Optimus SBR is elated to be donating a record-breaking $42,779 to our partner charities, raised during our 9th annual Play It Forward (PIF) fundraising event.

On Thursday, October 27th, we blasted into the future with a Sci-Fi themed PIF event for 2022. After 2 years of being apart due to Covid, PIF was live and in person this year…and the Force was with us! As with every PIF event, our colleagues were encouraged to dress the part, and did they ever! We had Jedis and Droids from Star Wars, children of Zion and agents from The Matrix, researchers from Jurassic Park, Terminators, and Trekkies, just to name a few.

Hosted by our Corporate and Social Responsibility (CSR) and Ministry of Fun (MoF) committees, PIF is one of Optimus SBR’s marquee events that celebrates our culture and provides an opportunity to socialize with colleagues, all while raising funds to support two great local charities who “Play It Forward” everyday, Fort York Food Bank (FYFB) and Engage and Change. The entire event, including food, beverages, decorations, and prizes, is funded or donated by Optimus SBR and local businesses. This means 100% of the funds raised go directly to our charities.

PIF involves a variety of fundraising activities that culminate in a mega event with a silent auction, a raffle, games, challenges, fun, and generous donations from Optimus SBR employees! This year the silent auction and raffle prizes included golf packages, signed sports jerseys, plane rides, skeet shooting, wine tours, and more. Our committees also led a series of live auction games and challenges to drive donations. New tiers were unlocked as friendly competition became heated and participants outbid each other to shatter all initial targets!

This year, for the first time, we decided to open PIF to our wider network to increase our impact in the community. We reached out to friends, family, and colleagues through email, LinkedIn, and other channels to donate Hygiene Kits, Winter Warmth Kits, and “Greatest Needs” Kits to support our partner charities.

A Bit About Our Partner Charities

Fort York Food Bank (FYFB): A vital service that aims to prevent homelessness of Toronto’s most vulnerable groups. They help feed those in need and provide counselling, training, and advocacy services.

Engage and Change: Help assemble and distribute survival kits that provide essential supplies needed by Toronto’s homeless and less fortunate to survive on the streets.

At Optimus SBR we have been giving back to our community for over 10 years, and we’re not about to stop now! Every year PIF gets bigger and better with higher employee engagement, more elaborate costumes, zanier  games, and more donations. The $42,779 raised during PIF this year smashed our previous record of $24,000. It’s going to be pretty hard to outdo ourselves next year, but we’re up for it!

The insurance industry is in a period of transition due to the changes in consumer expectations, exposure to climate, health, and economic events, regulatory pressures, and shifting market conditions.

A growing number of companies have seen significant returns when combining transformation objectives with pressing business priorities, such as the regulatory adoption of IFRS 17.  Successful organizations are balancing their capabilities and capacity to take a measured approach to transformation by applying strategic elements of digitalization, automation, and prediction to the transformation agenda.  Armed with the right tools and information, the office of the CFO and the finance function will continue to play a pivotal role in shaping the future of the insurance landscape.

Following the LDTI explanatory series, this article provides best practices in launching a successful financial transformation program that harnesses digitization, automation, and prediction through platforms, such as Vena and Microsoft Azure, and how to achieve financial transformation through a measured approach.

Understanding the Current State

The insurance industry is a challenging environment within which planning and forecasting become tricky due to the complexity and the many different processes involved in an organization amid rapidly shifting market conditions.

Today’s customers are savvier and more technology-literate than in the past. They are accustomed to using multiple channels to engage with a company and expect digital and accessible solutions across the board.

On the other hand, the frequency and severity of natural catastrophes have increased lately leading to evolving regulatory requirements that businesses need to promptly navigate and comply with, such as the recent global pandemic.

All this coupled with the typical planning technology challenges that face insurers makes for a tough planning environment, but not an impossible one to overcome. With a solid understanding of the current state, the available solutions, your business needs, and the way to strategize for better efficiency optimization, it becomes feasible to comply and thrive through the entire LDTI transformative implementation.

Financial Planning Technology is Key

The value in enabling financial planning technology is the automation and integration gained through the implementation. Taking the manual steps out of your process speeds it up by making it more efficient and removes the need to perform time-consuming validations.

Having a balance of pre-built industry-specific models with the ability to augment with bespoke models expedites time to value by allowing you to focus on what makes your organization unique.

When selecting the best-fit planning technology for your organization, the following capabilities, illustrated in the graph below, should be considered:

Considering the capabilities of the aspired planning technology that suit your business needs, a scalable cloud technology shapes the foundational base of the funnel, and most financial planning technologies have already migrated to the Cloud.  Yet, it should be noted that the ones born in the Cloud are the most scalable and optimized for this kind of deployment.  Those who have migrated on-premises technologies to cloud often need a few generations before they get it right.

