The insurance industry is highly regulated, meaning that it is critical for employees in this sector to keep up-to-date with any significant developments that may occur.
The implementation of IFRS 17 in particular means that employees in insurance will need to possess a strong level of knowledge in updated regulations in order to understand the financial position of the business.
As significant changes are taking place regarding the way insurance companies calculate and report information on their financial performance, business leaders in this sector have a responsibility to ensure that their employees are adequately prepared to deal with any changes over the coming years.
Fortunately, insurance training programmes can be structured to guide employees through the emerging regulatory pressures to ensure business continuity.
What is IFRS 17?
Introduced by the International Accounting Standards Board (IASB) in May 2017, IFRS 17 will represent the biggest shift to insurance accounting requirements in the last 20 years, and will come into effect for reporting periods starting on or after 1 January 2021.
It will serve as a default regulation model for all insurance contracts, aiming to simplify short term contracts with little variability and offer policies with enhanced comparability within insurance groups.
All companies that issue insurance contracts will be affected by the changes, whether the business specialises in the insurance sector or not.
Including a full scope of regulations including aggregation, accounting models, performance management processes and fast close initiatives, there are several new regulations for businesses to follow in order to avoid penalisation.
For more information on exactly how IFRS 17 will impact insurance contracts, please click here.
The differences between IFRS 17 and US GAAP
There are a number of key differences between IFRS 17 and current US GAAP regulations. We have outlined some of the most significant distinctions below.
As previously mentioned, IFRS 17 will impact all companies who issue insurance contracts. This is in contrast to US GAAP, which only applies to insurance companies. For non-insurance companies, any insurance contract issued is accounted for in accordance with other rules.
With IFRS 17, any acquisition costs as part of an insurance contract can be treated as an expense in the year in which it was incurred instead of amortising such costs. On the other hand, US GAAP, any acquisition costs have to be deferred and amortised.
IFRS also introduces the concept of ‘mutualisation’ to insurance. Mutualisation means that businesses must determine whether the cash flows of a group of insurance contracts will affect the cash flows of another group of insurance contracts. This is used to measure fulfilment cash flows.
For more of the differences between IFRS and US GAAP, please visit this whitepaper from Tata Consultancy.
Insurance training to help employees prepare for any changes
Fortunately for businesses, there is sufficient time to construct an insurance training programme to prepare a workforce for the changes that IFRS 17 promises to bring in several ways including opportunities, decision making and company analysis.
An effective insurance training course will allow employees to clearly identify current processes influenced by US GAAP, and begin to make comparisons to how accounts will be constructed when IFRS eventually comes into place, ensuring that the entire workforce is prepared. This can be implemented by utilising modern workplace learning methods that serve to improve learning retention and engage employees.
At MDA Training, our training programmes for IFRS 17 are designed to enable employees to interpret financial information that is reported to draw meaningful conclusions to help the business long term, while adhering to emerging regulations. For more information, please visit our insurance page here.
It is never too early for business leaders to develop an in-depth understanding of IFRS 17 requirements among their entire workforce. With so many changes set to take place, constructing a relevant and engaging programme will ensure that employees are prepared.