English 
Vietnamese The unique nature of insurance contracts, with their long-term liabilities and inherent risks, presents specific challenges for accountants. This blog post will explore key best practices that can help insurance professionals navigate these challenges and ensure accurate, reliable, and compliant financial reporting.
Read more: Transition from IFRS 4 to IFRS 17: Key Differences and Challenges
Table of Contents
- 1. Maintain Impeccable Records of Premiums and Claims
- 2. Regularly Review and Update Actuarial Assumptions
- 3. Implement Robust Internal Controls
- 4. Stay Abreast of Regulatory Changes
- 5. Enhance Transparency in Financial Reporting
- 6. Embrace Technological Advancements
- 7. Utilise Data Analytics for Improved Decision-Making
1. Maintain Impeccable Records of Premiums and Claims
Accurate and timely record-keeping is the cornerstone of insurance accounting. Ensure that your team maintains detailed records of:
- Premium income, including written, earned, and unearned premiums
- Claims paid and outstanding claims
- Reinsurance transactions
- Commissions and expenses
Implementing a standardised system for recording these transactions will facilitate smoother audits and financial reporting.
In addition to that, robust data governance policies are also required to ensure data accuracy, integrity, and security.
Read more: Top 3 Insurance Accounting Aspects Most Impacted by IFRS 17
2. Regularly Review and Update Actuarial Assumptions
Actuarial assumptions form the basis of many insurance accounting calculations. It's crucial to:
- Regularly review and update these assumptions
- Document the rationale behind any changes
- Assess the impact of assumption changes on financial statements
Collaboration between accounting and actuarial teams is essential to ensure that assumptions remain relevant and reflect the current risk landscape.
3. Implement Robust Internal Controls
Strong internal controls are vital for preventing fraud and ensuring the reliability of financial reporting.
Consider implementing:
- Segregation of duties in premium collection and claims processing
- Regular reconciliations of accounts
- Strict authorisation procedures for large transactions
- Periodic internal audits
These measures will help safeguard your organisation's assets and maintain the integrity of financial statements.
It’s recommended that you adopt continuous controls monitoring (CCM) to ensure that compliance programs are always on—rather than being periodic, retrospective exercises.
You can refer to our previous article about CCM to learn more about what it is and why it matters.
4. Stay Abreast of Regulatory Changes
The insurance industry is highly regulated, and accounting standards are constantly evolving. Keep yourself and your team updated on:
- Changes to IFRS 17 and its implementation timeline
- Local regulatory requirements and reporting standards
- Tax legislation affecting the insurance sector
Continuous professional development and regular training sessions can help ensure your team remains compliant with the latest regulations.
Among these regulatory changes, the adoption of IFRS 17 brings the most profound changes to the industry. This white paper provides you with a comprehensive guide to ensure a smooth implementation of IFRS 17 in your insurance business.
5. Enhance Transparency in Financial Reporting
Transparency builds trust with stakeholders and regulators. Strive to:
- Provide clear and concise explanations of complex accounting treatments
- Offer detailed breakdowns of key performance indicators
- Disclose any significant judgments or estimates made in the financial statements
Remember, the goal is to present a true and fair view of the company's financial position.
One major way to enhance reporting transparency is through automation. This can also greatly improve efficiency as demonstrated in the case of Astra Life, a leading Indonesian insurance company.
By upgrading their financial management system, they were able to achieve a 6-day reduction in the month-end closing process, a 75% reduction in reporting time, and a 72% reduction in accounts payable transaction time.
You can read more about this case study here.
6. Embrace Technological Advancements
The insurance industry is experiencing a digital transformation, and accounting practices are no exception. Implementing robust accounting software tailored to the insurance sector can significantly enhance efficiency and accuracy. Look for systems that offer:
- Automated premium calculations
- Real-time claim processing
- Integrated actuarial functions
- Advanced analytics for risk assessment
By leveraging these technological tools, you can streamline operations and reduce the risk of human error.
An example is how insurance companies can adopt automated tools to make their fund allocation process much faster and more accurate. You can learn more about automated fund allocations here.
7. Utilise Data Analytics for Improved Decision-Making
Harness the power of data analytics to:
- Identify trends in claims and premiums
- Assess the profitability of different insurance products
- Forecast future financial performance
- Detect anomalies that may indicate fraud or errors
By leveraging data-driven insights, you can provide valuable strategic input to the business.
Adhering to these best practices in insurance accounting will not only ensure compliance but also drive efficiency and provide valuable insights for strategic decision-making. As financial leaders in the insurance industry, your role in implementing and maintaining these practices is crucial for the long-term success and stability of your organisation.
Remember, the landscape of insurance accounting is ever-changing. Stay curious, remain adaptable, and continue to refine your processes to stay ahead in this dynamic field.