Also, when considering your financial planning technology, predictive planning should matter as it supports the continual evolution of your strategy. It leverages machine learning to take full advantage of internal/external datasets for richer business insights.

The predictive planning process works best when a balance of revenue and expense models are leveraged to tie the overall forecasting model together for your organization.


The predictive planning process can help answer key questions on the minds of insurers including:

A Proven Recommendation

When navigating the financial planning technology space, Vena is by far the leader in its offering. The Vena platform uniquely combines the data collection and management capabilities of the cloud with the user experience comfort and familiarity of those accustomed to using Excel.

In addition, Vena provides a model specific for the insurance community as a baseline starting point for the accelerated implementation of the platform.  It has a proven track record in connecting the dots for insurers while enabling the flexibility the office of finance needs to move the organization forward.

Helping You Optimize

In working with a number of insurers to advance their planning processes, we have established a predictive planning accelerator on the Vena and Microsoft Azure platforms that accelerates the path to LDTI compliance while advancing an insurer’s planning capability.

We would be pleased to showcase a demo of the predictive planning accelerator and how it can support the LDTI journey.

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for more information on LDTI

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

This piece was developed in partnership with BDO and Valani Global.

Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey.  Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.

Service Partners


With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.


Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.
The insurance industry has been hyper-digitized by the sophistication of consumer expectations, exposure to significant climate, health, economic events, and regulatory adoption pressures topped with rapidly shifting market conditions, including the pivot onto the recent Long Duration Targeted Improvements (LDTI).

 

However, digitization does not always equal modernization. The industry still wrestles with dated, manual, and time-consuming processes often involving fragmented legacy systems. At the same time, the war on talent is fierce and competition is very high. Our series of articles regarding the recent changes with LDTI implementation surpass compliance and requirement examination and delve into the technological impact it brings about. This piece explores modernized ways the LDTI implementation yields on the insurance landscape while stressing the importance of the human element in equipping the workforce of tomorrow.

Processes and Operational Automation

Insurers are beginning to see major benefits in automating core enrolment, underwriting, claims, customer care, and financial processes. However, insurers need to equip the workforce of tomorrow with the right capabilities to stay relevant in the market and service the changing needs of customers.

One of the catalyst enablers to operations modernizations is Robotics Process Automation (RPA). It is the application of software robots, not physical robots, that mimic human action and connect multiple systems through automation without changing the existing IT landscape. RPA enables organizations to automate existing high-volume and complex process steps as if business users were doing the work. This is enabled through a virtual robot that captures and interprets data across systems, triggers responses, and communicates with other systems.

The graph below illustrates some common transformation use cases that leverage RPA automation in the insurance landscape.

Moreover, RPA relies on basic technologies, such as screen scraping, macro scripts, and workflow automation. Cognitive automation, on the other hand, uses more advanced technologies, such as natural language processing (NLP), text analytics, data mining, semantic technology, and machine learning to make it easier for the human workforce to make informed business decisions. It should be noted that the RPA does not require coding as it depends more on the configuration and deployment of frameworks, whereas cognitive automation uses machine learning and requires the extensive use of programming knowledge.

As a rules-based solution that works on the if-then principle, the RPA is a process-oriented technology, which is often used to work on time-consuming tasks that were previously performed by offshore teams. It leverages the capability of virtual robots to automate existing high-volume repetitive tasks by mimicking human actions.

Unlike RPA which uses foundational technology to mimic basic repetitive human tasks, cognitive automation enables the use of advanced RPA tools to execute more complex processes. Cognitive automation is needed when human intervention, knowledge, and decision-making become a factor in the process. Here, the machine goes through several human-like conversations and behaviors to understand how humans talk or behave and define their own rules.  With the use of advanced technologies, cognitive automation can work with a high volume of unstructured data and understand how a human would talk, behave, and execute the right decision in a similar situation/process.

However, in speaking of taking the next level of modernization in the insurance industry, hyper-automation shapes a combination of advanced technologies such as RPA, AI, Machine Learning, and many more to enable the end-to-end automation of processes across the enterprise and amplify the overall ability to automate work.

Legacy applications are less nimble, less flexible, and less responsive to the ever-changing needs of employees and customers. In this competitive market, organizations often struggle to keep up with the newer technology but are constantly looking for ways to optimize the way their business operates with their internal processes and maximize efficiency by eliminating manual and redundant tasks.

Power Apps is great for replacing paper forms, legacy solutions, or even spreadsheets. It provides a low code, no code solution to enterprises struggling to streamline their business operations, and cuts down the cost of outsourcing or traditional in-house app development as it is built for users without any coding experience. Simple yet powerful capabilities enable you to develop business applications and automate business processes with a simple drag and drop features.

