By Amritpal Khangura and Tom Kim, Consultants from Milliman.
Amritpal and Tom, can you please tell the Risk Insights readers a little bit about yourselves, your experiences and what your current professional focuses are?
We are both consulting actuaries within the Life Technologies Solutions (LTS) practice of Milliman. Our group is committed to using technology to change the way actuaries in the life insurance industry work, making them more efficient, effective and informed.
Over the past several years we have both been involved in large scale actuarial transformation projects on our IntegrateTMplatform. Most recently we’ve both been leading the development and implementation efforts of our Integrate IFRS 17 solution.
At the IFRS 17 Forum, you will be presenting on your insight regarding ‘Leveraging technology to implement IFRS 17’. Why is this a key concern in the industry right now?
The adoption of IFRS 17 brings several unique challenges and complexities for which “low tech” solutions may not be up to par. The sheer volume of data and calculations, and complexity of processes can present a daunting challenge. In particular, the much closer integration of actuarial and accounting functions brought about by IFRS 17 will put significantly more responsibility on the underlying systems.
At the same time insurance isn’t known as an early adopter of technology, particularly with respect to finance and back office operations. We believe that insurers that are slow to pick-up on emerging technologies may lose competitive advantage, both with their traditional competitors, but also to new entrants unencumbered by legacy systems and mindsets.
Without giving too much away, how can financial institutions leverage technology to implement IFRS 17?
If implemented well, technology is proven to be an excellent means to minimise the operational risk that comes with complicated reporting regimes such as IFRS 17. We know that IFRS 17 is dependent on a myriad of input sources to perform complex calculations and support complex disclosure requirements.
A modern and proven technology solution can of course use massive scale to meet heavy processing burdens and shorten reporting time frames. In addition, this is allowing companies to better utilise their actuaries and accountants by reducing their time spent on executing processes and generating results. Instead, staff are able to maximise their time spent on analyzing and understanding results, prior to submission.
Beyond operational risk, process performance, and better use of staff resources, ever evolving analytical technologies such as machine learning can be leveraged to glean rich insights further empowering staff.
What key considerations need to be made when looking at the infrastructure needed to implement IFRS 17?
This really is a critical question for companies. Companies need to assess whether their existing infrastructure is fit-for-purpose, for both their current and future IFRS 17 business needs. If infrastructure investment is needed, companies will need to decide whether to extend existing infrastructure or consider moving to a software-as-a-service solution (SaaS). Related to this, companies will need to decide whether they want to opt for an on-premises solution or cloud-based. Beyond these decisions, companies will need to ensure their chosen IFRS 17 solution efficiently integrates with existing platforms and systems.
One observation we have is for companies that are struggling with deficiencies in their current systems and processes, a major regulatory event such as adoption of IFRS 17 can provide the necessary impetus (and budget) to rethink how the right infrastructure would allow for a major shift in the finance operations. In other words, it provides a chance to rethink how you work and the expectations and priorities of the finance team. It’s a chance to leverage technology and free up resources to focus on strategic insight and initiatives.
How do you see the financial landscape evolving over the next 6-12 months?
For the insurance industry over the past year, we’ve seen noticeable growth in the use of predictive modelling and artificial intelligence, as well as a growing number of InsurTech players. We believe these trends will not only continue but accelerate.
Closer to the heart, we hope to see an evolution of the actuarial industry to align closer with the field of data science, and in particular predictive modelling. It’s encouraging to see accreditation bodies placing greater emphasis on this field