Deloitte sponsored the Economist Impact to survey 360 insurance executives who are engaged in the implementation of IFRS 17. This research has produced new insights on the collective view of the insurance industry on IFRS 17.
Our key findings are around four major themes:
The industry assessment on the level playing field that could emerge from the adoption of IFRS 17 in over 100 countries from 2023. We report their view on the impact of the decision of the European Union (EU) to offer the option to avoid compliance with a key IFRS 17 requirement for certain material classes of life insurance contracts. This option is only available to insurers based in the EU.
A view on the technology dimension of IFRS 17. All participants acknowledged that this is the most material aspect of their journey. We analyze the scale of the change in systems triggered by IFRS 17. The view on how insurance companies approached the procurement of solutions and their integration in the broader architecture offers a final perspective from a juncture where work was nearly completed.
The preparation of the new financial results under IFRS 17. The theme of managing expectations across internal and external stakeholders brings a wide range of perspectives, both in terms of the state of readiness in June 2022 and elements that would form the investor relations strategy for 2023. During 2023, insurance companies will publish the equivalent of an avalanche of new financial information under IFRS 17. We look at approaches that may be used to manage this.
Post-implementation. Our survey asked about the appetite of insurance executives to embrace the momentum of change triggered by IFRS 17. Are companies using IFRS 17 as a catalyst for continuing a modernization journey for finance and actuarial functions? We look at the perceived benefits - exploring the recent experience as well as the unfulfilled modernization ambitions insurance executives may have for their finance functions.
Additionally, we have published a statistical compendium that shares all of the data from the Economist Impact survey to enable you to go deeper into specific areas of interest.
The IFRS 17 level playing field for insurance reporting - How do insurers plan to make it work?
In this first report of the survey findings, the Economist Impact team has focused on the responses we collected from participants based in the European Union (EU) given the EU-endorsed version of IFRS 17 has a key difference compared with the text originally published by the International Accounting Standards Board. This difference is the addition of a voluntary exemption from one key requirement in IFRS 17 that many stakeholders in the EU endorsement process believed should not apply on a mandatory basis to a particular type of life insurance business commonly found in the EU.
The highlights from the survey are that a large majority of EU-headquartered insurance groups will choose the voluntary adoption of the EU exemption. The overwhelming sentiment indicated that this choice is not expected to significantly dilute the benefit of the level playing field that IFRS 17 could deliver globally. Participants in the survey also noted their plan to provide disclosure on the use of the EU exemption.
The IFRS 17 data challenge and the technology solutions that insurers adopted to tackle it
In this second article of a four-part series, the Economist Impact team focuses on the technology considerations of the survey. The effort expended on the technology needed for IFRS 17 compliance was often more than initially estimated, but the expected benefits also appear to be greater. As the survey revealed, a much more transparent and agile finance capability may now be possible because packaged software helps to capture new information and offers new analyses that were previously impossible.
IFRS 17 programs were often reported to be more complex, to take longer than expected, to cost more than planned and to require more broadly skilled resources. And these results did not vary much for different business scenarios. Data capture and analysis was a recurring theme as insurers found that the requirement for additional data granularity and governance was a primary consideration as they integrated and tested packaged solutions. The need to build foundational capabilities to tackle these challenges has created new opportunities to better report and manage financial and operational information.
The preparation of financial results under IFRS 17 requires fluency in a brand-new financial language
In this third article of our four-part series, we report on the views from the participants in the 2022 Global IFRS 17 Insurance Survey on how they will use the new IFRS 17 financial language to communicate to investors. With the focus on building sub-ledgers, introducing new charts of accounts, preparing data, and updating actuarial models, it is also sometimes easy with IFRS 17 to lose sight of the numbers themselves, and the story they tell about the performance of the underlying business.
Yet, IFRS 17 is fundamentally different and therefore difficult to compare against IFRS 4, the previous standard for insurance accounting, which was designed as a mere interim solution. “The numbers” are much more than just a new balance sheet and P&L with additional, detailed disclosures. The survey shows that two aspects really stand out in terms of understanding the new world of IFRS 17:
The mixture of economic measurement and the smoothed release of profits over a policy’s lifetime and
The ongoing resetting each period of the insurance revenue to expected claims and expenses that could make the comparison of revenue and profit margins between lines of business more direct and understandable.
IFRS 17: New technology, new capabilities, and new business benefits
What might the future look like as the implementation of the standard continues? In this final article of a four-part series, we report on the views from the participants of the 2022 Global IFRS 17 Insurance Survey on whether they agree that the benefits of adopting IFRS 17 will outweigh the expected costs. With the bulk of the implementation investments made, and with insurance accounting set to be transformed, what long-term benefits can insurers expect beyond compliance and how can these benefits be grasped?
Nearly half of all survey participants say that improved technology has brought new capabilities – with the possibility of new opportunities and benefits emerging as a result of the changes made. The survey shows that many insurers have already entered the IFRS17 world, and are moving to reap these potential benefits:
While insurers will have completed at least some implementation work, there is still much to do, and insurers have stayed focused in 2023 on completing the aspects that remain outstanding.
With IFRS 17 implementation substantially complete, many insurers expect improved technology will boost operations and capabilities, increase the granularity of data, and generate figures that are easier for investors and markets to understand and compare.
Under the sponsorship of Deloitte, the Economist Impact surveyed 360 insurance executives during May and June 2022 to gauge the final views of the global insurance industry on IFRS 17. This survey took place only a few months before the "go-live" date of IFRS 17 on 1 January 2023.
This statistical compendium reproduces the questions to the participants and the summary of the answers collected. The findings from this data are the foundation of the four reports that Deloitte has sponsored on this topic.