Workplace Modernization

Customer and Employee Experience

The way businesses operate has changed as more employees work remotely. Accommodating remote-working or a hybrid model is imperative in order to modernize your workplace. With fewer in-person meetings, formal collaboration, and given the exponential growth of unstructured data internally, the complexity continues to rise while employee experience continues to drop.

The need for employees to access communications, collaboration, and content from anywhere on any device has become a necessity, and without it, employees feel disconnected which causes higher turnover.

In a way of embracing digital, many organizations are now investing in enhancing their customer experience models, and ultimately driving customer and employee satisfaction. As leaders continue to develop employee experiences to provide people with the resources and support to encourage thriving environments, organizations of all types face challenges, and insurance companies are no different.

To provide employees with convenient and secure access to company communication, tools, and information, businesses can capitalize on the use of Microsoft 365 tools with their new rolled-out products which can be embedded within MS Teams to enhance employee experience and modernize the workplace. You can now connect and embed those powerful tools and make MS Teams your one-stop shop for all your business’s collaborative needs.

Many organizations also struggle with understanding their organization’s future needs in the hybrid space and encounter gaps and challenges when modernizing their workplace. We leverage our proven Modern Work DNA framework using 23 traits that helps us understand the challenges our clients face in the workplace and identify ways to create a more collaborative, productive, efficient, and secure work environment that follows the PPTC model—People, Process, Technology, and Culture. These traits determine how well an organization is performing against the industry benchmark and indicate the areas for improvement.

 

By leveraging this approach, shifting towards a modernized workplace is attainable when developing strategies to adopt new and efficient ways of working.

Secure Collaborative Tools

With distributed teams, brand-new business models, and complex security issues, there is a strong need for secured collaboration as well. And often when collaborating, there is a need for sharing of documents internally and externally.

Enabling your workforce to access information and collaborate remotely across all devices is the heart of frictionless employee experiences. The engine that powers these experiences, however, needs a measure of protection. The security of your data is an absolute prerequisite of modern workplace activities. The right digital tools connect and support employees, wherever they are, to encourage productivity, engagement, and collaboration.​

With the help of Microsoft Information Protection, Security, and Compliance capabilities, you can add an extra layer of protection when collaborating and sharing files with others. By classifying and managing information labels, it helps to identify sensitive information including emails, documents in OneDrive, MS Teams, and SharePoint online or wherever your unstructured data lives.

Document Management

Information is growing faster than ever before and is stored in all different places. Finding the right information at the right place at the right time is a must. This is where document management comes into play. However teams decide to structure, organize, and manage their files and documents is key to finding the right information in the right place.

In this context, Microsoft 365 also provides the proper medium for powerful document management and a cohesive ecosystem in order to:

Digitizing Your Insurance Company

By now, insurance companies must know that the advent of all these new technologies will lead to a leap in productivity through another layer of change with the LDTI. Part of this implementation resides in understanding and adhering to the requirements whereas the core of it lies in the transformation journey and the adoption of technologies and strategies in order to comply with the new standard.

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for more information on LDTI

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

This piece was developed in partnership with BDO and Valani Global.

Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey.  Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.

Service Partners


With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.


Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

Many insurers are starting to consider their Long Duration Targeted Improvement (LDTI) implementation plan and are working on the design of their solution. This series examines how insurers can make use of LDTI through compliance, data management practices, and how it affects insurance companies and investors.

In this article, we outline the benefits and challenges of advancing data maturity and how to leverage the investments in LDTI as a foundation to address the data needs of the broader enterprise.

What to Consider

As the deadline for LDTI compliance approaches, it is crucial for insurers to examine and act on their compliance plans sooner than later. The question for most insurers now is whether they simply need to create a minimum viable product or seize this opportunity to truly transform their business and take a market leadership position.

In working with many IT leaders on LDTI, we recognize that the adoption of the new standard poses many issues for insurers, including:

 

The Silver Lining

Although the adoption of LDTI and its transformative aftermath may pose some challenges, it is often the right approach to address the needs of the broader enterprise. This includes benefits such as:

Data as an Asset

The value of the data for most LDTI implementations is high given the significant footprint of policy, claims, financial, investments, and reinsurance data residing in a variety of source systems. Establishing the right single source of the truth for the LDTI dataset can naturally become the right single source of the truth for the enterprise.

Agile Data Integration

LDTI often requires a significant investment in data integration because of the broad impact across the technology and data landscape. Those who combine both the integration needs of LDTI with the integration needs of other business objectives are able to achieve economies of scale by leveraging the same integration strategy and platform.

LDTI presents a catalyst opportunity for IT to move away from a legacy point-to-point approach and adopt a modern data fabric approach. This enables not only the data connectivity for LDTI but also sets the foundation for data maturity advancement and advanced analytics outcomes by leveraging the potential of AI.

Business Intelligence and Advanced Analytics Maturity

Given the rich dataset required for LDTI and the financial and management reporting requirements, it’s a great opportunity to leverage the business intelligence and advanced analytics used for enterprise LDTI.

