In the words of Richard Olswang, Prudential Global IFRS 17 Actuarial Lead, IFRS 17 has the potential to be bigger than Solvency II and with APRA seeking an industry update as early as August, it’s important to understand the changes and the implications.
The new insurance standard could impact your operations, IT and data, people, customers, regulation, financial, strategy and M&A. This is nearly every aspect of the business and most of its stakeholders. The flow on effect is a need for re-education, adjusting for risk and uncertainty, rethinking product design, and new messages to investors.
Over the next two years, collaboration and agile thinking will be key. Implementation will involve coordination of actuarial, finance, IT, data analysts, business consulting and tax resources, finding synergies and keeping up to date with final changes.
In the private health insurance space we expect the main impacts to depend on the level of integration that exists between your products, whether you have any onerous contracts, if you defer any of your acquisition costs and on your presentation in your financial reports. The new standard is expected to impact life insurance business the most. Life insurers will be required to:
- reduce the amounts deferred for acquisition expenses
- apply risk adjustments for reporting purposes
- some contracts, such as yearly renewable term insurance policies will have their contract boundary changed.
Thankfully the Premium Allocation Approach (now included in the standard) will permit general insurers to adopt an accounting model that is not too dissimilar from the current Australian insurance accounting standard.
Our IFRS 17 summary document provides more information for our insurance clients on the impact of the changes and the proposed timeline. For a more in-depth overview of the new insurance standard, please get in touch with one of our insurance specialists.
