April 28, 2022

Do Actuaries Have a Future?

“This is a guest article written by Caolan McCarron. Caolan can be found on LinkedIn here.”

Thousands of pounds, hundreds of hours spent studying and numerous exams…all for an Actuarial Science degree. So, finding the answer to the question "Do actuaries have a future?" is something I am highly invested in. As I am sure, are you.

It is impossible to predict, with utmost certainty, what the future holds for us as actuarial professionals. Six months? One year? Five years? Who knows?

But something we like to do, something built into our makeup, is just that. To predict, to forecast, to estimate.

In this piece, I envisage what the future could look like. Will the roles of actuaries be like those present today? Or will the profession be forced to adapt and adjust to new challenges ahead?

Currently, 13,000 fellows of the Institute and Faculty of Actuaries work in various sectors in the UK. As we would expect, and visible in the adjacent pie chart, most actuaries work in life insurance, general insurance and pensions.

Healthcare, investments, and other sectors such as government, banking, and risk management complete the field, with those working in consulting firms potentially working across all industries. The demand for actuaries in these non-traditional areas is growing, with actuaries using their transferrable skillset to provide critical insights and analysis.

pie chart where sector actuaries work

A typical actuary's day-to-day responsibilities include reserving, product pricing, pension plan assessment, and offering general actuarial advice to businesses. Although a solid background in actuarial knowledge is required for these jobs, many actuaries would agree that parts of the job are repetitive and could be streamlined.

With advancements in technology, these repetitive tasks and procedures are being automated more frequently, and this trend is likely to continue in the future. This will allow actuaries to concentrate on higher-value work, such as analysing and interpreting results and providing actionable feedback to clients, rather than spending time performing routine tasks. Actuaries will therefore have a more meaningful and significant impact within the workplace in the future, rather than "crunching the numbers."

Artificial intelligence and machine learning are also rapidly emerging. By allowing humans and machines to work side-by-side, these innovations are likely to redefine the actuary's role. Interestingly, 17 percent of global executives polled by Deloitte say they are prepared to handle a workforce that includes humans, robots, and AI. Will this percentage rise in the coming years? It is something to keep a close eye on…

Actuaries must evolve and take on new dynamic roles as the old ones become outdated. As a new world of work emerges, I expect that the current job description of an actuary will look very different in future years.  Actuaries will need to adopt a "growth mindset" and continue learning and adapting to keep up with the changing times. With the best prospects likely to be beyond the conventional actuarial sector, innovation and adaptability will be key to success as a future actuary.

Additionally, as actuaries move into these other areas and possibly into more client-facing roles, the use of softer skills such as effective communication skills will become more important. With technology taking care of more of the "behind-the-scenes" work, the ability to share ideas with a non-technical audience will become more sought after and highly valued.

Throughout 2020, the companies Actuartech and Montoux undertook a research study called 'The Evolving Role of the Actuary'.

In this study, they addressed two main questions:

  1. How has the actuary's role evolved in recent years in response to new circumstances?
  2. How will actuary's roles change in the future?
the evolving role of the actuary

The preliminary study produced interesting results and provided an insight into what the role of actuaries could look like in the future. Participants in the study included actuaries from all over the world. Respondents predicted that in the future conventional roles would focus on integrating data science, especially in areas such as risk management, big data analysis, and experience analysis. Respondents also expected that actuaries would branch out into non-traditional areas such as insurtech, technology design and growth, and climate change analysis.

One of the non-traditional areas mentioned is insurtech. Insurtech is revolutionising how insurance risk is managed, as companies are rethinking how insurance is delivered and premiums calculated. Insurtech companies offer customised policies, use devices such as smartphones to dynamically price premiums and are constantly developing new products to bring to market. Insurtech could lead to a massive shift in the insurance industry and the actuary's role in the coming years.

A changing world that includes driverless vehicles, quantum computing, blockchain, and space exploration will continue to alter the insurance industry. Each new technological development will impact insurance, mortality, and even pensions in their own way. As a result, actuaries will need to constantly evolve to develop new, creative solutions to issues that arise.

driverless vehicle

Take driverless vehicles, for example. Companies will encounter various issues as they become more feasible, including risk evaluation, risk management, and liability. Just think how difficult it could be for insurers to assign liability in the event of an accident involving a driverless vehicle. Does fault lie with the driver (if the car isn't completely automated), the carmaker, or the supplier of the software systems that enable automation?

Actuaries, therefore, are an excellent choice for analysing and managing these problems when they arise.

Other emerging threats and problems, such as climate change, population ageing, economic crises, pandemics and conflicts, will cause the insurance industry to change even further. Actuaries will play a very significant role in these areas in the future.

Take COVID-19 as an example. Inevitably it has and will continue to change the insurance industry. It will almost certainly result in a greater focus on introducing emerging technology and an overhaul of insurance models and policy terms and conditions.

I believe actuaries will be at the forefront of designing and creating new products, models and policies to help mitigate the risks mentioned. As a result, continuous professional development will be critical to become proficient in these new areas so that actuaries can lead the way in providing advice and guidance.

While thinking of the never-ending possibilities that a fast-changing world will bring for actuaries, I can't help but think of the increased risk of disaster that accompanies such advancements and reliance on technology. The following example reinforces this.

In January 1986, NASA launched the Space Shuttle Challenger. The shuttle disintegrated 73 seconds after takeoff. NASA's model determined the likelihood of such a disaster to be 1/100,000, corresponding to a VAR of 99.999 per cent. However, since the engineers had concerns about the impact of the cold on O-ring seals, they measured the likelihood at 1/200, or a VAR of 99.5 per cent, using more intuitive tests. The O-rings had been designated as a "critical 1" part, meaning that if they didn't work correctly, the spacecraft and its crew would be jeopardised.

This extreme example highlights how important expert opinions are and that overreliance on models without human intervention could be disastrous. In my opinion, it is a strong argument against those who say "the job of an actuary will become redundant, and technology will take over". I anticipate that as technology advances, actuaries' roles will become much more critical in calculating the costs of new, emerging risks and developing, pricing, and evaluating a wide range of insurance products.

According to the US Bureau of Labour Statistics, actuaries' employment is expected to increase 18 percent from 2019 to 2029, further contradicting the idea that technology is here to take over.

Additionally, the paper, "21 steps for teaching mathematics," which was sent to the French Minister of Education in February 2018, further indicates the need for actuarial services in the future. The report states: "Artificial intelligence, modelling, digital simulation, process optimisation and massive data processing are pervading our world. They make use of fundamental and applied mathematics that require a high level of expertise."

Actuarial degree programmes have often emphasised high-level theoretical mathematics while still emphasising their applications. This puts actuaries in pole position to solve technical mathematical problems that arise in the future, with a particular focus on how to apply and implement real-world solutions.

So, to conclude. In my opinion…

Will actuaries have a future? Yes.

Will it look very different from right now? I think so.

As Frank Redington, a British actuary best known for his development of Immunisation Theory, once said, "An actuary who is only an actuary is not an actuary."

So…Learn. Adapt. Grow. Evolve.

Continuous professional development will put you in a solid position to thrive in the fast-paced world we live in and allow you to keep up with the ever-changing technology. The future provides many exciting, non-traditional challenges for actuaries, so embrace it. Dive in. Let us make the world a better place—a place where we use our unique skill set to manage and mitigate the new risks that appear.

I believe that actuaries who continue to upskill, learn, and adapt have a long and successful future in this world.

A more important question, in my opinion, and one that deserves your consideration, is...

Do you have a future as an actuary?

night vision glasses

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