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Will future actuaries be replaced by technology?

Advancements in data analytics and technological innovations are changing how and where actuaries work. The modern actuary faces challenges that differ greatly from what their predecessors faced 20-30 years ago.

For example, calculating policy premiums can now be done quickly using statistical software and real-time data. Instead of previous, more time-consuming methods where actuaries used more conventional statistical methods which were largely based on historical data.

We are in a technological expansion. The emergence of new statistical software and advancements in computer processing power is enabling actuaries to work quicker and more accurately, with new resources at their fingertips.

Will actuaries always be needed in the future?

Some actuaries may be worried about where their place is with the explosion of data and technology. But the following will address how innovations in the industry are opening up new areas for the profession and how future actuaries are in demand more so than ever. 

Non-Traditional Actuarial Work

Actuaries have typically been employed primarily by insurance and consultancy firms, but it is becoming increasingly common to see actuaries working in a wide range of non-traditional areas. An example of this is the auto vehicle industry. Actuaries already work in car insurance, but this industry is rapidly changing due to developments in AI technology. Here lies an opportunity not within the traditional scope of an actuary where their skills can be applied to a whole new area in car insurance.

Autonomous vehicles could undoubtedly reduce driver error and, as a result, the number of car insurance claims. In the US, and in the wider world, personal auto insurance is expected to decrease as driver assistance and self-driving cars minimise the need for personal auto insurance.

future actuaries

As autonomous vehicles become the norm for individuals looking to get from point A to point B, the arrival of driverless cars is likely to coincide with a decrease in vehicle ownership. Also contributing to this is the recent transition towards ride-sharing and private taxi services such as Uber. But the growth of other lines of insurance would compensate for a shrinking auto insurance market.

Motor insurers will have to diverge from their current traditional product lines. Concentrating on creating cover specific to new insurance groups. These groups may consist of vehicles that will be owned or rented and driven on a ‘per-use’ basis. An example of one contributing firm in the transition towards ride-sharing and private taxi services is Uber. Overall, this introduces the concept of usage-based insurance, and also insurance that could be offered on a subscription basis rather than a paid annual premium.

The sale and use of these vehicles bring about risks than that previously have not been seen when valuing auto insurance. Actuaries are the best choice and most equipped to analyse these risks and help manage them as this sector grows.

Today’s actuarial talent have opportunities that are not just limited to working in insurance. Companies from different industries are now recognising the importance of employing actuaries. Such jobs can now range from working at hedge funds and investment banks to waste management firms. And as the working environment becomes more data-driven, future actuaries are becoming even more employable because they have the skills and tools to manage a diverse new range of risks.

Future Prospects for Actuaries

Fresh graduates are faced with this new technological reality. Where the impact of these new technologies is being felt throughout all sectors of industry, and not only in the actuarial field.

What is the future for actuaries? Will actuaries be replaced by technology? For the graduate market, competition to break into entry-level roles is higher than it ever was. The average number of applicants per job ranges from 80, and when looking at a Times Top 100 employer that number can rise to 650. With this level of market saturation, finding that first actuary job can be quite tough.

The actuarial career itself attracts a lot of graduates, but in the first 5-10 years people do leave which can be majorly put down to the qualification process as the exams are challenging. Also, it is difficult to give up thousands of hours in your 20's, when students typically studying for exams are this age, for the IFoA or ACA qualification. Some views are that perhaps this sacrifice may not be worth it.

But the job prospects for more qualified actuaries, those with say 6+ exams and a few years’ experience, is a lot more positive. For those that can persevere through the exams face a lot more employment opportunities. The department of US Labor Statistics projects that the number of jobs available as an actuary is to grow by 18 percent from 2019 to 2029. This is a much faster rate than the average for all occupations. Thus, opportunities and the demand is there for future actuaries.

Future Actuaries in Insurance

Data science and artificial intelligence (AI) can significantly improve the resources available to actuaries. This wave of new data analytics is introducing innovative approaches which can aid in solving long standing societal issues and open up new markets and industries for the profession to get right in to.

Some examples of actuaries employing AI techniques is in the modelling of the sales and in the distribution process. More than often done to determine the characteristics of their most successful products in where their sales are highest.

Also, innovation is happening in the use of big data. This data is generated by telematics devices in automobiles which perform a claims analysis based on driver performance.

