Insurance organizations are now going through what banks have endured for the last 15 years—significant changes in compliance and regulation. Banks initially took a siloed approach to compliance, with business unit by business unit implementing specific solutions. No one knew that regulation would hit banks so hard and, over time, this siloed, uncoordinated response turned out to be very costly (institutions often spend 5% to 10% of their net income on compliance and it is expected to increase drastically). Without the right approach and the right tools, banks experienced a duplication of data and processes, inconsistent results, lack of reuse, difficulty adapting to changing regulations, and difficulty presenting to auditors.
With new banking regulations (in particular BCBS 239, which requires reporting at the transaction level), all banks have been forced to take a step back and review their approach. To make regulation reporting easier and more accurate, banks are now consolidating all their data into a single place and leaning on modern data prep tools to ensure accuracy.
Banks experienced a learning curve as they adjusted to new regulation compliance while striving to remain cost effective and efficient. Insurance companies can benefit from this experience by avoiding the same errors, and by seeking out the proper tools for the job.
IFRS 17: Not Your Average Reporting Standard
As far as insurance regulations go, Solvency II was an appetizer, and IFRS 17 is the main course—and a big one to swallow at that. It is the biggest challenge the insurance industry has faced in generations.
IFRS 17 is a monumental change because it applies a new accounting model to insurance contracts, changing profit calculation to occur when the insurance fulfills its promises to the policyholder, versus the old model that recognizes profit at the time the contract is issued.
Accurately estimating the cash inflows and outflows means insurance companies need to look far into the future—which requires complex, fundamental changes and new calculations in accounting for both liability measurement and profitability recognition. This change is mandatory and failing to deliver on IFRS 17 can have serious repercussions.
The new standards come into effect on January 1, 2021. While it may seem to be in the distant future, this massive initiative necessitates changes in technology to be done now.
Choosing the Right Data Platform for IFRS 17
At Trifacta, we’ve worked on many projects to modernize companies’ risk and compliance data pipelines. Over time, we’ve witnessed similar patterns in every single engagement we’ve been involved in. We recommend that insurance companies look for the following benefits as they strive to have their data pipeline support new regulations. A modern analytic stack should :
- Result in cost savings
- Avoid data duplication by consolidating the data in a single place to better supply and meet the demand of data for each regulation
- Leverage modern data processing and storage technology that is scalable and flexible
- Leverage both cloud and on-prem technology according to sensitivity and processing requirements
- Optimize IT team activities
- Generate results faster
- With self-service solutions lessening IT dependence, ess business users are able to define their own calculations and reports
- The time-to-market matches speed of query formulation and regulation requirements
- Real-time data sourcing and management facilitates event-driven decisions
- Increased automation of processes and process engineering
- Continuous delivery and deployment with frequent deliveries in production
- Yield better results
- More accurate results with a universal data quality processing approach
- Increased governance and full transaction level traceability for efficient auditing
- Analytics capability integrated into the architecture, with Machine Learning available
- Scalable, fully secured solution
Trifacta for IFRS 17
Trifacta is a critical component of a well-designed data solution for IFRS 17. Trifacta offers self-service data preparation for risk, financial, and accounting analysts. With it, they can clean and combine data, create metric calculations, and validate the data themselves to create the required reports. No matter the complexity or volume, Trifacta will deliver accurate, clean data that can be trusted for reporting.
Empowering risk and financial analysts with self-service data prep has a direct impact on the speed and design of reporting. With Trifacta, users experience up to 90% faster delivery gains. Some customers with very large reports went from spending nearly a day processing them to getting them delivered in less than an hour.
Perhaps the most important benefit is the shift of ownership of the metric calculation process from IT to the business users themselves. They can now keep up with any regulation changes and implement updates themselves without waiting 6 months for the IT team to deliver it. In addition, because Trifacta tracks every single data manipulation, it is easy to demonstrate to regulators how particular metrics are calculated.
To learn more about Trifacta and how it relates to regulatory reporting, watch this short demo or reach out to our team.