icbc’s application to streamline it compliance reporting ...€¦ · compliance reporting...

6/19/2018

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ICBC’s Application to Streamline IT

Compliance Reporting Requirements

Streamlined Review Process Presentation

June 19, 2018

• ICBC has been filing IT capital reports and IT

capital expenditure information in its IT Plan

filings for 12 years.

• ICBC’s IT capital spend has limited impact on

Basic insurance rates.

• The impact of IT Spend is provided in the

annual Revenue Requirements Application.

• Further to the BCUC Core Review Report, it

is appropriate to assess whether reporting

can be improved.

• ICBC’s proposals achieve effective oversight

more efficiently.

Opening RemarksOverview

June Elder

Manager of

Regulatory Affairs

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• Application – historical context

• ICBC’s proposals

• Improvements to ICBC’s internal

processes to facilitate BCUC review

• ICBC’s responses to written

questions

• Conclusion

• Questions

AgendaOverview

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June Elder

Manager of

Regulatory Affairs

APPLICATION IN

CONTEXT

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• IT capital reporting has seen only 2

changes since 2006.

• IT capital reporting currently consists

of:

1. Individual IT capital project reports

2. Annual IT Capital Expenditure Plan (IT

capital plan)

3. Annual Update to the IT Strategic Plan

(IT strategic plan)

History of IT Capital ReportingContext

June Elder

Manager of

Regulatory Affairs

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2014 Core Review emphasized proportionality

and focusing on areas of greatest impact:

“Compliance resources should focus on matters that

pose risks of increasing customer costs and rates…”

“The BCUC should make additional efforts to ensure

all compliance reports are necessary and useful, and

eliminate the reporting requirement for those that are

not.”

“The BCUC should place more responsibility on

regulated entities to report, on an exception basis,

deviations from forecasts that could affect costs and

rates, instead of routine reporting.”

2014 BCUC Core Review FindingsContext

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June Elder

Manager of

Regulatory Affairs

6/19/2018

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Impact of IT Capital on Basic

RatesContext

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Phil Leong

Corporate Controller


Rates – Recent HistoryContext

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Phil Leong


Basic Revenue Requirements Application

2013RRA

2014RRA

2015RRA

2016RRA

2017RRA

Approved Premium * $2,500M $2,600M $2,900M $3,200M $3,400M

IT Capital Depreciation Expense **

$9.0M $6.7M $6.4M $8.4M $8.6M

Depreciation as a % of Approved Premium

0.36% 0.25% 0.22% 0.26% 0.25%

* Amounts are rounded for illustrative purposes** Assumes 58% allocation to Basic insurance (Corporate Shared Services ratio)

Impact to Basic rates has been stable:

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Impact to rates at different IT capital reporting

thresholds:


RatesContext

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Phil Leong


Reporting Threshold

100% allocation to Basic Rates *

Impact toAverage

Policy***

58% allocation to Basic Rates **

Impact toAverage

Policy***

# of Projects

(2015-20)

$1 million 0.006% $.06 0.003% $.03 20

$2 million 0.012% $.12 0.007% $.07 15

$3 million 0.018% $.18 0.010% $.10 13

$5 million 0.030% $.30 0.017% $.17 10

* Assumes 100% allocation to Basic insurance (unlikely)** Assumes 58% allocation to Basic insurance (Corporate Shared Services ratio)*** Based on average Basic insurance policy premium of $1,023 (excludes trailers, ORV and manual policies)

ICBC’S PROPOSALS

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1. Increase IT capital reporting

thresholds

2. Change IT capital plan content to

provide better information upfront

3. Exclude certain types of expenditures

from IT capital project report

requirements (not true “projects”)

4. Reduce frequency of IT strategic plan

filing to every 3 Years

Proposals in SummaryProposals

Gary Eastwood

Chief Information and

Technology Officer

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Proposal 1:

a) Increase threshold for the IT capital plan to

$3 million.

b) Increase threshold for individual IT capital

project reports to $5 million.

Rationale:

Focus on higher impact/risk projects; providing

the right balance between efficiency and

Commission’s regulatory oversight.

Proposal 1: Increase IT Capital

Reporting ThresholdsProposals

Gary Eastwood


Technology Officer

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Implications:

• Commission will still see information about

projects over $3 million threshold in the IT

capital plan.

• Total IT capital spend will still be shown.

• Commission will no longer see projects that

have low risk and low impact on rates.

Proposal 1: Increase IT Capital

Reporting ThresholdsProposals

Gary Eastwood


Technology Officer

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Proposal 2(a):

Reduce the forecast period shown in the IT

capital plan from three years to two years.

Rationale:

Provide more meaningful budget information;

based on more refined estimates.

Reduce potential for skewed forecast trends that

can arise from early estimation and changes in

technology.

Proposal 2: Change IT Capital

Plan ContentProposals

Gary Eastwood


Technology Officer

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6/19/2018

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Implications:

• Focuses Commission’s oversight on more

meaningful budget information and away

from “placeholder” figures.

• Commission will still have visibility into

business strategy and IT trends that drive

the longer term expenditures IT Strategic

Plan.

• Commission will also be notified when there

are changes.



Gary Eastwood


Technology Officer

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Proposal 2(b):

Merge the Figures 3 and 4 from the IT capital

plan and provide new information (providing

information requested by the Commission).

Rationale:

• Full picture of project lifecycle (better

information upfront);

• Aligns to information BCUC has requested

in the past.



