BBC Breaking News - 8 December 2021 - Government appoints first ever “Actuarial Tsar”
Nobody was really surprised when the Prime Minister announced the appointment of the first ever “Actuarial Tsar”, marking the anniversary of the world’s first mass Covid-19 vaccination programme launched in the UK. Described by the PM as the “new guardian of recovery”, the Actuarial Tsar is tasked with modelling pandemic risks within the UK’s recovery plan from the greatest health and economic crisis since World War 2.
It seems that the pandemic has been a tipping point for the profession that prefers to work intelligently behind the scenes. Actuaries have been enjoying a steady if unspectacular rise long before Covid-19. But how has this stereotypically boring, humourless and introverted role suddenly been thrust into the A-list of professions?
Dare we give their professional body (the Institute and Faculty of Actuaries) some credit? Perhaps dusting down its statement of purpose was a signal of intent. No longer happy “to support, develop and be the voice of our members” alone, now they want “to unleash actuaries as adventurers to enrich the planet, by ethically connecting humanity and data”. What on earth is going on here?
Why Become an Actuary?
Okay, the Actuarial Tsar is hypothetical, and the adventuring actuary remains aspirational. But go with the flow here, and I’ll do the math to convince you why to become an actuary.
To answer the question, why become an actuary, let’s begin by talking about what an actuary does. Yes, we do harder and harder sums, using the increasing power of computer modelling to do so. Yes, we are the gatekeepers of statistical methods and processes to ensure that our assessments of future risk are reliable and robust. Yes, we have the ability to translate complex concepts into simple sentences, to help the decision-makers do their jobs. In short, actuaries are the fortune-tellers of the business world.
However, the real excitement is coming from the rapidly emerging fields of data science and artificial intelligence. Data science is sometimes regarded as a wild west where anything goes, but no one doubts that there is now an unstoppable gold rush for data. Say hello, then, to the modern actuary as the natural choice for sheriff. Your mission is to bring about law and order of the professional and ethical kind. A role as challenging as it is compelling. Should you choose to accept it, your success will be in mining the gold for the benefit of society. If you are still interested in 'why become an actuary?', read on...
1. Big Data = Big Opportunity
So “Big Data” is the next biggest thing, but what does it actually mean and why become an actuary so you don't miss out on this big opportunity?
In broad terms, Big Data describes “the collection of extremely large data sets that may be analysed using advanced computational methods to reveal trends, patterns, and associations”. The actuary will feel right at home in this sea of data and will be relied upon for their professional and technical expertise to steer the ship.
In fact, we like to say that actuaries were the original data scientists. We’ve always been using data to solve business problems. Now we are seeing a dramatic increase in the volume of data and level of detail. As we are also seeing an explosion of technology to intelligently process and analyse this data, the actuary can now sail the Big Data ship into any of the seven seas.
So, why become an actuary? It’s a great time to become an actuary, because you’ll be doing what actuaries have always done but with far greater precision, speed and influence.
2. Enter InsurTech
To explore the evolving role of the actuary, let’s look at InsurTech - the emergence of technology innovations within insurance. The sector has been slow to embrace the so-called FinTech (Financial Technology) revolution, with the majority seeing it as a challenge to their industry. Incumbents have until recently focussed on customer centricity for their competitive edge. However, Big Data is now proving to be quite the “disruptor”. Technology is changing the customer experience in a number of areas, such as telematics monitoring for car insurance and wearable technology for health insurance.
Telematics has transformed car insurance by allowing driving behaviour to be monitored in real time. The data from a telematics device provides actuaries with new intelligence to inform their understanding of risk and price their policies accordingly. Due to this powerful new capability, it has been reported that profitability per telematics customer is boosted by up to three times.
Beyond the commercial benefit, telematics-based insurance policies can improve driving skill by providing feedback on driver performance. This also brings reassurance to parents of younger drivers that their child is driving sensibly. Not forgetting the ethical benefit of being able to offer affordable car insurance to drivers with previous convictions who would have otherwise been classed as high risk. This brings a new paradigm of fairness into the pricing of motor insurance.
Wearable technology is becoming more widely adopted in the health insurance market, monitoring metrics such as step counts and heart rate variability. The immediacy of feedback has again been shown to bring about positive behavioural change, to the benefit of insured and insurer alike. The psychology has been taken one step further by incentivising healthier habits and behaviour with policy rewards. Cover can now be offered to previously uninsurable health risks, simply because real-time metrics allow risk to be quantified in a way that one-time metrics cannot.
InsurTech has resulted in an explosion of data available to the actuary for insurance underwriting, pricing and product development, as well as better engagement with customers. Some of these applications are not traditionally within the actuarial domain, but InsurTech is creating new sources of data – the lifeblood of the actuary.
