One collateral benefit of IFRS 17

Insurers who go beyond just mere compliance with IFRS 17 into data optimization are reaping the benefits, including expanded capabilities with advanced analytics, machine learning and artificial intelligence, speakers said Wednesday at an industry event.

The rich dataset collected from IFRS 17 requirements can open this whole new world for insurers, attendees heard Wednesday at the Canadian Insurance Accountants Association’s Fall Technology Seminar in Toronto.

International Financial Reporting Standard (IFRS) 17 Insurance Contracts requires insurers to open up their data infrastructure to connect various systems together. The accounting standard affects the entire technology ecosystem within insurance – from financial systems to policy management systems to actuarial systems – “in a manner that often hasn’t been impacted in the same way in the past,” said Daryl Senick, a partner with BDO IT Solutions.

“You need that data ecosystem to connect all the systems together and there is a major decision point there in how you do that,” he said. “One route will get you IFRS-compliant, and another route will get you something far greater than that. It’ll get you automation, it’ll get you advanced analytics.”

Senick, who is also BDO’s national industry lead for insurance, said that most clients he speaks with talk about just wanting to get through IFRS 17 without anything fancy. But when the actuarial, finance and IT teams get together to discuss the standard, they see compliance is not enough as an objective and outcome – they want to move into the realm of optimization.

“You have this rich dataset,” Senick said. “For some, it’s the very first time they are pulling [data] in a standardized, consistent manner across the collection of systems within their organizations. And [insurers] are saying, ‘I want to do much more than simply report on this information. I want to analyze this information. I want to do customer analysis. I want to grow with this information. I want to apply the world of data science to this. I want to leverage artificial intelligence against this. I want to grow the business leveraging this kind of information.’”

The difficulty for insurers is that their technology ecosystem is often siloed. “It’s not accessible from a data and agility perspective and that’s a problem for IFRS 17 because you need to that data agility to really implement the standard,” Senick said.

So how do insurers get there?

“You build an agile data pipeline, where you are able to remove all of your point-to-point integrations to all of your systems and you’re connecting everything into your data pipeline for your requirements for IRS 17,” said Alex Ng, national practice lead, data & analytics, with BDO Canada. “If you have a rigid data pipeline, if you have rigid systems, every small change can seem like a really big event and then you’re going to go through a lot of pain during your IFRS 17 implementation.”

A lot of insurers have a data warehouse, but it might not contain the level of granularity needed for IFRS 17. The data warehouse for most insurers also sits in an on-premise environment which may or may not be at capacity, and it can be costly and timely to expand the warehouse, Ng said.

One option insurers are considering is the cloud, which provides a cost-effective option to quickly expand that new storage. “You are going to need to start immediately,” Ng said, as the cloud has security and privacy considerations.

But the cloud does open up capabilities in terms of analytics, machine learning and AI. “Once you have the data in the cloud, it’s an easier leap to put your analysis in the cloud, your protection in the cloud and all of your other capabilities in the cloud.

“Now that you have all this data in your data repository, it opens up the world to what you are able to do with that data,” Ng said. “You’re able to make better data-driven decisions, you’re able to do a new level of analysis that you weren’t able to do before.”