How Oracle Cloud ERP equips insurers to address IFRS 17

The new financial reporting standard IFRS 17 represents the most significant change to insurance accounting requirements in over 20 years. IFRS 17 is scheduled to be applied for reporting periods on or after January 1, 2021. Its dynamics will not only have implications on the financial disclosures of insurers but will also have profound operational impacts on all aspects of these organizations.

IFRS 17 requirements for insurers include:

1. Consistent accounting for all insurance contracts.
2. Multinational insurers must measure insurance contracts consistently within the group, making it easier to compare results by product and geographical area.
3. Revenue reflects the insurance coverage provided, excluding deposit components, as it would in any other industry.

What are the requirements for IFRS 17 in the insurance industry?

A snapshot of the impact of IFRS 17 across process, policy, people, systems, and data for the insurance industry:

Processes

• Materiality concepts and guidelines
• Closing and reporting, actuarial, planning procedures, risk management
• Internal and external reporting templates, group reporting packages
• Internal controls and audit trail
• Planning, budgeting and forecasting processes

Policy

• New accounting policies, guidelines, and control procedures
• IFRS 17 calculation methodology guidance and reporting instructions
• Actuarial models and assumptions-setting and inputs
• General Ledger (GL) chart of accounts changes and local account mappings
• Investment policy changes (IFRS 9)

People

• Technical and functional training
• Cross-functional collaboration (Business, Technology, Finance and Risk)
• Project resourcing and budgeting
• Managing change fatigue

Systems

• Core insurance, investment, actuarial, and reporting systems
• New posting logic and engines for IFRS 17
• GL, accounting rules engine, consolidation tool, and reporting system changes
• Changes to system interfaces
• Demand for flexibility in the actual system landscape
• New system functionalities and features

Data

• Granular financial reporting requirements
• Data reconciliations at different levels
• Data quality, storage and archiving
• Data security and controls
• Data governance and master data
• Demand for a single-source of truth for finance and risk data

How can insurers manage all these requirements and changes? Let’s look at a case study of one large insurer that successfully managed the transition.

The catalyst for change

A large pan-African financial services group provides a broad spectrum of financial solutions to retail and corporate customers across key markets, including life and savings, banking and lending, asset management, property and casualty solutions. The insurer is one of the oldest, having a strong presence and a long history in Africa. Yet, along with that history came a patchwork of disparate legacy systems.

The insurer was running an aging on-premises ERP solution that presented real challenges in process standardization, making it difficult to adapt and innovate. Moreover, they were facing the new IFRS17 reporting and regulatory requirements that are impacting insurers across the globe.  

The insurer’s commitment to financial transparency was its catalyst for transformation. It needed to modernize its on-premises financial accounting and reporting platform to  support a smoother transition to IFRS 17 reporting. While looking to meet the requirements of a new accounting standard, the insurer also wanted to define a new finance operating model to improve efficiency and compliance—a model in which the insurer adopts the latest cloud innovations every quarter. Ultimately, these changes would transform the customer and employee experience.

To drive transformation, the insurer launched an ERP modernization project, a multi-year program that is helping it to achieve its new finance operating model with unprecedented agility. The initiative spans the core umbrella brand as well as its subsidiary brands.

The transformation journey

This insurer took a proactive approach, modernizing their existing on-premises ERP solution with Oracle Cloud ERP. The cloud transformation focused on building a new finance platform along with process standardization across procurement and  supply chain. The insurer is already a strong user of Oracle solutions, and wanted a platform that would scale across its business operations and integrate with its existing systems. The insurer embraced an out-of-the-box strategy with limited customizations or extensions applied to the core platform.

IFRS 17 ignited the insurer’s move to Oracle Cloud ERP, but the improvements go beyond compliance— improving efficiency, decision velocity, and quality across finance functions. Oracle Cloud ERP has fundamentally changed the operating model, covering processes, policy, people, systems, and data requirements:

1. Accounting: A centralized accounting and integrated subledgers with a collaborative close process.
2. Reporting: A consistent reporting platform delivering simple, accessible reporting and analytics.
3. Procure-to-pay process:
   1. Centralize payments in accounts payable, which would essentially allow single business unit to process payments for multiple BUs.
   2. Simplify catalogue management, reducing complexity and the chances of maverick purchases.
   3. Streamline the procure-to-pay processes with improved visibility and increased control over spend
   4. Automate processing of more than 20,000 invoices for their top 200 partners
4. Accounts receivable: Improve control over receivables operations by highlighting all transactions that require attention.
5. Audit: Centralize critical accounting information for decisions, audit and compliance into central service for easy access.
6. Automation: The system executes routine transactions without manual intervention, flagging only those transactions that require exceptions.

Solution at a glance

This  transformational project has helped the insurer to improve the close process, and reduce costs for accounting, reporting, accounts payable, audits, off-contract spending, and project overrun costs. Below is a summary of the key highlights of the Oracle Cloud ERP solution coverage:

• Geographical coverage: 3 Countries
• Ledgers: 194 
• Transactions: 5 Million+
• Employees: 32,000
• Systems integrated: 18
• Supplier portal: Top 200 Suppliers
• Automatic invoice processing: 20K invoices per month

Future forward

This finance transformation project helped the insurer to disrupt the African insurance landscape by digitizing, simplifying, and automating finance end-to-end. It also helped reduce the overall cost to the insurer. The next step includes implementing Oracle Cloud Enterprise Performance Management (EPM) to improve financial planning, budgeting and forecasting. Also, the insurer is planning to expand the geographical coverage by rolling out to other operating countries.

Learn more at Oracle Cloud for Insurance.