Data Governance and Literacy Maturity

The pragmatic data governance and data operations strategy required for LDTI can be applied as the golden standard for other high-value data sets across the organization.

The data literacy and education approach for LDTI is often the same approach for advancing an organization’s data literacy overall.

The chart below details the stages of maturity and the strategic value created during each stage.

 

Insurers who seek to comply with the new standard need to evaluate data fabric options to determine which will improve the quality of their data at lower costs. Choosing an appropriate fabric, such as a data mesh strategy, may be less costly than upgrading to a point-to-point environment. Over time, insurers should seek to integrate advanced analytics into their new infrastructure to capitalize their overall data maturity and governance.

While many insurers may challenge the cost/benefit of transitioning to newer data fabric as they seek to comply with the new standard, our experience is that building on a point-to-point strategy is just as or more expensive that implementing a new data mesh platform. Such upgrades also do not easily position the insurer to advance their overall data maturity/governance and to set the stage for capitalizing on the potential of advanced analytics.
With the compliance deadline fast approaching, insurers need to actively and quickly examine and execute their compliance plans.  We have established deep expertise in building solutions that immediately solve regulation specific requirements while laying the foundation for solid enterprise data management practices.

We have established a data accelerator known as InsurFabric based on the Denodo platform that accelerates the path to LDTI compliance and advances an insurers data maturity for advanced analytics. The InsurFabric accelerator shortens the timeline of LDTI implementations with data connectivity, workflow processing, a calculation library, and reports aligned with the requirements of LDTI.

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for more information on LDTI

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

This piece was developed in partnership with BDO and Valani Global.

Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey.  Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.

 

Service Partners


With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.

 

Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

 

 

The implementation of Long Duration Targeted Improvement (LDTI) introduces a number of changes from the current Generally Accepted Accounting Principals (GAAP) and spans over cross-functional business units. These changes apply to the measurement of specific traditional, non-participating life products as well as their groupings and assumptions. In addition, changes are introduced to the chart of accounts, financial statements, disclosures, and reporting and analytics of LDTI contracts.

This article looks at how the changes in accounting policies affect actuarial measurements and what they look like before and after the implementation.

The Complexity of LDTI for Insurers

Actuarial Measurements – the Impact and Effects

The far-reaching effect of the LDTI implementation will affect the actuarial measurements in many ways including:

In order to understand how the aftermath of this implementation will impact your organization, we summarize and break down the areas involved and the variances incurred before LDTI and after as follows:

Grouping for Reserve Calculation: The current GAAP has groupings at the policy level whereas LDTI has policies grouped in cohorts—quarterly or annual—with each cohort based on similar characteristics.

Current Best Assumptions for Liability for Future Policy: The current GAAP has assumptions locked in at an issue level with a Provision for Adverse Deviation (PAD) and is updated when a loss recognition event occurs.

However, under LDTI, assumptions are reviewed and updated if needed at least once per year, at the same time each year, with no PAD.

Discount Rate Methodology: The current GAAP has a discount rate equal to the insurer’s expected investment yield. With LDTI, all insurance companies will use the same discount rate assumption of an upper-medium grade (low credit risk) fixed-income instrument yield—rated corporate bond yield.

Retrospective Unlocking Approach for Non-discount Rate Assumptions: Under the current GAAP, the Net Premium Ratio (NPR) is locked in based on the expected future cash flows at the issue level.

On the other hand, LDTI uses the revised NPR by using actual historical experience calculated with updated assumptions and discount rates at the issue level. The difference between the previous and revised NPR is used to determine a revised liability, reflected in the current operating period income.

Simplification of the DAC Model: Under the current GAAP, DAC is amortized in proportion to the expected future profitability or premium recognized with the accrual of interest.  Yet with LDTI, DAC is amortized in proportion to the expected life of the contract with no accrual of interest.

Market Risk Benefits (MRBs) Subject to Fair Value Measurement: Under the current GAAP, some guaranteed benefits are valued under an insurance accrual model rather than fair value. Whereas with LDTI, MRBs are measured at a fair value with changes recognized on the income statement.

Increased Financial Statement Disclosure Requirements: Under the current GAAP, the level of disclosure requirements aligns with historical representations and disclosures. With LDTI, there is a significant increase in the disclosure requirement with disaggregated roll-forwards.

Investor and Insurance Companies – the Impact and Effects

Consequences to the changes and volatility introduced from moving to LDTI will affect investors and insurance companies in one way or another.

For instance, investors will now need to recalibrate expectations for the financial position, profitability, and income volatility of insurance companies following the change in the accounting standards from GAAP.

On the other hand, insurance companies should assess the strategic implications of LDTI to their business in order to develop a plan to address the required changes in processes under a narrowing timeline.