Not only has technology-enabled new methods of statistical analysis, but technology has also helped actuaries in other ways. The use of Robotic Process Automation (RPA) within the security space automates routine tasks such as moving and reconciling data, freeing up actuaries' time and energy to focus on higher-value activities. The result is not only doing more rewarding work, but it also is a more effective use of a company's resources.

As actuarial models start to drive more business decisions, the value that actuaries add to a business is being recognised and so more actuaries will be employed as a result. Actuaries with programming and machine learning skills are more likely to be employable for a longer period than those without. Consequently, those who do not have these skills run the risk of doing themselves a disservice by not utilising what’s available to them.

It’s also worth knowing that with tasks that can be easily automated, for regulatory reasons there will always be someone in the background pulling the strings. So, the concept of being replaced by machines should not be at the forefront of actuaries’ mind when worrying about if they have a job in the future.

For future actuaries, as technology evolves, so will the number of gadgets to insure and so there will be new risks for insurers to try to minimise against. It’s important to note that insurance is, at the end of the day, a business and so as new products are being developed to meet customers' ever-changing needs. It can be said that the workforce of the future will be defined by innovation, technology, and creative thinking, and those who do not follow this direction risk becoming obsolete.

Insurance Innovation

Insurance technology advancements are redefining how risk is managed in today's world. From software to telecommunications with a range of cover options, companies are rethinking where, when, and how to introduce new insurance products.

COVID-19. A pandemic that has compelled many insurers to accelerate their digital transformation efforts. It has been seen as a catalyst to accelerate company plans in employing digital processes to improve their operations and operating models in order to deliver a seamless customer experience. One such change was with contact centres, who initially found it difficult to adapt at beginning the pandemic. The digital response to this came in the form of customer chatbots to address common queries and issues, all while setting up a customer portal and outsourcing phone lines so customers who want it can talk to a ‘real’ person.

COVID-19 has encouraged some insurers to explore new technologies, striking partnerships with InsurTech companies who can develop new models and tools to meet their needs. Such partnerships can require significant investment as well as implementation costs. But as customers are now expecting some form of a digital service and presence, which is very much in line with the growth of technology, means that the insurer has to meet these needs or risk losing customers. All the while hoping the reward is worth the risk.

An example of other innovations in insurance is in wearable technology, which is smart technology that tracks physical activity through mobile apps. In the already strained national health system (UK), getting a doctor’s appointment is difficult. Hence, the implementation of InsurTech will allow information to be gathered on an individual’s behaviour. Using built-in sensors on the wearable that can track motion, brain activity, heart activity, and muscle activity.

The collection of this data can be used to help monitor and minimise the risk of developing chronic health conditions, as well as informing the user of their health statistics. The healthier the user the less likely they are to make a health insurance claim. So, it’s a win-win situation for both parties, the insurer can collect more data and the user is more informed on their health.

As insurers and consumers embrace wearables, this form of technology will almost certainly change the way life insurance is priced. As well as providing a more realistic way of measuring the impact of factors like smoking and alcohol on an individual's longevity.

When considering other technologies such as renting cars via a mobile app or ride-sharing, the issue of how to measure and minimise risks becomes increasingly complex. But this is where future actuaries can make the most difference. Through offering not only new tools but also a new mindset on how to quantify risk, actuaries are influencing how companies design goods, predicting potential opportunities, and bringing these innovations to market.

Concluding Thoughts

The job of an Actuary has consistently been ranked as one of the top 10 professions to venture into. Even with this high rating, the number of professionals in the industry is small but the number of student applicants for actuarial jobs has been growing rapidly. The actuarial job market is becoming more competitive every year as a result of this.

Despite the strong competition, the types of jobs available in the actuarial field are expanding. Actuaries are still in short supply across the world, and with new industries such as artificial intelligence continuing to dominate markets, the jobs for future actuaries continue to grow.

As excellent risk management and problem solvers, actuaries will still be in demand. Since society will be exposed to new risks as the world transitions into the age of computer automation, the need for insurance and safety will rise. Actuaries contribute best here, as their primary job is to manage and mitigate risks.

By being able to have a good grasp of new technologies and keeping up with insurance innovations, future actuaries will be in more in demand than ever before. Taking on new roles, working in new industries beyond the traditional scope, and carving out their part in the new tech-driven world.

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

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