This article was originally published in the Summer 2019 issue of The Record. Subscribe for FREE here to get the next issue delivered directly to your inbox. 

There is a recognition that IFRS 17 will create disruption across the insurance industry. A need to have trusted data inputs into cash flow models is combined with a need for trusted data outputs to feed into financial disclosures. Given the volume and complexity of the calculations required, our view is that automation will go a long way towards being able to do calculations fast, but also with the required confidence that they are right first time. IFRS 17 will also add to the future computing demands, so companies will need to think about scalability and cost effectiveness as part of their IFRS 17 programmes.  But technology is not a single, unitary, one-size-fits-all solution and hasty implementation can lead to expensive errors and delays. There are five areas that everyone beginning IFRS 17-related transformational change needs to think through in advance before they apply innovation.

One, using more staff is never the answer. All chief financial officers (CFOs) are under significant pressure to bring costs down. By adding more people to the headcount, the CFO may seem to be bringing more resources to bear but is adding more expense with little or no demonstrable benefit. These staff will not be used to add more strategic insights that will help guide the company and anticipate risk, but to do repetitive tasks that could easily be automated away.

Two, get your heads in the right place. Once the company has realised that process automation can buy the time needed to work on IFRS 17 compliance and started to implement it, it needs to think carefully about how it should be applied and deployed. Automation is only ever a vehicle to execute a pre-existing design, so while finding a partner who understands and can deploy modern technology is half the battle, the other half is finding a partner who can analyse the processes and make sure they are both necessary and efficient.

We worked with a large UK client to challenge its existing working day timetable as a way of meeting the demands of Solvency II. The answer was an innovative design that was deliberately not anchored to the pre-existing process but brought a wholly fresh perspective to bear. We applied our robotic process automation technology, freeing up resources which allowed re-deployment to other ‘volume-add’ areas and provided the opportunity to reduce costs. It meant that the company could deliver effective change earlier and maximise its savings in time and money.

Three, select your team carefully. The redesign of processes so that they are more innovative will only work if the people in the company who are involved in the redesign are similarly innovative. Many people default to what they have always done during their careers and it can be hard to get them to change. Similarly, avoid people who want to work in silos, with work handed from one silo to another with little or no understanding of the overall schematic – and no insight into why it exists at all.

Four, communication is more than an article on the intranet. After the change process has begun, there needs to be a fundamental alignment between the c-suite and the teams that run the processes day to day. The sense that technological change is being done to them, rather than with them, can prove fatal. One client spent millions on new technology to give them a greater degree of control, and yet it was found that if they wanted to make a change, it would take months. The actuaries went back to using their spreadsheets and the full benefits of the transformation were not realised. Technological change needs to embrace the culture of an organisation rather than seeking to change it.

And finally, ‘I’m going to lose my job’ is a common refrain. This idea stops people from engaging with technology as well as not giving their best to the programme which will implement it. In reality, removing the tasks which can be easily automated allows roles to be reoriented towards strategic and forward-looking projects rather than poring over spreadsheets. What you are effectively saying to these people is that their jobs are going to become more interesting and that the strain of managing IFRS 17 is going to become easier, because technology is doing the grind.

The insurance industry is often wedded to processes that have been laid down, incrementally, over decades, and is perhaps why Solvency II and now IFRS 17 are sending quiet shockwaves through it – and why people are trying to find more time. But the lesson of process automation is that that time is surprisingly easy to create and, viewed in this way, IFRS 17 offers a unique opportunity to bring greater efficiencies and job transformation into corporate life. 

Rakesh Patel is a senior director at Willis Towers Watson

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