This change creates another opportunity for insurers to invest in modernizing finance processes to better understand key drivers of change affecting financial statements. They may also want to engage in strategic divestitures of underperforming business that is not central to their strategy or consolidate a leading position in certain lines of business central to a strategy to strengthen their positions.

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for more information on LDTI

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

This piece was developed in partnership with BDO and Valani Global.

Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey.  Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.

 

Service Partners


With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.

 

Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

 

Toronto June 9, 2022 – Optimus SBR, one of the largest independent management consulting firms in North America, announced their eighth acquisition in a decade with the purchase of n-gen People Performance Inc., a training organization that specializes in solutions for managing generational differences in the workplace.

“I’m excited to announce the purchase of n-gen as a great addition to our Learning & Enablement practice.” said Kevin Gauci, Founder and CEO, Optimus SBR. “We can now offer our clients an enriched suite of training services with n-gen’s uniquely focused workshops that help companies increase employee engagement, drive team performance, and retain and grow a multigenerational workforce.”

n-gen has trained more than 65,000 people in the areas of Leadership, Team Building, Early-in-Career Talent (Gen Z), Sales & Customer Service, and Human Resources. They were the first to define the generational disconnect in the workplace and provide targeted solutions. In addition to their hallmark workshops addressing the challenges and opportunities in multigenerational workplaces, n-gen has conducted research and published work on key leadership behaviours. They deliver training programs addressing issues that are highly relevant in today’s competitive environment. These include leading through change; hybrid team collaboration; recruiting, retaining, and engaging top talent; building resilience, and selling & servicing diverse client groups.

The dynamic n-gen team is eager to offer their roster of training services to Optimus SBR’s clients.

“We’re very excited to be a part of a company like Optimus SBR that shares our entrepreneurial spirit and bold attitude – we make a great team! We welcome the opportunity to deliver n-gen’s training programs to a much broader audience and continue to help organizations improve their performance and productivity” said Giselle Kovary, President and co-founder of n-gen People Performance Inc.

Over the last 10 years, Optimus SBR has been on a path of continuous growth, embracing change and making bold decisions to provide value-driven, innovative solutions for clients. The purchase of n-gen marks the next chapter in its remarkable story.

For life insurers, the introduction of the Long Duration Targeted Improvement (LDTI) standard is often a catalyst for adoption of modern data management practices.  However, compliance can’t be achieved without substantial alignment of supporting IT systems to match new accounting policies, data accessibility, and data analytics/reporting requirements.

For many insurers, this is the time to question the investment in upgrading legacy point-to-point systems, using LDTI as the reason to consider an upgrade to a data fabric that captures all components of the requirement—allowing for alignment of the data flows for the end-to-end process.

Insurers must consider key implementation realities as they compare upgrading their point-to-point system or upgrading to a new data fabric environment.

Complexity of Data Integration – Data integration for most LDTI implementations is quite complex due to the significant footprint of policy, claims, financial, investments, and reinsurance data usually residing in a variety of source systems.

Approach to Data Integration – How data is integrated is a key consideration for the IT department because of its broader impact across the technology and data landscape. Those who combine the integration needs of LDTI with the integration needs of other business objectives are able to achieve economies of scale, leveraging the same integration strategy and platform.

Data Connectivity and Maturity – LDTI presents a catalyst opportunity for IT to move away from a legacy point-to-point approach and adopt a modern hub approach. This facilitates the data connectivity for LDTI and sets the foundation for data maturity advancement, enabling advance analytics outcomes that leverage the potential of artificial intelligence.

Total Cost – When looking at the total cost of ownership, agility, maintainability, advancing data maturity, advancing analytics, and being cloud ready, there’s a clear advantage for a data hub strategy versus a point-to-point strategy.

Revisiting Enterprise Integration – Given the rich dataset required for LDTI, it’s a great opportunity to take a look at your enterprise integration strategy and progressively modernize it through the LDTI initiative.

While many insurers may challenge the cost/benefit of transitioning to newer data fabric as they seek to comply with the new standard, our experience is that building on a point-to-point strategy is just as or more expensive that implementing a new data mesh platform. Such upgrades also do not easily position the insurer to advance their overall data maturity/governance and to set the stage for capitalizing on the potential of advanced analytics.
With the compliance deadline fast approaching, insurers need to actively and quickly examine and execute their compliance plans.  We have established deep expertise in building solutions that immediately solve regulation specific requirements while laying the foundation for solid enterprise data management practices.

We have established a data accelerator known as InsurFabric based on the Denodo platform that accelerates the path to LDTI compliance and advances an insurers data maturity for advanced analytics. The InsurFabric accelerator shortens the timeline of LDTI implementations with data connectivity, workflow processing, a calculation library, and reports aligned with the requirements of LDTI.

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for more information on LDTI

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

This piece was developed in partnership with BDO and Valani Global.

Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey.  Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.

 

Service Partners


With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.

 

Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

 

Long Duration Targeted Improvement, or LDTI, is the most significant change in decades to the existing accounting requirements under U.S. Generally Accepted Accounting Principles (USGAAP) for long duration contracts that are non-cancellable or guaranteed renewable contracts such as life insurance, disability income, long-term care, and annuities.

The ultimate objectives of this accounting standard change are:

There are two groups of LDTI adopters. The complexities of LDTI apply to both:

  1. Early Adopters – These are SEC filers, excluding smaller reporting companies as defined by the SEC, for whom LDTI would be effective for fiscal years beginning after December 15, 2022 and for interim periods within those fiscal years.
  2. Fast Followers – All other entities for whom LDTI would be effective for fiscal years beginning after December 15, 2024 and for interim periods within fiscal years beginning after December 15, 2025. These non-SEC insurers who have a later implementation date and more time to implement will want to be fast followers.

Smaller insurers may believe that they might have a simpler path to compliance; however, they should not underestimate the complexity of the integration LDTI requires between actuarial, accounting, and IT teams, which will require ongoing detailed tracking that will be extremely difficult to do manually.

Insurance industry -impact and implications

This disruption will transform the insurance industry regardless of the type of insurance underwritten. Business functions— from accounting to actuarial—will have to adjust.

Accounting – Accounting for LDTI is not as simple as just adjusting the accounting that currently takes place under current USGAAP. The grouping required for reserve calculations, ongoing tracking and creation, and eventual disaggregated roll-forwards mean the entire end-to-end process requires more details and continuity.  Many insurers will look to track these details through in the form of additional dimensions and attributes to track directly within their general ledger to more easily tie together their financial statements and disclosures.  Mapping those to the data requirements for the new standard is the baseline minimum change.

Data – Data is at the heart of LDTI. Ensuring comprehensive data quality, data controls, and data governance are all at the heart of a functioning LDTI compliance program. Data drives the LDTI accounting engine, is required for traceability and auditing of the results, and will need to flow in a connected manner across your core insurance, actuarial, and financial systems.

Reporting – Minimum compliance reporting requirements under LDTI are well beyond what is required under USGAAP. Generated data from your LDTI accounting engine will feed the minimum reporting requirements. Limiting investment to minimum viable product may be suitable in the short term, but capitalizing on the rich data sets from LDTI can transform an insurer’s business by providing deep customer and business insights to drive market penetration, retention, and profitability.  In the end, the ongoing maintenance of data required for LDTI necessitates automation, as any manual maintenance will continue to become more onerous as your company continues to add new cohorts of business.

IT Systems – Compliance cannot be achieved without substantial alignment of supporting IT systems to match new accounting policies, data accessibility, and data analytics/reporting requirements. For many insurers, this is the time to question the investment in upgrading legacy point-to-point systems using LDTI as the mandate to upgrade to a data hub that captures all components of the requirement—allowing for alignment of the data flows for the end-to-end process.

Actuarial – In many cases, actuarial models will need to be upgraded to be LDTI compliant, adding new components and inputs, as well as providing updated outputs of your best estimated cash flows, containing new components such as risk adjustment.  Alignment between actuals and expected at a granular level is something that LDTI will rely on in order for your LDTI accounting engine to work properly.

Insurance Companies and Investors – Impact and Implications

Consequences to the changes and volatility introduced from moving to GAAP to LDTI will affect investors and insurance companies.

Investors – Investors will need to recalibrate expectations for the financial position, profitability, and income volatility of insurance companies following the change in accounting standard from GAAP.

Insurance Companies – Insurance companies should also assess the strategic implications of LDTI to their business in order to develop a plan to address the required changes in processes under a narrowing timeline.

Bottom Line for Insurers

Insurers can use this change as an opportunity for investment into modernizing finance processes to better understand key drivers of change affecting financial statements.

In addition, insurers may want to engage in strategic divestitures of underperforming business that is not central to their strategy or consolidate a leading position in certain lines of business central to strategy to strengthen their positions.

With the runway to compliance shortening, insurers need to be rapidly examining and acting on their compliance plans. The only question left for most insurers is whether they use the opportunity of LDTI compliance to simply create a minimum viable product or to truly transform their business into the 21st century and take a market leadership position.

Optimus SBR’s Financial Services Practice

Optimus SBR is an independently owned management consulting firm that works with organizations across North America to get done what isn’t. Our Financial Services Group provides strategic advisory services, process improvement services, risk management services, and project management support to leading Financial Institutions, insurers, asset managers, and pension funds.

Contact us for more information on LDTI

Peter Snelling, Senior Vice President, Business Development
Peter.Snelling@optimussbr.com
416.649.9128

This piece was developed in partnership with BDO and Valani Global.

