fund the insurtech startups and payments disruptors that have been shaking up the sector in the past few years.
By contrast, competing for fresh investment has proven a formidable challenge for the industry’s incumbents. Yet, transparency for investors is worth its weight in gold and IFRS 17 could well change their fortunes.
IFRS 17 obliges insurers to create large quantities of high-quality financial information that is detailed, trustworthy and universally comparable for IFRS reporting firms. The regulation will standardise accounting procedures and greatly improve the transparency of firms’ obligations and profitability. In short, it will help investors compare insurers and decide where to invest.
In a challenging market, transparency is valued greatly by investors assessing the viability of their investments. With 98 per cent of insurance professionals believing that IFRS 17 will increase transparency, the regulation will surely be an important step in winning their trust and driving inward investment to the industry.
A plethora of positives
The world of insurance is changing rapidly as the volume, complexity and velocity of data expands. Yet what matters now is not how much data you have, but your ability to interrogate it and extract insights from it quickly in an auditable way.
IFRS 17 will force accountants and actuaries to work and align processes more closely to ensure auditors get the data they need. Yet, with the right approach, this burden becomes an opportunity.
Greater automation and use of analytics can be a gateway to more efficient operations and data-driven decision making across your business. A data analytics platform can handle the requirements of IFRS 17, running all necessary calculations and processes while enabling the sharing of consistent data between teams.
Automation and improved data flow between teams will significantly speed up operations. The level of detail achieved in data collection and management also enables superior pricing analytics for contracts.
The improvements in data handling inherent in IFRS 17 compliance can translate into more up-to-date, accurate insights, helping teams to identify positive trends or anomalies at a faster pace. When the finance and actuarial departments start sharing insights quickly it will serve as encouragement to other parts of the business to emulate that behaviour.
It is undeniable that IFRS 17 will take painstaking preparation. However, it is also helping insurers to reinvent their approach to analytics and transparency. Ensuring that data drives decision-making is key for both compliance and for creating that competitive edge. Ultimately, although it may be a rollercoaster ride for some, with the right approach to data IFRS 17 compliance will be more than worth it in the end.