Gary Eastwood


Technology Officer

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6/19/2018

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Current Format (proposing to be

changed) Proposals

• Limitations: No view of the total project budget; no

comparison of actuals at completion to budget.

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Proposed FormatProposals

• ICBC agrees this format is better.

• Added columns include the project capital budget, total

actuals to date, estimate at completion, and planned and

actual schedule.

• Removed year over year forecasts.

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Proposed Format Proposals

Gary Eastwood


Technology Officer

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Implications :

• We will not be including year over year project

forecasts

• Can now see how the project is tracking against

initial project budget and schedule.

• Explanations of significant variances (estimate

at completion vs budget) will still be included in

the project summaries in the IT capital plan.

• Overall year over year forecast (proposed 2

year actual and 2 year forecast) will still be

included in the IT capital plan


Plan Content

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Proposals

Gary Eastwood


Technology Officer

Figure 5 — Depreciation and Amortization of IT Capital Expenditures

2015 2016/17 2017/18 2018/19 2019/20

Description Actuals Forecast** Forecast Forecast Forecast

1Depreciation and Amortization

of IT Capital 11.5$ 16.1$ 13.4$ 14.1$ 15.1$

2 % of ICBC's operating expenses 1.9% 2.4% 2.0% n/a n/a

* ICBC’s new capitalization policy, as discussed in paragraph 10, has been applied to 2015 expenditures and beyond.

**As noted in paragraph 11, the 2016/17 forecast period reflects a 15 month f iscal year w ith January to December 2016 actuals and

January to March 2017 forecasts.

($ millions)

Line

No.

Proposal 2(c): Discontinue IT Asset Category

Cost Details.

Implications:

• Removes information that may be redundant.

• Excluding the asset category will streamline

the IT capital report content.

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Proposal 3: Confirm Reporting

Requirements for 3 Categories

ICBC seeks confirmation that it can exclude the

following costs from the requirement to file an

individual IT capital project report:

a) System enhancement costs

b) Hardware/software costs for new employees

c) True-up costs

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Proposals

Phil Leong


Proposal 3(a): System

Enhancement Costs

Proposal: Exclude System Enhancement costs

from IT capital project reporting

Rationale:

• This is not a single project but an aggregate of

costs for discrete enhancement work.

• Not practical or useful to prepare an IT capital

project report.

Implications:

• Aggregated costs will be shown in the IT

capital plan.

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Proposals

Phil Leong


6/19/2018

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Proposal 3(b): Hardware/Software

for New Employees

Proposal: Exclude Hardware/Software Costs

for New Employees from IT capital project

reporting.

Rationale and implications:

• Bulk purchase of routine equipment for new

employees.

• No additional risk to warrant additional

reporting.

• BCUC already sees rationale for new staff

in RRA.

• Costs will be reported in the IT capital plan.

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Proposals

Phil Leong


Proposal 3(c): True-up Costs

Proposal: Continue to exclude True-up

Costs from IT capital project reporting.

Rationale and implications:

• Not a new project but contractual true-up

of an existing project.

• No additional planning, analysis of risks,

examination of alternatives, etc.

• Going forward, these costs will be included

as part of the projects costs (at onset).

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Proposals

Phil Leong


6/19/2018

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Proposal 4: Reduce IT Strategic

Plan Filing Frequency

Proposal: Reduce the Filing Frequency of

the IT Strategic Plan from once every year

to once every three years with provision for

off year updates.

Rationale:

• ICBC uses a 3-5 year strategic planning

cycle so annual updates are typically

minimal.

• If there is any material change to the

Corporate or IT strategy in the interim,

ICBC will file an updated IT strategic

plan.

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Proposals

Gary Eastwood


Technology Officer

CONTINUOUS

IMPROVEMENT

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Improvements to Internal

Processes Regarding Timing

of IT Capital Project Reports

• Recent late filing for Guidewire Rating

resulted from a gap in our process

• ICBC has taken steps to improve the

internal process:

• Education and awareness (Finance, IT,

Corporate Planning).

• New process with help from Corporate

Planning.

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Process

Gary Eastwood


Technology Officer

RESPONSES TO

INFORMATION REQUESTS

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6/19/2018

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TREAD’s Questions Regarding

ICBC’s IT Strategic Plan and

RAAP

• RAAP is aligned with the current IT strategy.

• ICBC will be filing an updated IT strategic plan

in the next RRA.

• Guidewire Rating engine is the only RAAP IT

capital expenditure that has any funding from

Basic and IT capital report has been filed.

• RAAP involves a low degree of technology risk.

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IRs

Gary Eastwood


Technology Officer

Questions on Savings

• Clear savings in work effort but no

quantifiable bottom line savings.

• This Application is about ensuring that

reporting over and above the RRA is

focused on significant expenditures and

risk.

• ICBC’s proposals achieve effective

oversight more efficiently.

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IRs

Phil Leong


6/19/2018

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Alternative Approaches to

Thresholds

• Dollar values are an objective test that is

easily understood by all stakeholders.

• “Impact on customers” methodology is

subjective.

• Top 5 /10% methodology may be over or

under inclusive.

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IRs

Phil Leong


CONCLUSION

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6/19/2018

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Conclusion Closing Remarks

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• IT capital reporting requirements has had only 2

changes since 2006.

• Reporting and the level of scrutiny

commensurate with risk & the quantum of

expenditure is consistent with BCUC Core

Review findings.

• ICBC’s proposals maintain appropriate levels of

oversight and understanding of upcoming IT

capital expenditures.

• ICBC’s proposals achieve effective oversight

more efficiently.Phil Leong


QUESTIONS

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