Optimus SBR, BDO, and Valani have come together to establish accelerators for the LDTI journey.  Our accelerators do not only meet the compliance needs of LDTI, but also advance an insurer forward in the areas of financial transformation, operations modernization, and data innovation.

 

Service Partners


With access to a global knowledge base and professional expertise, BDO offers extensive value to their clients across all segments of the insurance and financial services industry.

 

Valani Global supports life insurance companies in achieving their financial risk management goals through implementations of Moody’s Analytics solutions including AXIS and RiskIntegrity for IFRS 17.

 

Optimus SBR has been recognized as a Great Place to Work for a fourth consecutive year! The award exemplifies the bold commitment our team makes every day to uphold Optimus SBR as a place where people come first, and culture is everything.

Optimus SBR demonstrated remarkable resilience, dedication, drive, and creativity during the pandemic and entered 2022 stronger and more engaged than ever. As restrictions lifted, we made a concerted effort to welcome back the team to the workplace that made us a Great Place to Work previously. We re-launched in-person events such as our annual Holiday Party, Thursday Night Birthday Celebrations, Tuesday Talks, Optimus Chats, and Cocktails & Conversations. Extras such as Optimus Days and the Optimus Lite program continued to support work life balance.

This year’s achievement reflects a continued focus on our people and their growth with initiatives ranging from training and career development opportunities to things like our seven, employee created and led committees, and our commitment to diversity and inclusion.

The 2022 Best Workplaces™ in Canada list is compiled by the Great Place to Work® Institute. The award is based on feedback received through a 2021 annual Great Place to Work® survey of Optimus SBR’s people and an in-depth review of our culture which evaluates areas such as diversity and inclusion, onboarding practices, and training and development opportunities. The competition process is employee driven, based on two criteria: 75% percent of each organization’s score is based on confidential employee feedback, from the globally recognized Trust Index® Survey. The remaining twenty-five percent is based on quality, quantity and effectiveness of the programs and policies which support their employees and corporate culture.

 

The explosive growth of data has provided incredible business opportunities but has also presented challenges for many companies, and one of the biggest challenges is ensuring data accuracy. Although we have seen some companies with robust data validation practices, more often companies are in dire need of a systematic and disciplined approach. It is not unusual for business users to tell us they receive inaccurate or questionable data from their data team! The use of “bad” data can significantly impact the performance of the business and in some cases, prove catastrophic.

What is Data Validation, and Why is it Essential?

Data validation, a form of data cleansing, is the process of verifying the accuracy and quality of data before using it.

As a business user, you may not realize that raw data rarely meets an organization’s analytical needs, so it must be manipulated into a form suitable for further analysis. Any data process requiring large volumes of data to be transformed, merged, and cleansed is intrinsically error prone – the more data, the greater the likelihood of error.

For example, when moving and integrating data from different sources and repositories, it may not conform to business rules and may become corrupted due to inconsistencies in type or context.

“Bad” data includes data that is inaccurate, incomplete, inconsistent, duplicated, poorly compiled, or not relevant for its intended use.

“Bad” data can be prevented by following best practices for data validation. The goal is to create data that is consistent, accurate, and complete to ensure the data presented to business users in reports, dashboards, or other tools is correct. When data is consistently accurate, business users trust reports and can confidently make critical decisions based on the right data. If data can’t be trusted, insights from reports or data visualizations can’t be trusted, and ultimately, companies won’t be able to make data driven decisions.

3 Data Validation Best Practices to Prevent “Bad” Data

1.  Start by Verifying Source Data

As a first step, it is critical that the data from each source follows Data Quality measures to ensure that the validation process begins withhigh quality” data.

“High quality” data indicates data meets the needs of the organization in terms of operating, and decision and planning support.

The following Data Quality measures should be verified for each data source:

Accuracy: Are the data records error-free, and can they be used as a reliable source of information?

Data Completeness: Is data complete for all relevant information?

Consistency: Does information in one table match the same information in another?

Timeliness: Is data readily available when the business needs it?

Validity: Does data follow business rules? Business rules are a set of actions or constraints that are applied to data to comply with data quality standards as well as make the data usable and meaningful to non-technical data consumers.

Uniqueness – Do tables consist of unique sets of data or is data repeated among tables?

It is strongly recommended that a proactive approach be taken to identify potential data inconsistencies early to avoid the complexity, cost, and time of having to fix them during later stages of the project.

2.  Data Validation During Integration

Data integration is a process that combines data from multiple sources into a single unified data repository.

Once data quality measures have been verified for all data sources, there are many different transformations, integrations, and aggregations required for large volumes of data within an ETL (Extract, Transform, Load) process.

ETL (Extract, Transform, Load) is a data integration process that collects data from original sources (Extract), cleans and combines it into a format that can be analyzed (Transform), and centralizes it into a target repository (Load).

