Darrel Orsmond, Industry Head Financial Services at SAP Africa, says that insurers stand to benefit immensely from the process of digital transformation required to comply with IFRS17.
The biggest currency in business right now is data, and insurance companies have this resource in abundance – but many insurers struggle to realise the true business value of their data due to antiquated systems.
“By undertaking a well-designed process of digital transformation ahead of the IFRS17 deadline, insurers can create effective data models that enable them to activate predictive capabilities in their insurance offerings,” says Orsmond. “For example, life insurers can start predicting major life events at an individual customer level and offer personalised products and services to customers when they are most likely to be invested in understanding and purchasing such products. They also begin to build the data structures which are required for ongoing reporting and assessment which avoids ad-hoc responses to business and regulatory change.”
In Africa, insurers are under pressure: a concentration of a small pool of very large insurance companies means even a minor change to their reporting standards result in changes to their earnings. This is likely to have a distinct impact on shareholders, especially since insurers will now have to provide more granular insight into how the figures on the balance sheet – including how they report on risk valuations – were calculated. Due to a prevailing specialist skills shortage, many insurers will struggle to find local consultants who can help them develop the systems and models required.
Insurers on the continent should therefore look to global firms who can partner with their internal teams and provide the technology, skills and global insights required to make their process of digital transformation a success. This is particularly important for companies who do business across borders, especially European ones, as new legislation such as the General Data Protection Regulation further forces changes in how customer data is collected, stored and protected.
“In an ideal world, insurers will start their digital transformation journeys today. There is great benefit to being first mover: by making the necessary investment now, insurers can start gaining insights into their customers and business processes that can improve their ability to change customer offers, reduce loss rates, and gain deep insights to the factors influencing their valuations,” says Orsmond. “Being late to the game with this may knock years off an insurer’s competitiveness, and by the time they catch up their market share may have been claimed by current competitors or new upstarts. Those insurers that act now, however, will be able to get ahead of the curve and be far better prepared to take advantage of the opportunities of this new age.”