insurance actuary

The Extinct Insurance Actuary?

I recently took part in a panel debate interview organised by Rick Huckstep from the Digitial Insurer. The write-up was titled: “Is the insurance Actuary an endangered species, or simply facing an evolutionary makeover?” and involved Geoff Keast (CEO of Montoux in North America) and Steven Mendel (Co-founder and CEO of Bought By Many).

Rick is one of my favourite InsurTech authors, so I knew he would do a good job of bringing up some interesting debate.

image of an extinct actuary, dressed in a tattered suit

We covered many areas, and I’ve briefly summarised the top 13 key points below:

  1. As we enter the fourth industrial revolution and age of technology and automation, change is upon us. Many professions, including the 300 year old actuarial profession may be under threat.
  2. The digitial economy has led to an explosion of data. This data is emerging from many different sources and is also impacting the insurance industry (think IoT, Telematics, Wearables, etc).
  3. The non-actuarial “data scientist” is encroaching into actuarial work.
  4. Many actuaries are now adding machine learning to their toolkit and the actuarial profession is embracing this change.
  5. In the era of “data is the new oil”, actuaries may be able to use their skills to break into new non-traditional areas.
  6. Actuaries understand financial performance and policy-holder behaviour and hence they are the lifeblood of many insurance companies.
  7. We are likely to see a blending of actuarial and data science in the next five years.
  8. We are moving towards more dynamic pricing models as data increases in size and availability.
  9. New risks will emerge that will likely require actuarial expertise to understand (e.g. drone risk or liability from autonomous vehicles).
  10. We may see a shift towards growth outcomes (new business, customer retention, etc.) rather than the risk/compliance/ regulatory side of modelling.
  11. Automation may enhance the actuary’s work rather than leading to extinction. Assuming you are a forward thinking perpetual learning actuary!
  12. An actuary’s strong professional code of ethics provides an oversight which I think is particularly important for helping to ensure that we are using data ethically and responsibly.
  13. Being flexible and being able to adapt and grow is key for future actuaries.

FAQs About Insurance Actuary Becoming Extinct

While AI and automation are transforming how tasks are performed in the insurance industry, they are unlikely to render insurance actuaries extinct. Actuaries are adapting by integrating new technologies into their work, enhancing their analytical capabilities, and focusing more on strategic decision-making and advisory roles that require a deep understanding of both business and ethical considerations.

AI and machine learning are automating routine calculations and data processing tasks traditionally done by actuaries. This shift allows actuaries to focus more on interpreting data, deriving insights, and providing strategic advice that machines are not equipped to handle, such as assessing the implications of results from a business or regulatory perspective.

To stay relevant, insurance actuaries should focus on:

  • Technical Skills: Enhancing capabilities in programming languages like Python or R, and gaining proficiency with machine learning techniques and data analytics platforms.
  • Soft Skills: Strengthening communication, leadership, and project management skills to effectively convey complex information and drive strategic initiatives.
  • Business Acumen: Deepening their understanding of the insurance industry’s broader business models, products, and customer needs to add value beyond traditional calculations.
  • Continuous Learning: Keeping abreast of technological advancements and regulatory changes in the insurance sector to adapt strategies and practices accordingly.

While data analytics provides powerful tools for understanding risks and behaviors, the need for actuaries remains strong because they bring a unique blend of skills that include not only technical data analysis but also financial theory, business knowledge, and ethical judgment. Actuaries interpret and apply analytics in ways that align with business objectives and comply with regulatory standards.

Technological advancements are creating new roles and opportunities in areas such as:

  • Cyber Risk: Evaluating risks associated with data breaches and cyber threats.
  • Predictive Modeling: Developing advanced models for personalized insurance pricing and underwriting.
  • Climate Change and Sustainability: Assessing insurance implications related to environmental risks and sustainability issues.
  • Healthcare Analytics: Using data to design insurance products that better manage health outcomes and costs.

The actuarial education system should adapt by:

  • Incorporating More Technology and Data Science: Including courses on data manipulation, predictive analytics, and machine learning.
  • Focusing on Application: Offering more case studies and projects that reflect real-world business challenges and technological applications.
  • Enhancing Interdisciplinary Learning: Integrating knowledge from other fields such as computer science, business, and ethics into the actuarial curriculum.

Insurance actuaries can maintain their importance by:

  • Leveraging Technology: Using AI and machine learning to enhance the accuracy and efficiency of their work.
  • Focusing on Strategic Advice: Providing insights that go beyond numbers, such as advising on product development, pricing strategy, and risk management.
  • Ethical Leadership: Guiding companies in ethical data usage and ensuring that automated processes adhere to fairness and regulatory compliance.