The Importance Of Consistency For Insurers In An Ever-Evolving World
Sapiens Three Cs Blog Article Series– Consistency, Control Convenience
I’ve always admired people who are consistent in what they do – people who project self-confidence, focus, clarity and a sense of certainty. Being consistent in an ever-changing world is a sign of strength and resilience. It means you’re persistent, which often leads to great results.
It doesn’t mean sticking with what you know, or being stubborn, while the world changes and moves on. On the contrary, being persistently consistent means always looking out for what’s new, understanding the implications, analyzing the consequences, and choosing what works for you.
Adapting to change and embracing innovation empower us to stay cool and excel in emergency mode.
This proactive approach applies to work, home and relationships. Consistency brings stability, predictability and a higher level of trust.
It also creates accountability. Good results indicate that we’re on track, and if not, we can adjust our actions to take accountability for our achievements.
Inconsistency, on the other hand, is often associated with a lack of confidence and trust by our customers and friends, an inability to differentiate between what’s important and what’s not, and difficulty coping with change.
Consistency is the Core of Technology
Let’s talk about reinsurance automation solutions, for example. If you still think that manually calculating endless spreadsheets from dozens of sources in countless resolutions will generate the same results and numbers every single time, well think again. With change being the only constant in life, a key goal of every reinsurance solution is to provide consistency for insurers and reinsurers, as well as their clients. Without consistency, what good is technology?
Reinsurance solutions should support business objectives for insurers as they relate to customers and business partners. They must simplify processes through automation and innovation and enable change without going into organizational turmoil.
Functionality-wise, they should:
- Manage the entire reinsurance program for insurers and centralize all reinsurance data on a single platform
- Support proportional & non-proportional; ceded & assumed; and even more complex structures such as intercompany pooling
- Offer a highly configurable and flexible platform that provides comprehensive support for current and future reinsurance programs
- Provide fully automated reinsurance allocation and calculations, premium, acquisition costs and claims
- Offer full accounting support, broker/reinsurer accounts receivables/payables and accounting functionality
- Enable a consolidated information repository for reinsurance, with convenient information retrieval, online queries, reports, regulatory reporting, etc.
Reinsurance: Coping with Change
Reinsurers must prepare to face big changes when the new IFRS 17 standardization will replace the IFRS 4 on January 1, 2023. The new standardization confirms that reinsurance will need additional focus. Reinsurance contracts will be valued separately from the underlying insurance contracts to which they relate.
The new standards obviously affect the accounting and balance sheet, but also have a significant impact on future recognition of profit, which subsequently becomes a critical consideration for determining dividends and managing investors’ expectations.
Some consequences of the above:
- Many insurers were using approximate methods, often referred to as ‘netting down’, as one might expect that splitting out the reinsurance is simply deducting net from gross using current methods. Unfortunately, the new guidelines, including the granularity at which the calculations must be carried out and the rules for the amortization of the Contractual Service Margin (CSM) mean that traditional, simplified approaches may no longer be valid or helpful.
- The CSM, a key measure of the profit of an insurance contract, can differ significantly between the reinsurance contract and the underlying contracts reinsured.
Eventually, managing detailed and quality data is crucial to meeting the new regulatory requirements.
Stay tuned for our next Two Cs, and for more information on Sapiens Reinsurance solutions click here.
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