The immediate challenge is to utilise the corresponding rise in computer modelling power and capability at the actuary’s disposal to commercially process the data-rich risks. We will be required to upgrade our toolkit and to embrace new data science techniques. This will allow us the flexibility to deal with data that is not currently captured in neat and structured databases.
You will sometimes step out of the data (which we love) and into the role of product developer as well. There you will apply your psychology skills to factor in the behavioural changes that may now be possible due to the availability of real-time information. A word to the wise, however. Some leaders of the InsurTech revolution still see actuaries as blockers of innovation, not enablers (it’s an historical thing). Your job will be to persuade them otherwise. The opportunities presented by the InsurTech revolution challenge actuaries to find innovative solutions that can make a meaningful difference to society.
The sea of data generated by a wealth of wearables has been possible because of advances in sensor technology. However, the real breakthrough has been in the development of clever algorithms that can efficiently process and interpret this information. Yes, you’ve guessed it – the actuary has been at work again. Why become an actuary? Welcome this time to the world of Artificial Intelligence…
“The end of the human race”?
Why become an actuary... Insurtech is only the tip of the iceberg. Artificial Intelligence (AI) “enables computers and machines to mimic the perception, learning, problem-solving and decision-making capabilities of the human mind”. AI is already solving business problems using technologies such as robotics and autonomous vehicles, computer vision, language, virtual agents and machine learning.
By applying machine learning to large datasets, patterns are identified by algorithms which learn how to make predictions and recommendations. This improves over time in response to new data and experiences.
The actuary will drive this era of advanced risk modelling, using machine learning as their new lifeblood. This will enable a tsunami of data to be captured from many sources - social and streaming media, wearable devices and a plethora of Internet-connected devices in our homes (the Internet of Things).
All of these connected systems have the potential to provide insight into risk in real-time, but only with the cognitive capabilities of machine learning. This opens up the potential for new actuarial rating factors and more finely tailored, bespoke product designs.
For example, the “IBNR Robot” can complete in minutes what the most efficient actuary could perform in a day. It reads in paid claims, incurred claims and earned premiums to estimate the optimum level of expected claims and liabilities. This is then used to price insurance products and set aside reserves. The vision is to have a fully automated AI system that can organise and analyse large actuarial data sets. Currently, the robot requires input data to be highly structured in order to provide pragmatic actuarial solutions.
The combination of AI and process automation will be revolutionary to the role of actuaries (and others besides). Actuaries will be freed from the burden of processing data and liberated into the higher-value responsibility of business analysis and insight. You will be creator of the clever machine-learning algorithms that will revolutionise insurance, pensions and investments. AI will become the brains of the actuary and process automation will be the brawn at your disposal.
3. The Adventuring Actuary
The short-term impact of the pandemic may have been to slow down the merciless rush for data and innovation. On the upside, digitalisation amongst the masses has undoubtably been accelerated as the working world shifted online. As a consequence, the drive for data will be rebooted at an even more ruthless pace.
We’ve been parodied in the past as a humourless profession. After all, where is the fun in being a professional known for setting mathematical boundaries and staying within them? Well, think of it this way.
Actuaries are masters at working inside the box, whilst thinking outside it. And here’s the fun part. We are then expected to build new boxes, bringing new technology and data with us. And then we go back to work inside the new box, still thinking outside of it. And guess what we’re expected to do then?
Qualifying as an actuary requires determination, commitment and an adventuring spirit. You will not have to climb this mountain alone - employers are keen to offer study support and training. Professional and personal development will help you embrace the changes and opportunities in this age of rapid technological advancement. As you progress your ascent to the summit, you will discover a lifestyle that provides a healthy and happy work-life balance.
Why become an actuary? The reward is a world-recognised qualification in a prestigious industry, offering high-earnings and stability. It acts as your passport for adventure wherever life’s journey takes you, to the benefit of society. Actuaries will have a role in analysing the challenges of today to prepare for the risks of tomorrow.
Why become an Actuary - where do I sign?
Let’s see if we’ve covered the key reasons for becoming an actuary.
Intellectual challenge – check. Cutting-edge technology – the sharpest. Professional & personal development – in abundance. Financial reward – you may already know that. Making a difference in society – that’s over to you.
Small wonder then that demand for the evolving skills of an actuary is predicted to rise. Employment of actuaries in the US alone is projected to grow 18% from 2019 to 2029, much faster than the average for all occupations.
Why become an actuary? If you have now decided to revise your CV, let’s finish with this:
The capabilities of the actuary are developed over a lifetime and are built on the twin pillars of analysis and communication. This core skill set will increasingly become a passport for entry to the decision-making echelons of society, whether in public or private sector. The modern actuary will be aware of their intrinsic value in shaping and managing risk holistically in society. They will be widely regarded as the ethical & regulatory guardians of a fast-changing world driven by technology and data.