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IFRS 17's transforming effect

IFRS 17's transforming effect

The deadline for IFRS 17 implementation in January 2021 will be here in a blink of an eye. And the implications for insurance organizations will be significant. But it will also create a valuable opportunity for insurers to start creating their workforce of the future. Is your organization using IFRS 17 to transform the enterprise?

By now, most insurers should already be thinking very carefully about their IFRS 17 implementation strategy. It is, after all, the biggest change to insurance-related accounting standards in more than a decade.

In part, the change will be significant because IFRS 17 goes far beyond financial reporting to also encompass actuarial valuation, asset liability management and risk management. The impact and requirements of IFRS 17 will be felt across virtually every part of the insurance organization.

It will also be a significant change for the workforce. Indeed, most insurers already recognize the massive workforce challenges that will arise during the 'transition years'. Parallel processes and reporting will need to be conducted and reconciled. Stakeholders will need to be informed and updated. New processes will need to be tested and tweaked. Compliance and audit procedures will need to be performed. And, all the while, business will need to go on as usual.

The pressure will only rise as insurers work through the implementation roadmap ahead of the 2021 deadline. History suggests that few organizations will keep to planned timelines. For employees, the pressure will become enormous as the implementation deadline looms.

Those looking further down the road will also recognize that IFRS 17 will require insurers to rapidly evolve their current skills and capabilities – both through the transition period and post-2021 – to properly manage the business under the new standard. In some cases, new competencies will be needed to speed up decision-making, particularly within middle management. Many may struggle to create the right mix of skills, capabilities, job roles, collaboration and operating models to also achieve a high level of business flexibility, responsiveness in decision-making and value.

Turn the burden into benefit

KPMG member firms believe that insurers can view the shift to IFRS 17 in one of two ways: either as 'yet another disruption' that must be endured; or as an opportunity to accelerate their existing organizational transformation roadmap. Those conforming to the former view may capture some benefits as they implement IFRS 17, but they will also likely encounter significant operational challenges. Those that take the latter view should find themselves rejuvenated and fit for the future.

There are a number of ways that insurers could use the shift to IFRS 17 to catalyze their transformation efforts:

  • Increase the use and value of automation. Rather than trying to get even more out of employees who are already feeling the strain of implementation and fatigue of continuous change, insurers should be exploring opportunities to automate new IFRS 17 processes. Mission-critical processes and those with high data volume and low risk should be the first to migrate. But insurers should also be using IFRS 17 to identify other (possibly longer-term) opportunities to incorporate digital workers into their employee mix.
  • Breaking down organizational silos. IFRS 17 will require a much higher level of collaboration between employees and across functions (particularly when it comes to creating more seamless internal data hand-offs). And this, in turn, should help employees take more of an 'enterprise view' of their activities, impact and decisions. By engaging top talent from across the organization in the IFRS 17 implementation process, insurers could be helping to develop their next generation of business leaders.
  • Create a common language. IFRS 17 will require organizations to place greater focus on improving data quality, achieving data normalization and encouraging cross-interpretation. While this may pose a challenge at first, it will also deliver massive benefits; for the first time ever, IFRS 17 will allow insurers to essentially 'speak the same language' when reporting across jurisdictions and markets. And that should allow insurers to not only improve collaboration across the enterprise, but also achieve much deeper levels of insight on everything from financial through to operational performance.
  • Explore new models. The adoption of a single approach to financial reporting and accounting should allow insurers to centralize some of their common processes and practices into a shared service or Center of Excellence model. This will not only alleviate some of the strain on the operating companies, it will also allow the organization to create 'knowledge communities' that enable ideas and leading practices to be rapidly shared across the organization.
  • Develope new skills and capabilities. Even without the implementation of IFRS 17, it was obvious that the traditional insurance capability set would need to change to meet the realities of the new business environment. Insurers should be using the shift to IFRS 17 (and the adoption of automation) to rethink their core capabilities, assess the value of digital labor and start the transition towards their ideal workforce of the future.

Take advantage

The bottom line is that IFRS 17 deadlines are coming. And that will mean massive changes for the traditional insurance workforce. Insurers can either try to get through with the minimum of disruption, or they can see IFRS 17 as an opportunity to catalyze real and sustainable transformation within their workforce and their wider organization. We would strongly encourage the latter.

Five steps to turning IFRS 17 into a transformation accelerator

  1. Create a robust IFRS 17 implementation roadmap that spans the enterprise and takes into account people, process and technology implications.
  2. Find opportunities to leverage automation to support the organization through the IFRS 17 transition period and beyond.
  3. Identify the skills you will need in the future and consider how you might partner, develop or acquire the right capabilities to manage the full IFRS 17 implementation.
  4. Explore new models that might reduce the strain on existing employees in the short term while setting the business up for increased flexibility in the long term.
  5. Use the transition as an opportunity to increase collaboration across functions and develop top talent for future leadership roles.

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