In the summer of 2020, Elon Musk, founder and CEO of Tesla, tweeted:
“We are actually looking for revolutionary actuaries for Tesla Insurance! Please inquire, if interested.”
After reading this, I breathed out a sigh of relief I didn’t know I was holding in.
Subconsciously, the emergence of artificial intelligence had planted a seed of doubt about my chosen career path in my mind. Careers that once formed the cornerstone of society have been all but replaced by rapid developments in robotics and programming. If a world can learn to live without its factory workers, receptionists, drivers and even doctors, the question must be asked: can it also learn to live without its actuaries?
The question of whether there will be a demand for actuaries in the future is one that I am certain crosses every actuarial student’s mind from time to time.
Would it be more worthwhile to pursue data science instead?
Are we specialising in too narrow a field?
Will the actuarial profession even exist into the future?
These are all questions that warrant a thorough response.
Actuaries in the Future
Opinions on whether the actuarial profession will survive are mixed.
In researching for this piece, I discovered a website called ‘Will Robots Take My Job’ which was inspired by a 2013 research paper by C.B. Frey and M.A. Osbourne entitled ‘The Future of Employment: How susceptible are jobs to computerisation?’. The website uses a blended approach of a Gaussian process classifier and qualitative information from the Bureau of Labor Statistics to quantify the likelihood of certain jobs being fully automated in the future. They estimate that actuaries have a 21% likelihood of being replaced by artificial intelligence in the next two decades. As we have no access to the precise algorithms behind this figure, it can only be validated through the accompanying poll, in which 367 people voted the profession has a 34% chance of being fully automated. As critical thinkers, we must consider whether these figures are reasonable.
At a high level, actuarial work can be generalised into two parts; producing results and interpreting results.
Producing results involves intricate data analysis, which I believe could be facilitated by artificial intelligence. Some of the more routine aspects of analysis are already beginning to be automated, such as data entry and data cleaning, and it is undeniable that as AI advances in sophistication we will be able to use it in more areas of statistical and data analytics. I consider artificial intelligence to have the potential to be an incredibly useful tool, especially in areas such as predictive analytics or pattern recognition, but a tool only.
The interpretation of results is another story entirely. We analyse data so we can draw conclusions and recommendations from the results, and this involves critical thinking and professional judgement. It is also essential to remove complex technical jargon and present results in such a way that they are applicable and meaningful to non-actuaries, such as business partners. For this, we need people with a certain skillset and knowledge base - we need actuaries.
These figures also fail to consider the dynamic nature of the actuarial profession. Actuarial work is constantly evolving and adapting, and actuaries will be needed to facilitate this digital revolution. As new technologies emerge, approaches will need to be altered to ensure clients’ needs will still be met with tailored solutions. For example, the advent of self-driving cars may not kill the auto-insurance industry, but rather revolutionise it. We will have new data to analyse and new risks to consider, and for young actuaries this is an exciting prospect.
Deloitte suggest the future of actuarial science to depend on ‘holistic transformation’. By this, they argue actuaries must develop flexible approaches on the work, workplace and workforce levels to transform the actuarial function and to ensure actuaries are producing efficient and tailored results.
They argue that the COVID-19 pandemic has expedited the need for increased effectiveness of actuarial work, for example assessing the impact of additional cyber risk and designing alternative pension plans due to the impact of the low interest rate environment caused by the pandemic.
Deloitte also published several case studies on the future of actuaries, covering topics such as robotics, automating memo generation and data-wrangling automation, which are highly worth a read. They demonstrate how flexibility in the workplace and openness to emerging technologies can improve efficiency and quality of work.
There is a quote from Richard Hamming which I believe summarises the situation exactly: ‘The real problem is what can man and machine do together and not in competition.’ Actuaries may need to shift their focus to upskilling on data science, AI, blockchain, and more to stay relevant, but the integrity and creativity of actuaries are at the core of what we do, and that cannot be replaced by a computer.
The real problem is what can man and machine do together and not in competition”
– Richard Hamming
Actuaries vs. Data Scientists
Due to the increased emphasis on technology and programming, it can almost seem as though actuarial science is merging into data science, and thus it may be tempting to instead consider a career in data science as the way forward.
But what distinguishes an actuary from a data scientist?
Both the actuarial and data science professions share the same fundamental data. Data is at the core of both an actuary and data scientist’s work, whether that is through analysis, visualisation or prediction. As machine learning takes an increasingly important role in actuarial work, the line of demarcation between actuary and data scientist is becoming somewhat blurred, save for a key distinction: business acumen.
Actuaries typically work in traditional areas such as insurance, pensions and investments, and many start their careers by completing focused degree programmes which give them a thorough foundation of economic, statistical and financial knowledge. This knowledge is reinforced and built upon through specialised exams and industry exposure, leading actuaries to garner an unrivalled level of expertise in their chosen field. However, this traditional approach has led some to argue that actuaries are ‘pigeonholed’ too early and have too narrow a scope of learning.
