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:
- Significant data connectivity asks are being made to fulfill the requirements of LDTI.
- Quick decisions on cloud may be required as many LDTI accounting engines are only available in a cloud model.
- A complex mix of current and legacy infrastructure present challenges for IT teams.
- Considerable differences between insurers in terms of where they are on the data maturity spectrum.
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.
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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.
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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. |
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