In this blog we focus on some of the challenges we faced during various IFRS 17 implementations and how we addressed them. Read it to discover more!
Following our opening blog "Meet the challenges of IFRS 17 with CCH Tagetik", here is part two of a series of articles where we share some of the key lessons learned from implementing IFRS 17 with CCH Tagetik.
Here we are in early 2021 and there are still quite of few businesses and organizations with a hill to climb before implementing IFRS 17. Time is running out so it’s more crucial than ever to be effective and pragmatic about implementation. So what can insurance companies learn from their peers who are leading the way in implementation?
In this second blog we focus on some of the challenges we faced during various IFRS 17 implementations and how we addressed them.
Lessons learned from implementing IFRS 17 with CCH Tagetik
IFRS 17 is about actuarial calculations and the alignment with accounting needs. To complete an IFRS 17 project successfully, the bottom line is that implementation teams need in-depth knowledge of both IFRS 17 and the Analytical Information Hub, the technology behind Tagetik’s IFRS 17 solution.
During the different IFRS 17 projects we have learned that some actuaries have a habit of complicating things by introducing various customizations. But the leadership of the project should have enough content knowledge to challenge and manage actuaries and consultants. IFRS 17 is complex so taking a structured and pragmatic implementation approach is the only way to complete the project on time and within budget.
With time running out there is precious little room for customizations. They pose a risk to the project because requirements often change and the impact of implementing customizations is hard to predict upfront. On top of this, customizations have to be maintained by the insurance company, which is not necessarily aware of the disadvantages, complexity and costs involved. So we advise alignment as far as possible with the CCH Tagetik solution. If customizations are really important then consider transferring them to a phase 2 to ensure compliance requirements are finalized first.
IFRS 17 is principle based. This means actuarial and accounting requirements have to be defined, often by means of shadow models or test cases. The insurance company is responsible for setting requirements so, in our view, the shadow models or test cases should be set up by the customer to ensure the right allocation of duties. Shadow models can be very complex which makes it hard for the project team to understand and analyze requirements. This can lead to misinterpretation and significant delay, especially with complex actuarial calculations involved. This is why it is important that test cases or shadow models are set up so that calculations are fully transparent, easy to follow and only include the scope of calculations to be executed in CCH Tagetik. In our projects we offer insurance company templates which the client can then use as a starting point to prepare its requirements. This has proven to accelerate the implementation enormously.
As mentioned before, changing requirements pose a real challenge and result in significant delay, particularly when you are further down the road in the implementation. On top of this, when requirements are not properly documented, how do you know when you are done? We strongly advise implementing a process where requirements are properly documented through test cases and after hand-over to the implementation team is frozen. Structured management of requirements will create transparency and avoid confusion, misinterpretation and disappointment caused by results not meeting expectations.
Lastly, when they have finalized the configuration, most insurance companies will want to execute a so-called dry run to practice and chain-test the reporting value chain including the CCH Tagetik IFRS 17 solution.
We have supported different insurance companies through several IFRS 17 dry runs and learned that to get the most out of your dry run it is essential to run extensive tests covering all calculation steps and accounting events using input data from the risk engines and general ledger, and execute at least one chain test prior to the dry run. This will ensure technical and functional issues in the data delivered to CCH Tagetik will be resolved upfront as much as possible.
This approach will enable the company to review IFRS 17 numbers instead of having to focus on resolving technical issues.
Do you want to discover more about the CCH Tagetik IFRS 17 – Insurance Contracts pre-packaged solution? Click here!