October 4, 2021 by Jason Contant, Online Editor
KPMG’s Chris Cornell says project management, system implementation, and accessing resources are the biggest challenges, as the start date of the new insurance accounting standard IFRS 17 approaches.
cu | What challenges and successes are you seeing from IFRS 17 implementation?
There’s still a lot of work to be done to get through the implementation, but insurers are ramping up accordingly. The top three challenges right now are project management, system implementation, and resources.
For project management, IFRS 17 involves the entire organization. And I think there were some grand views of what could be done at the beginning. Now [the discussion] is more around, how do we ensure that we’re going to be able to comply? And how do we get enough team member participation in order to meet the deadlines? Project management has been one challenge, especially given that people are navigating through the pandemic as well as trying to take on this big accounting standard change.
System providers are continuing to have to change, as a result of tweaks to the standard over the last couple of years. That’s proving to be a challenge in terms of making sure that they’re up to date on all of the requirements within the standard. Then you’re going to have to test things before you make them online.
And lastly, resources. All insurers in Canada are going to have to comply with IFRS 17. There’s a finite number of resources to get organizations ready for this standard. It’s been a challenge in terms of making sure you’ve got the right resources available because of all the competing priorities within organizations, not just IFRS 17, but digital transformation and those types of things as well.
cu | What about some successes?
There have been some good successes, too. IFRS 17 has allowed organizations to really optimize certain processes around finance and actuarial, and making sure that they’re working seamlessly, hopefully digitizing more of those processes to make it more efficient, and potentially giving organizations better information when they’re looking at their financial reporting capabilities. That’s a big [success] that we’ve seen.
The other one is it really has helped to build teams within organizations. Because it’s such a challenging standard and requires so many people within the organization, it has allowed people to work cross-functionally to learn more about what their teammates are doing. So that’s been good as well.
cu | Digitization has been a hot topic of discussion for a while now. How is the industry doing in this regard?
We did a survey focused on global insurers and 56% of insurers say the most important thing from the digital platform they put in place is to meet customer expectations. That’s their largest and number one priority. But only 9% of insurers compare or benchmark themselves against other digital retailers. The majority of them — 64% — benchmark themselves against their direct competition: other insurers.
So, it’s a bit of a dichotomy. We want to have amazing world-class customer experience, but you’re comparing yourself against an industry that’s been a laggard in terms of digitization over the years.
In claims, we’re further behind other countries. In certain instances in China, you can be in a car accident and have your claim paid out within an hour. It can happen that fast. They’ll send a drone down, take a picture, do the assessment, and your claim payment is basically in your virtual wallet. We’re a long way from that. And I don’t think at this point, Canadians expect that. But that’s where the industry is going.
cu | Looking at M&A, what could we see from a carrier perspective? How about from a broker perspective?
There are still some smaller P&C carriers on the market for sale. In the broker sector, we still see lots of consolidation. Some of the bigger players that are out there, they’re looking to be very acquisitive.
But I think the piece that we’ve seen over the last couple of years is more private equity, investment, pension money. They’re looking at purchasing or partnering with carriers to get some exposure to some of the longer-tail assets that they could potentially have, or looking at the broker market and seeing if there’s an opportunity to get some traction there as well. I think we’ll continue to see activity in the Canadian market.
cu | What are your thoughts on the insurance industry’s approach to climate change?
We’ve seen a shift in terms of insurers focusing on climate risk as a risk area, whether it’s a claim situation, or pricing, or how they design strategies for stakeholders around climate change and the impact it’s having. That’s where you see more education information out there for customers or clients around how they can better protect property because of climate change factors. And you’re also obviously going to see it in the pricing from a risk point of view as well.
Insurers need to have a climate strategy. It’s obviously a key area of focus for the government. And working collectively with public and private partnerships around making sure that people’s goods are protected, especially given the wildfires and flooding that we’ve seen over the last number of years as well.
We have to make sure that we’re following the science around it. But we also have to make sure that we’re appropriately communicating what the impacts are on the industry as a result of climate risks to our clients and customers.
cu | How are insurers approaching diversity and inclusion these days?
I think it needs to be embedded in insurance organizations across the country. Sixty-nine per cent of P&C insurance employees are women, 31% are men. But for senior management positions, there’s only 35% women.
If you think about the impacts of that on the industry and how do we become a more diverse industry and workforce, then there’s still a long way that we need to go. The nice thing from an industry point of view is that organizations, especially public organizations, are starting to disclose some of these metrics. As part of that, they can be held accountable to try and drive up better diversity and inclusion within their organization.
I think some organizations have almost 50% board membership being female, and maybe they’re lagging a little bit in terms of minority visibility on board. Other organizations probably need to catch up as well. But I think now the majority of HR functions within insurers have a key component of diversity and inclusion, which wasn’t always the case. Think back a number of years ago.
KPMG publishes an annual diversity inclusion report as part of what we do, and we encourage other organizations to think about doing that. Some of them disclose as part of their ESG [environmental, social and governance] reporting, which is a step in the right direction.
cu | What about other ESG principles?
Boards are much more focused on ESG-related metrics. So, that’s a really big area, whether it’s new risks that they have to insure, or whether it’s reporting that is expected by stakeholders. It’s different in each jurisdiction.
It’s continuing to evolve, but it’s an area that organizations are going to be measured on as they move forward. It’s going to be expected from stakeholders. And so, you need to have a robust plan around how you’re going to track and communicate these climate-related measures. Organizations need to be transparent about what they’re doing in those areas, and also make sure that they’re educating their team members on what their policies are going to be as they move forward.
Title: Partner, Audit, and National Sector Leader, Insurance, KPMG in Canada
Industry experience: More than 16 years’ experience, specializing in the financial services sector. Cornell has worked extensively with financial services clients in Canada and abroad, including time at KPMG’s office in London, U.K.
Education: Bachelor of Business Administration (Honours), Wilfrid Laurier University.
Feature image via iStock.com/Paul Lawrence Photography