If any single one of the ETL processes is not developed correctly, the resulting metrics will be inaccurate. This in turn may result in unjustified decision making at the business level. Analytics are only as good as the data that supports it, so it is crucial to implement best practices early when developing ETL workflows.

Optimus SBR Data uses our ADM – Analytical Data Mart to blend multiple, disparate data sources for further analytics and data visualization. Data validation is built into the ADM framework, and each of the ADM’s three tiers – landing, integration, analytics – has a specific purpose and set of validation techniques.

Since a report or dashboard is only as useful as the data that powers it, creating test cases to support data accuracy is crucial in the validation process. Each tier has its own set of test cases that support that tier’s purpose. ETL testing ensures the transfer of data from different sources to a target strictly adheres to transformation rules and remains compliant with all validity checks.

Landing Tier maintains an exact copy of data from the source tables to ensure that a reference of the source is always available.

Test cases: Since the landing layer functions as an exact copy of the original data, the record values and data types must match. The test case for the Landing Tier involves performing a count of records and a list of the metadata of the original and the copy. If these tests are successful, a more detailed test can be performed comparing the values of the original and copy using an ETL tool such as KNIME or Alteryx.

Integration Tier combines the raw data from the landing layer by applying transformations and data structure best practices (e.g., consolidations, aggregations, removal of duplicates).

Test cases: There are several test cases involving the structure of the data that must be created at the Integration Tier to test relationships between fields, tables, and structure.

Data redundancy: Normalization is applied to reduce data redundancy. This divides large redundant tables into smaller tables with a specific purpose and links them using relationships.

Data Integrity: Validation occurs before inserting, updating, or deleting the data. Tests can be performed to determine if the metrics contain any incorrect data (e.g., if sales contain any negative numbers or name fields contain special characters). Another test would be to insert inconsistent data to ensure it fails (e.g., insert a product number with 8 characters when the format is 7).

Parent/child: Data behaviour also requires testing. The database should indicate an error when a child record is inserted before a parent record. For example, when a sale is added that contains a product number that does not exist in the product table.

Cardinality: Involving the relationship of data in one table joined with another table, cardinality refers to whether a relationship is one-to-one, many-to-one, or many-to-many. For example, when testing the relationship between a sales fact table and a product dimension table, many of the products will be the same, but a product dimension table will have unique values for products, so joining these tables will create a many to one relationship.

To test the cardinality, a distinct list of the primary keys (fields designated to identify unique records) is pulled in both tables. The table with the cardinality ‘one’ will have unique values while the table with the cardinality ‘many’ will not. If the product table has duplicate Product IDs, we know that it will involve some cleansing.

Analytical Tier transforms data from the integration layer to create tables and marts that apply specifically to the business. The analytical layer is pulled by a data analysts or data scientist to be used by the business. The function of this layer is to answer real business questions, so it is important to test scenarios that the business will regularly ask.

Test cases: For a retail store, for example, an analyst would create a table with metrics such as sales, margin, and cost that are sliced by dimensions such as region, brand, and product. The resulting information would answer questions like:

What are the sales by region for this year?

What are the 5 least profitable stores this month?

Which stores improved their sales the most compared to last year?

Tests cases are performed that align with how the business slices their data. The answers can then be cross referenced with data from each tier to verify data accuracy.

3.  Automate Tasks for More Efficient Data Validation

When large volumes of data are being validated for analytics, manually sifting through millions of records can not only be error prone but very time-consuming. A great way to increase the efficiency of data validation is to automate tasks using SQL functions. Specific test cases are queried by looking at metrics and comparing the source value and destination value. Queries are named by using a function, so that function can be run when you make changes to the ETL process. Here is a sample output:

A significant delta will indicate which tables and fields are producing problems in the workflow, so they can be rectified. This greatly reduces the amount of manual work, reduces errors, and speeds up the process of data validation.

A Final Thought

Data Validation has become increasingly important and complex with the massive data projects Optimus SBR is seeing. Businesses need to have absolute trust in their data, and decisions must be based on accurate data. The solution is to implement and adhere to a rigorous data validation process that follows the…

3 Best Practices to Prevent “Bad” Data

  1. Verify Source Data: Start with verifying data quality for each data source before beginning the integration processes.
  2. Validate Data During Integration with Test Cases: Employ the ADM – Analytical Data Mart to perform ETL processes. The ADM has built-in data validation techniques at each tier (Landing, Integration, and Analytics) and uses test cases to support data accuracy.
  3. Automate Data Validation: Automate validation tasks to achieve greater accuracy and efficiency.

Optimus SBR’s Data Practice

Optimus SBR provides data advisory services customized to support the needs of public and private sector organizations. We offer an end-to-end solution, from data strategy and governance to visualization, insights, and training. Click here for more information on our Data practice and how we can help you on your data journey.

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