Every cloud has a silver lining, especially in insurance. The upcoming International Financial Reporting Standard 17 (IFRS 17) regulation is certain to unsettle the industry. However, to ignore the bright side would be a big mistake. Achieving compliance is not only for satisfying regulators, it can be a competitive advantage if done well.
IFRS 17 will upend decades of insurance financial reporting standards. It will require painstaking preparation, substantial investment and no small amount of stress to be compliant before the 2021 deadline.
However, IFRS 17 also represents a golden opportunity for insurers to rethink their approach to automation and analytics. Upgrading systems and capabilities for readiness with IFRS 17 will have a wider positive impact on the business, and potentially the industry as a whole.
A question of survival
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 start-ups 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.The #IFRS17 regulation will be an important step in winning investors' trust and driving inward investment to the industry. #insurance #compliance Click To Tweet
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.
Faster data sharing means more accurate and timely insight, which helps teams spot opportunities or anomalies faster and make better decisions. What’s more, once finance and actuarial departments can share insight quickly, the system can serve as a blueprint for encouraging collaboration across other parts of the business.
While IFRS 17 may cause a few headaches, it’s helping insurers rejuvenate their approach to transparency and analytics. Data-driven decision making is essential both for compliance and for thriving in the modern insurance environment. The road to IFRS 17 may be long, but there is light at the end of the tunnel.
Find out more about how insurance companies believe they can benefit from IFRS 17 and how they’re preparing for it.