Data scientists, on the other hand, tend to come from a variety of backgrounds and work across a range of industries. Their specialist knowledge is primarily focused on programming and machine learning, rather than the industry in which they work. The absence of formal qualifications also leads to a more dynamic learning style, in which data scientists are constantly training and upskilling in emerging technologies and ‘hot topics’.
So, while the actuarial profession becomes increasingly technology-driven and the importance of upskilling on data science cannot be overlooked, I believe there will continue to be a demand for actuaries in the future. The complex problems faced by the insurance, pensions and investment industries require the creativity, professional judgement and risk expertise curated by the actuarial profession.
Thus, data scientists cannot simply replace actuaries, in the same way actuaries cannot replace data scientists.
A Polish company called Quantee are already pushing ahead to develop an actuarial data science approach (as illustrated in their published graphic), with a mission to becoming a key player in the insurance AI market. They have developed a software called ActuAI Platform, which they describe as an ‘enterprise software solution tailored to insurance data science applications’.
It is essentially a cloud-based automation tool that includes pre-programmed solutions for a range of actuarial problems across the general, life and capital modelling disciplines. Interestingly, the user has the option to use the software in a completely automated method, or in a manual method which allows actuaries to exercise the professional judgement and expertise in the same way I mentioned before.
So, it is possible that the data science and actuarial professions could learn from each other and perhaps even make this hybrid approach the norm, to provide innovative yet reliable solutions to modern actuarial problems.
Regardless of the prospects of the actuarial profession itself, I believe there will be a continued demand for actuaries in the future due to transferrable skills. Studying to become an actuary equips you with a unique skillset that is highly valued across the job market. Actuaries must be effective risk managers, communicators, problem solvers, business professionals and possess many more sought-after qualities. Those who retrain have the potential to excel in professions such as data scientists, risk analysts, financial advisors, and more.
Becoming a member of the actuarial profession also involves adhering to strict ethical standards, in line with the six principles of the Actuaries’ Code – integrity, competence and care, impartiality, compliance, speaking up and communication. A thorough grounding in these six principles could be applicable to any career and thus increase actuaries’ employability in any field.
However, it could be argued that the narrow focus of the actuarial exams decreases actuaries’ transferable skills, as many modern professions have begun to move away from the traditional exam route and into more blended approaches of learning. I believe some elements of the actuarial training may need to change in the coming years to keep up with this, but it cannot be denied that the academic rigour required to complete the actuarial exams instils a good work ethic that could be applied to other methods of learning.
Staying Relevant as Actuaries in the Future
So, what can actuaries do to ensure they remain in demand?
The Institute and Faculty of Actuaries have already taken steps to ensure students of the IFoA are developing skills suited to becoming actuaries in a digital world. Some of the exams now involve programming elements, and a new Vision, Skills, Mind-sets, Domains (VSMD) strategy has been introduced. Current president of the IFoA Tan Suee Chieh described the strategy as a ‘modernisation of our skillset’ and ‘reinvention of the profession by embracing new cultural values, such as curiosity, the growth mind-set and continuous learning’ in a recent article for the IFoA blog.
Actuaries must also take an active role in their own development to keep up with the pace of innovation today. It is no longer sufficient to simply complete the exams – we must adopt a focus on lifelong learning about emerging technologies, new risks and industry developments. Many members of the profession are making fantastic inroads towards this, as evidenced by the plethora of actuarial summits, events and digital academies that have taken place in recent years.
We also cannot settle for complacency in the development of softer skills. As the COVID-19 pandemic has necessitated a move to remote working for actuaries around the world, there has been a vast reduction in the number of networking events and meetings. The importance of networking cannot be neglected, as it not only allows us to gain vital insights to different industry developments, but also expand our creative intellect through the sharing of ideas. This constant focus on creativity and innovation is what will ensure actuaries continue to be sought-after, even as the industry shifts and adapts.
Exploring actuarial opportunities in emerging fields is another way to ensure the demand for actuaries is kept constant. In recent years actuaries have created opportunities in non-traditional fields including enterprise risk management, environmental finance, financial planning and even marketing. The diverse nature and applicability of the actuarial skillset means where there is a risk to be managed, there will always be a demand for actuaries.
Would I Encourage Others to Become Actuaries in the Future?
In short, yes. While almost certainly biased, I see potential in both the actuarial profession and the skills provided by a grounding in actuarial science.
Thus, I do not see the current need for actuaries being diminished in the near future, and would encourage anyone who wants a fast-paced, worthwhile and interesting career to pursue actuarial science. We need to continue growing a community of actuaries who can add their own flair and creative expertise to the profession, to ensure we stay relevant and become the ‘revolutionary actuaries’ Elon Musk, and hopefully many others, are looking for.