The upcoming accounting standard IFRS 17 has been in development for more than 20 years. By now, most insurers are at a point where they have carried out their initial analyses and are embarking on technical implementation, or at least looking at their options.

But is it time to take a step back and look more holistically at what IFRS 17 changes really mean? If regulators are seeking to establish standards for insurers to provide improved information about their company’s current and future profitability, why shouldn’t Chief Financial Officers (CFOs) seek to provide the same capability for internal business purposes on a contractual level?

From an accounting perspective, more granular contractual data can be assessed to identify applicable principles and to determine contractual margin. The analytics team can also use that data, to better understand costs and revenues at the contractual level for more accurate profitability analysis. This data can further inform the 360-degree view of the customer.

In a world where insurers should aim for a single source of truth and real-time analytic capabilities, applying a holistic perspective to this future accounting change can bring many benefits beyond regulatory compliance.

Why is this regulatory change a matter for management, and not just the CFO?

When IFRS 17 reporting is in place, new information will become available to the entire management team, providing insight into the profitability of both existing and new business. It’s likely that for some insurers, the additional data from IFRS 17 will shed new light on individual portfolios, quantifying uncertainties and risks, and subjecting them to better analysis.

This newfound transparency can better inform decisions about how to manage underperforming lines. Ultimately, the consumer will see the impact, as insurance offerings may change based on these additional insights.

So what should insurers do?

Insurers are encouraged to step back and validate their existing IFRS 17 pre-study or gap analysis from a holistic perspective—one that aligns with long-term data and analytic capabilities. They should include key stakeholders and be sure the way forward is in line with their long-term reporting strategy, future finance operating model and analytics agenda. There are smart investments to be made along this journey, and many new insights to be generated.

When embarking on a technical implementation, having the right scope, understanding and capabilities are key success factors. The scale and impact of this change will vary among insurers, but, for most, the benefits realized can potentially go far beyond compliance gains.

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