Article Synopsis :
The new accounting standards released by the Financial Accounting Standards Board (FASB) in 2018 will force insurers to become more agile in how they manage, analyse, and report their data.
Sounds good in theory, says this paper from Deloitte, but it will also be a challenge. Systems have been designed to handle transactions, not information. They must now evolve from a “transaction state” to an “information state.” in double quick time.
Insurers will now be forced to make the leap towards digital transformation that they have been contemplating – in some cases – for years.
The first thing to do is reassess operations and technology – do they work with finance and IT and business line partners to prioritise data driven strategies for integrated financial reporting, risk management, and compliance?
Wide ranging transformation projects
Improvements will need to be made throughout the information value chain to produce better operations data that finance can source, store, quality check, and use for advanced analytics and compliance purposes faster than ever before.
This will require considerable work, says the report:
- Modifications may be needed to operational processes and data sources to feed updated calculation and reporting requirements, such as those for FASB’s updated deferred acquisition cost guidance.
- Data on legacy systems must demonstrate the transition approach and retrospective calculations related to the new accounting standard.
- Actuarial models must be adapted to the new regulations to include detailed insurance contract information for premiums, claims, reinsurance transactions, etc. Also policyholder behaviour, discounts, risk factors must be tracked, modelled, and analysed by cohort for more accurate calculations and improved analysis.
It will be worth it in the end
Enhanced data aggregation and reporting tools will avoid substantial manual effort when dealing with large volumes of data and reporting bases. But these tools will offer insights into asset and liability management and profitability.
Transformation will by necessity be widespread and encompass many areas, such as:
- cloud based big data platforms;
- machine learning to be able to analyse unstructured operational data;
- enterprise finance and actuarial systems;
- making use of robotic process automation (RPA) and natural language generation (NLG).
No such thing as an overnight success
Basic compliance requires some of these functions today, yet these cannot be accessed through plug and play software purchases. It requires a comprehensive, properly engineered and designed solution. These things take time.
Data is the most important factor for success. If a joined-up and properly resourced approach isn’t taken, it is also likely to be the greatest obstacle.
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Digital Insurer's CommentsDigital transformation is going to be tough, but the new FASB regulations will force the hand of many insurers who may have not yet made any meaningful advance on the road to a digital business.
This paper outlines that there’s a lot to do, covering a wide range of business systems and that it can’t be achieved overnight.
OK, so we already know that, but this presents a coherent argument for those in North America who may have been drawing their feet on the matter of digital transformation.
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