Come 2023, the insurers will be faced with the challenging ask of transitioning IFRS 17 implementation activities to Business as usual (BAU). Chalking out a strategy as per Target Operating Model to transition the IFRS 17 project work to BAU becomes crucial as the deadline looms.
One of the major challenges, the insurers will face regarding effective IFRS 17 implementations, will be the creation of a strong plan to transition the IFRS 17 project activities into BAU and that includes technology as well as functional activities. This would include:
a) Identifying new data cleansing activities of IFRS 17
b) Knowledge transfer of the complex new systems
c) IFRS 17 reporting and disclosures requirements
The transition will need to be smooth, seamless and as per the defined Target Operating Model (TOM) without impacting the existing BAU deliverable. Without any proper strategy and plan, it would be very difficult to achieve this milestone.
The bigger challenge will be in the shape of knowledge transfer for the new systems and the processes since many new activities need to be transitioned to several new team members. This is critical as it has been observed that given the brief duration of the transition, several process details are missed out resulting in IFRS 17 TOM failure.
Preventing TOM Failure
The insurers should consider two important pillars of the Target Operating Model while finalizing the transition plan to BAU.
Firstly, identifying technology work to transition to the BAU technology team, that includes identifying the technology activities to be transferred to the BAU teams e.g., – batchwise generation of relevant data on agreed frequency, production support for application issues, monitoring and fixing the breakdown of the applications, L1 and L2 support for various new applications, documentations like codes, technical specifications, entity relationship diagrams, SOPs.
The insurer IT team should also consider the need for managed service provider for all the new and scattered IT services, revisiting location strategies of the IT services, identifying the additional resources needed due to additional activities, clear definition of roles and responsibilities involved, and establishing proper communication channels by leveraging existing weekly, monthly communication toolsets.
Secondly, transitioning functional work to BAU team, including but not limited to identifying the functional activities to be transferred to BAU teams, e.g., training the BAU team on new IFRS 17 requirements, new process training for seamless knowledge transfer, which will include CSM calculation processes, new accounting schema per new chart of accounts, new data reconciliation activities, identifying new processes e.g. data reconciliations between Policy Admin Systems and CSM Engine, data cleansing activities, if needed, transitioning and going live with IFRS 17 disclosures by embedding these reports in BAU reporting, informing variations of local regulatory requirements to the subsidiaries/branches, creating new process maps and updating SOPs as per the new IFRS 17 processes.
The insurer business team will have to realign the various teams to match the new target operating model, finalizing the outsourcing strategy if the insurers are looking for recouping the cost incurred in IFRS 17 program over the period, identifying additional resources needed due to extra activities and identifying the best practices to be shared with the BAU team.
Optimize Cost with Automation
The insurers should identify automation opportunities for the processes and leverage the existing transformation projects, tools and accelerators to accelerate the month end processes. This would help early closing of additional IFRS 17 activities. The insurers can use IFRS 17 validation tool to automate the validation process for changes in the group of contracts measurements in the existing IFRS 17 solution. This will help them optimize cost with limited manual intervention.
A well thought out transition plan along with strong knowledge transfer will help insurers transition the project work to BAU smoothly and achieve the IFRS 17 Target Operating Model. The time is now to be ready with the transition plan. Are you ready?