The looming January 2023 deadline for compliance with the latest evolution of the International Financial Reporting Standard, IFRS 17, has brought the critical issue of visibility of data to the forefront for many insurance companies.

“Insurance companies still struggle with siloed data sets, but are working hard to comply with IFRS17 – and using the opportunity to improve their back office systems and even innovate,” says Louw Hopley, co-founder and CEO of insurance platform Root.

Complying with IFRS17 offers insurers the chance to review their whole operation, and make it easier to manage their back offices. It also offers the chance for greater innovation, Hopley says, by uncoupling product development from older mainframe systems, for instance.

IFRS17 dictates how insurance companies across the world should report on insurance contracts, the timing of cash flows and the risks related to these contracts.

The benefit of this standard is that it makes it easier for shareholders to monitor the performance of insurance companies, identify potential risks and benchmark them against their global counterparts.

For insurers with worldwide operations, it also creates a global standard to easily compare a subsidiary in South Africa and one in Brazil, for example.

The data gap

According to IFRS.org there are 450 insurers worldwide with $13-trillion in assets using the IFRS standard.

“The challenge that these companies face is that many of them can’t reconcile information between their various backend systems quickly enough to be useful in today’s world of apps, even to the point of struggling to link policy information and financial transactions,” Hopley comments. “Insurers need to be able to extract all the data, do calculations, recognise if it’s an asset or a liability, and provide forward-looking projections, fast, if they are to keep up with what their competitors are doing.”

Remedying this requires platform technology that accommodates both legacy systems (like mainframes) and customers’ digital needs – like mobile apps that give instantaneous responses.

Taking a platform-based approach

Considering that many insurance contracts have lifespans of decades, it’s essential that there is a standard way of reporting around them, so that an onerous contract can be tracked, and the risk associated with it properly accounted for.

“It all comes back to how organisations manage their data,” Hopley says. “To accurately report according to IFRS 17 requires that companies know how the data they’ve collected fits together – be it policy payment data, actuarial data or even third-party data that’s used in the decision-making process.”

And data management is one area where insurtech firms have set themselves apart from traditional insurance companies. The data-driven approach that insurtechs like Root adopt makes it possible to ensure that all relevant data is clean and available as and when it’s required.

Most companies have dedicated teams responsible for compliance and reporting, and IFRS17 compliance itself might be an immediately pressing legal requirement, but the drive to eliminate data silos has a knock-on effect across the entire business.

“With greater visibility of all an organisation’s data there is potential for the company to leverage that data to address new market opportunities and respond to changes in consumer behaviour,” Hopley says.

“APIs and SaaS platforms allow insurers – or any company looking to add insurance to its product suite – to build and deploy new insurance products themselves, while data requirements like IFRS17 are built in and maintained by the platforms behind the scenes,” Hopley concludes.