In September 2019 EFRAG called for an extension to the #IFRS17 implementation date to January 2023, and on November 13th their board meeting discussed that effective date as if it had been agreed and approved by the IASB.
Target timeline(i) Consistent with the recommendation included in the final comment letter issued on 24 September 2019, the plan will assume that the effective date will be 1 January 2023. In order to allow entities to be able to voluntarily early apply in January 2022, the endorsement process will have to be completed by the end of 2021. Link.
However, only 6 days later the IASB board meeting offer no affirmation of the effective date – in fact they just laughed when the topic of deciding the effective date came up.
Q. “Do you have any kind of plan as to when we are going to discuss the issue of the effective date?”
So alas the effective date uncertainty lingers on, and once again brings into focus the two approaches to implementing IFRS17, namely:
- Minimum Viable Compliance (MVC)
- Business Process Transformation (BPT)
Most who chose MVC will have done so because:
- They think BPT is impossible/costly.
- IFRS17 isn’t going to help you sell any more insurance polices than you do already, so you should spend as little as possible on it.
- They think MVC is quicker – and want to get IFRS17 over and done with ASAP.
This way of thinking is so unfortunate, because:
- BT is possible, and not that expensive – if done in conjunction with IFRS17, and you use agile technology, have a capable project team, and are strategic in how you augment the back-office.
- I agree IFRS17 may not help sales – but an MVC may make a bad situation worse and actually hinder sales. It will do this in two ways:
- It will limit scale – processing in the back-office will just grind to a halt as more work is stuffed into less time.
- You are going to lose control of P&L and your ability to demonstrate financial strength – beware of ‘the black box’. Simply put, if you build a process that doesn’t let you control CSM, then you have by definition lost control of your P&L!!
- Given EFRAG is pushing 2023 so hard, other jurisdictions (like South Korea) are delaying already, and IASB haven’t even decided a date to discuss the date, a delay to 2023 looks very possible. If IFRS17 does roll out till then it means another lump of budget is required to deliver the exact same MVC – whereas a timeline and budget extension for a BPT project also gives more output.
Firms that went with (or have turned to) a BPT approach have taken IFRS17 and it’s budget as a welcome invitation to review the BAU and clean up their house while also fully addressing IFRS17 requirements (including transparency and control).
Business Process Transformation inside those firms tends to have an approach that looks like this:
- People – IT literate insurance domain experts delivering an agile project.
- Processing – automated and data-driven.
- Data – a single source of truth.
- Tools & Tech (versus spreadsheets & spades)
So as IFRS17 potentially sets to drag out further, and should you find your firm rethinking MVC vs BPT, then perhaps you’d find our complimentary 2-hour IFRS17 hackathon to be full of valuable insights – a duplicable framework that you can take to inspire your own framework, along with a good look at the impact to your business should your firm decide on a new horizon.