Over recent months, there has been growing pressure on the International Accounting Standards Board (IASB) to push back the introduction of the IFRS 17 accounting standard for insurance contracts. Now, with the Board voting to delay until 1 January 2022, the immediate question for insurers is: what will the new deadline mean for my business?
Here are our top recommendations for responding to the delay:
- Don’t delay your implementation
One thing is certain – IFRS 17 is not going away. So, it is critical to avoid the temptation, strong as it may be, to lay down tools and catch a breath. The underlying challenges of how to implement the standard and interpret its uncertainties clearly remain. And firms should use every moment of the extended timeline to surmount these obstacles.
IFRS 17 amplifies the need for insurers to better integrate their finance and actuarial functions, and consolidate and modernize data management, systems and processes. The delayed deadline does not eradicate this requirement – and, in fact, it will never be too early to start the arduous journey of transformation that IFRS 17 entails.
- Overhaul operations to add value
Many early implementers of IFRS 17 have found that existing practices and processes run deeper through systems and resources than they first believed. The good news is that overcoming these entrenched barriers represents a major step forward in adding value to the business.
Rather than merely meeting new reporting requirements, insurers should view IFRS 17 as an opportunity to improve both reporting timelines and insight into business performance, as well as reduce operational risks by increasing automation and governance of the entire reporting process.
- Take time to reap business benefits
An important upside of the delay to IFRS 17 is that a more phased approach can be taken to implementation. First, insurers should focus on data management and system updates that adopt the latest technological advancements and best practices. Next should come the layering of process automation and other governance initiatives, all in time for the go-live date.
In other words, the delay gives you more time to look beyond the minimum requirements of compliance – and consider additional investments that will provide greater business benefits.
- Secure the right expertise right now
Insurers should also learn from previous experience of regulatory initiatives. The delayed introduction of Solvency II, for example, resulted in a scrabble for resources as the new, later deadline approached. Many firms had dispersed their teams when the delay was announced, and then had significant problems re-staffing their projects as they competed for their own, vendor and consultancy resources.
It is just as likely that insurers who hesitate now to implement IFRS 17 will struggle with securing the right talent and skills to restart their programs. The new accounting standard needs a multi-disciplined approach to meet the varying needs of insurers’ actuarial, finance and IT functions. The skills required are numerous and already we see demand for them increasing – a trend that is unlikely to change.
Conclusion – Keep time on your side for a competitive edge
In summary, the delay to IFRS 17 gives insurers the chance to deliver maximum business benefit through their implementation program – and, for those willing to keep up the momentum, to get ahead of the competition, too. Conversely, firms that see the delay as a reason to pause risk falling behind and missing a window of opportunity to add real value and transform their business for the better.