Page 190 - India Insurance Report 2023- BIMTECH

178 India Insurance Report - Series II

Change is inevitable, and the impact of this will vary by insurer. Some insurers will see their top line
reducing substantially, whereas some may see an increase in their market share. Onerous contracts
could have a direct impact on product design, pricing and their bottom line. While amortization of
acquisition cost and discounting of liabilities could bring a positive impact, there would also be soft
challenges in understanding the new presentation and disclosure requirements. Ind AS is a principles-
based standard and the industry could observe different positions and practices in the initial years, but it
would all stabilize in the medium term. Therefore, stakeholders would require multiple knowledge
transfer sessions for a smooth transition.

Data, resources, cost of implementation has been three big challenges globally faced by Insurers to
address. More importantly, Ind AS implementation needs to be a sustainable solution. These would
require company-specific solutions and full involvement of company personnel instead of delegating to
an outsider. What would be ideal is an integrated operating model across operations, actuarial, finance,
technology and data coupled with a strong PMO to stich them together. While professional firms can
help as facilitators, the ownership will have to be joint to reduce dependency on an external firm.

Here, product evaluation and its Ind AS 117 impacts coupled with identifying the right technology
solution could help address the implementation cost. It is important to note that no two companies
would have the same problem and hence no one-size fits all solution. Life Insurers with a large UL
portfolio will have a different impact (top-line impact) compared to those with a large group portfolio
or traditional portfolio. Similarly, non-life insurers and reinsurers would have their own impact and
require different solutions. For example, classifying substantial products as Premium Allocation Approach
(PAA) could immensely reduce the cost of implementation.

Considering the complexities and organization wide touch points, Insurers need to manage Ind AS
implementation as a change management program; thereby focusing on:
• Right governance framework – providing an environment to support the project

• Establishing controls and documentation – ensuring the project is controlled and documented
• Knowledge transfer throughout the project – making external advisors redundant at the end of the project
• Embedding the change – creating a sustainable reporting environment

For industry, there are multiple common challenges; and all need to come together to address them.
For example, a standard and robust Ind AS 117 curricula for different stakeholders led by the IRDAI,
ICAI and IAI supported by professional firms and Insurers can help bridge the knowledge and resource
gap. Addressing the impact on solvency, regulations and taxation can be led by the IRDAI and Finance
Ministry supported by Insurers and professional firms to have an informed decision. A dialogue to
derive solution for audit sign off on full financial statements (including revenue and actuarial liability)
led by the ICAI and IAI supported by professional firms and Insurers will help achieve casting appropriate
responsibility and a clean audit report on the financial statements.

IRDAI is leading from the front and trying to address some of these issues, however, others would
require collective and innovative solutions. IRDAI’s likely phase-wise implementation approach may
help medium to small insurers to learn from their peers who are likely to go first. IRDAI can think of
bringing innovative ideas and incentive program to encourage insurers to adopt and embrace Ind AS.