The Rise of New-Age Actuaries: The digital shift5 min read . Updated: 27 Aug 2020, 06:02 PM IST
- The first episode of ‘Driving Innovation in Insurance’ – a series of virtual panel discussions focusing on the impact of digital transformation on the insurance value chain – looks at how technology is redefining Actuarial work.
For a business driven by numbers and statistics, the advent of technologies like Artificial Intelligence (AI) and Machine Learning are all set to redefine the fundamentals of actuarial work. The role of actuaries in the digital era, where the pool of data is vast and largely unstructured, will be driven by tech-aided data crunching and faster decision making.
Our latest series of virtual panel discussions titled ‘Driving innovation in insurance’ looks at the impact of digital transformation on the insurance value chain. The first episode shows us what the ‘New-Age Actuary’ will look like as these technologies are adopted by the Insurance industry.
“Historically, Actuaries have adapted well to technological advancements. When computers were invented, they were perceived as a threat to the actuarial business. But, computers came as a blessing. Calculations that took weeks could now be completed in hours," said Sunil Sharma, President (Institute of Actuaries of India) and President– Chief Actuary & CRO (Kotak Life Insurance).
What has changed now is the quantum and nature of data. “Actuaries have always been involved with data, but the volume of data has grown exponentially including the way it is presented. The tools and techniques used in the past also need to be re-evaluated," said Gaurav Malhotra, Appointed Actuary at Bajaj Allianz General Insurance Co. Ltd.
To keep up with the changing times, Actuaries need to play the role of a data scientists and at the same keep abreast with the constantly evolving technology landscape. Interestingly, some of these emerging tools have already been made part of the syllabus of budding actuaries.
“While new-age actuaries equip themselves with the latest tools and technology having core business skills and knowing what the new age customers demand is of paramount importance. They should also have domain knowledge, expert level technical actuarial skills & excellent communication to explain the outcome of the analysis to the management. Knowledge of the latest AI and ML powered tools will help them take faster business decisions. We have already introduced some of these new skills in the curriculum at the Institute of Actuaries of India," Sharma added.
While the core job remains the same, the challenges are only growing for Actuaries, especially those in the insurance business where they remain to be in very high demand. Talking about the main challenges, Souvik Jash, Executive Vice President and Appointed Actuary (TATA AIA Life Insurance), said: “The two major business challenges faced by the life insurance industry are- First, how to price a risk. This requires you to look at and analyse the volume of data that is sitting beside it, some of which is structured, some unstructured. We need a tool to analyse the data and then find a way to rate it and use it for pricing."
“The second use case is optimizing the company’s profit. There have been instances around the world where you can look at the customer’s search history and accordingly change your price to offer an instant discount and drive sales. This requires AI and ML at the backend to help actuaries with instant pricing capabilities," he added.
The boon and bane of digital transformation is data!
“If data is used correctly, it is a boon. If there are challenges with it, it becomes a bane. Historically, we used to think about the processing time so only a limited set of information used to be captured. Now, as things are evolving, we need to bring in more fields and get processes to ensure that the data we are capturing is correct. Earlier, this data used to be served on a physical server. But because of the quantum of data, we are exploring options like cloud storage. We need to use the best technologies and use data which is accurate," said Malhotra.
These new technologies help sort out the data deluge available out there and create a consolidated model to make future predictions from. “Actuaries need ways to perform fast prototyping by just clicking models together in order to see if a detailed modelling is worth it. Using easy to use ML tools, actuaries can easily challenge their productive GLM models with ML models, compare them and derive insights for further improvement of the productive model," feels Michael Rabin, Customer Advisory Insurance Industry (SAS DACH).
The use has already begun and the impact is visible! AI and ML are also being used to pilot new products being introduced into the market based on intelligent studies on customer behavior patterns. “On the pricing side, AI and ML are doing a wonderful job in India and globally: From an analysis perspective, putting some of these findings into an explainable AI to the regulator, and finally taking it to the final frontiers of customer sales. That’s already happening and I feel that the pace is only going to keep on increasing as we go along," said Mehul A Shah, Appointed Actuary and Chief Risk Officer (Kotak General Insurance).
Industry leaders like SAS are gearing up to bring AI and ML closer to the actuarial fraternity. “The philosophies of the classic rituals of actuaries and ML are completely different. While one is hypothesis driven and very transparent, the other is data driven and often difficult to interpret. And due to these different philosophies, actuaries seek guidance and professional confidence when they use these methods. So, this is how SAS approaches it. We are helping actuaries in different dimensions," said Dr. Andreas Becks, Head of Consumer Advisory Insurance (SAS DACH). Insurers were among the first customers for SAS back in 1976.
The road map ahead
The pandemic has led to a sudden surge in demand for catastrophic covers like what was seen right after 9/11. “I think the industry has taken the pandemic like an opportunity. A lot of work from home has been successful. That’s a big positive. Lowering of costs will definitely affect the insurance penetration in the country, which is dismal," Sharma concluded.
Want to know more about the evolving role of Actuaries in the digital era? Watch the full episode and hear what our thought-leaders had to say.