How to identify the right IFRS 17 vendor solution

When it comes to implementing IFRS 17, insurers may decide to appoint a third-party vendor to help build their system solution. So how can they make sure they pick the right one? 

As highlighted in my previous article last week, many solutions are available, all with their own strengths and weaknesses. In order to identify the vendor and solution that best meets individual requirements, insurers need to consider their desired target state and what they need in order to achieve it. This itself will require an assessment of the current capabilities of the end-to-end reporting process. 

In conducting a current state assessment, key focus areas would typically include the current data flows between the policy administration systems, claim systems, actuarial models, data stores and accounting systems. Insurers should also assess their current data management capabilities, specific output requirements from accounting and actuarial systems, and current system limitations. 

Having assessed the current state landscape, insurers can then develop a roadmap for moving to their defined target future state – and consider which vendor solution will support them in achieving their goals. Making the choice may still not be easy, given that vendor solutions vary in their approach, capabilities, flexibility and cost. What works for one insurer may not work for another.

 Vendor selection criteria

 A useful starting point when choosing a vendor is to establish some key grading criteria based on the insurer’s working assumptions, design principles and target end state. The criteria used for assessing vendors, and the weighting given to each, may vary depending on specific requirements, but some useful key criteria are likely to include: 

• Functional fit – can the solution meet the key functional actuarial, accounting and reporting requirements for IFRS 17, within the required reporting timeframes for group and local statutory reporting?
• Technical fit – can the solution meet the key technical requirements including alignment to existing architecture, desired system performance and scalability, desired system sizing, and ETL capabilities?
• Solution readiness – will the solution be ready in time to meet the deadline for first IFRS 17 reporting?
• Geographic presence, solution support and capability – does the vendor have the local support infrastructure in place if neccessary?
• Implementation approach and alliances – can the vendor provide a robust approach and methodology during the implementation stage to minimise the risk? Does the vendor have any alliances with system implementation partners?
• Indicative cost to implement – is the solution cost effective, taking account of any one-off licence fee, yearly renewal licence fee, system implementation costs, infrastructure costs, and ongoing maintenance costs?
• Credentials – does the vendor have a track record with proven solutions and technologies, as well as geographic presence?

 From shortlist to appointment

 If there is sufficient time, initially selecting a few vendors will help with gauging the different options available in the market. Requests for Information (RFIs) can be used to ask a set of specific technical and functional questions relating to the business. Vendor presentations can then be held to gain more insight into specific solutions and the people behind them. The RFIs and presentations can be scored or graded using the insurer’s initial criteria to refine the list of potential suitable vendors.

 Having short-listed potential candidates, the next step is to undertake a proof of concept. This enables solutions to be tested with a sample of the insurer’s data as a final check of suitability before a vendor is ultimately appointed. 

Project planning and implementation management 

As well as choosing the right vendor, successful IFRS 17 implementation also depends on comprehensive project planning. A phased approach is generally advisable, with broad projects covering initial planning and scoping, core design, iterative build-test-and-deploy phases, systems integration testing, user acceptance and post-implementation support. 

Roles for each phase and workstream would generally be split between the vendor and insurer. In most cases, vendors will also suggest that insurers appoint a system integrator such as EY to work with the vendor in managing the implementation program.

 IFRS 17 implementation will be a major undertaking. It is important that insurers allow enough time for acquiring all necessary resources and making all decisions – particularly the key decision of which vendor solution offers the best fit.

 If you have not already done so, topic listen to our IFRS 17 podcast for more information. In this episode Janine Donelly, a finance performance improvement partner, is joined by Martyn van Wensveen, EY’s Asia Pacific IFRS 17 leader based in Hong Kong to discuss IFRS 17 solution design and implementation. Click here to listen.