A Calculated Transformation

The actuarial workforce of the future can provide even more value to employers TONY JOHNSON, SENECA SMITH, KARA ROSS, CATHERINE YANG AND TAYLOR PATTERSON

Until recently, the typical actuary worked at an insurance company or consulting firm in traditional pricing, underwriting, reserving/financial reporting, modeling or capital management roles. Analyzing and managing insurance risk was completed by the actuarial department, which relied on tried-and-tested models, systems and methodologies. While actuaries are still expected to perform these core services, who performs the work, how the work is completed, and what additional work actuaries can and should do has started to shift radically.

The key driver of change in the actuarial workforce is the push to do more with less—a need for organizational cost reduction alongside increased strategic insight. Recent measures to reduce expenditures have extended to the actuarial department, as companies are recognizing the availability and ability of nonactuaries to perform much of the same work at a lower cost. Moving some of the more redundant and repetitive work to nonactuarial resources should create capacity for actuaries to produce more insight and foresight for the enterprise.

As companies rethink the actuarial workforce, many have started to focus on:

  • Realignment of responsibilities. Insurance companies are reevaluating the work that should be performed by actuaries and how their departments should be structured to optimize the utilization of actuarial skill sets within the organization.
  • Changes in the nature of employment. The rise of the gig economy, crowdsourcing and other alternative staffing models are affecting who performs actuarial work.
  • Advancements in technology. New technological developments that enable improved information processing, data analysis, anomaly detection and increased opportunities for automation are influencing how traditional actuarial work is performed.

While these company-level changes affect the actuarial workforce, nontraditional opportunities to broaden the actuarial profession as a whole have begun to emerge. As companies seek to integrate more advanced analytics capabilities within their organizations—and as the actuarial skill set becomes more desirable outside of the insurance industry—actuaries have more opportunities to grow their skill sets and expand into nontraditional career paths. The nature of work is changing across most industries, including financial services, and the actuarial profession is not immune to these changes within the insurance sector.

Organizational Cost Reduction: A Key Driver of Change

Internal factors—such as stagnating sales and the pressure to provide more value-added insight while minimizing expenses—as well as external factors—such as the availability of new technologies and changes in regulatory reporting—have forced insurance companies to concentrate on reducing costs. Historically, when companies performed cost-cutting measures, actuaries were exempt because of the complexity and necessity of their work. Now, companies are realizing actuaries traditionally have held responsibilities that other types of specialists within the enterprise may be able to perform at a lower cost—and many insurance companies are taking advantage of this revelation.

Because actuaries are among the highest paid professionals in the financial services industry,1 they are now under the spotlight when organizations are looking to minimize costs. Insurance companies are assessing if their highest paid practitioners are doing work that requires the sophisticated skill sets of an actuary. As an example, actuaries should not be performing data wrangling, but rather they should be analyzing the data to provide strategic recommendations and better inform business decisions. In this example, the data wrangling could be performed by someone in a lower-cost position outside of the actuarial department. Technological advancements have made it easier than ever to access and share files across databases and on servers. This enables the actuarial department to seamlessly partner with other areas of a company.

As other positions subsume actuarial work, actuaries will have more time to focus on work that is aligned to their core capabilities—critical analysis and value-added insight. Released actuarial capacity would allow actuaries to expand their analysis into drivers of profit and loss, improve internal reporting metrics and capture detailed insight into asset allocation—all resulting in more informed decision-making.

Extensions of the Changing Actuarial Workforce

Realignment of Roles and Responsibilities
As a direct result of these cost-cutting efforts, paired with the rapid speed of change and the pressure to be lean and efficient, it has become necessary for companies to reevaluate their normal day-to-day operations and the structure of their workforce. One effort that is attracting attention is the realignment of actuarial roles and responsibilities. This realignment takes two common forms:

  1. An evaluation of whether actuaries are doing work that requires true actuarial expertise and assessing whether the work they perform is in line with the responsibilities intended for their assigned roles.
  2. An evaluation of the organizational design of the actuarial department, with the potential to move from the traditional “product silos” to “centers of excellence” that span multiple lines of business.

Ensuring the correct alignment of actuarial roles with responsibilities is important for helping actuaries operate as efficiently as possible and adjust to new and ever-changing work environments. As companies go through this transition, the shift of nonactuarial work—whether to different actuarial roles or to nonactuarial roles within the enterprise—typically has proven to be a productive endeavor.

Icon 1Increased expectations, accompanied by the changing social values of work-life balance, are altering the perspective of workers.

An effective alignment of actuarial roles with responsibilities can lead to increased productivity and allows for actuaries to focus on true actuarial work. Nonactuarial work—such as data retrieval and manipulation, historical product research, serving as a “shadow IT department,” and fielding claims or operations inquiries—should be performed outside of the actuarial department. Shifting those and similar tasks away from actuaries will help increase their capacity to spend more time on providing insight for the enterprise. As the realignment changes the traditional actuarial workload, actuaries will have time to concentrate on work that requires more judgment and deep actuarial expertise. They will notice their day-to-day focus changing from supervision and oversight—currently amounting to an estimated 48 percent of an actuary’s duties—to more problem solving, which currently accounts for only 29 percent of actuarial time.2

Rise of the Gig Economy, Crowdsourcing and Alternative Staffing Models
Beyond the shift of responsibilities affecting the workplace is the changing workforce ecosystem. “On-balance sheet” talent is no longer the only form of staff in the workforce. Types of employment are becoming more diverse, with an influx of gig workers and crowdsourced labor. To staff complex financial service roles, companies are more often considering freelancers and contract employees to perform the work. In the United States, for example, more than 40 percent of employees work under alternative staffing arrangements, and this number is steadily rising.3 Along with the types of employment available, staff members desire flexible working hours, the capability to work remotely and the ability to take time off for personal reasons when workloads are low.

Several external factors are at the forefront of this disruption in the workforce. The increased expectations and demand of workers from their employers, accompanied by the changing social values of work-life balance, are altering the perspective of workers. The opportunity to use telecommunications, remote meeting spaces and other technology-driven mediums provides workers more flexibility. Many employees also are working on teams across time zones, requiring a need to adapt to time as well as space. In addition, businesses are seeking to expand their current capabilities with minimum impact to costs. With the ability to hire nonsalaried personnel, employers can cater their workforce to meet their own business goals and the needs of their employees.

The use of alternative staffing arrangements within the actuarial profession is enticing, specifically with nonrecurring projects and data-driven work. Many firms utilize external platforms to seek crowdsourced solutions. As an example, a competition-based platform can allow for input across various industries and sectors for complex challenges.

Impact of Technology
In addition to reconsidering who is performing the actuarial work, companies are seeking to utilize new technologies to change how the actuarial work is performed. The accessibility and availability of technology is rapidly transforming the way information is processed and work is completed. Along with these changes, the volume and robustness of data is shaping how actuarial and data analysis work is performed. Robotics processing automation (RPA) is systematically advancing the way work is done by applying rules-based actions across platforms to complete repetitive tasks. Natural language generation (NLG) goes beyond that to mimic human judgment by generating tools that utilize both a data set and business rules to generate conclusions. Predictive analytics and cognitive automation augment human intelligence and utilize big data, allowing for stronger analysis on the large influx of data utilized daily.

Due to the surge in the scope and availability of data, employers are demanding an increased level of granularity, greater quantity and quality of analyses, and higher productivity at lower costs. Employees are expected to perform at a faster and cheaper rate with greater accuracy, while focusing their judgment and analysis on high-risk issues. There is a push for employees to utilize technology in areas that require lower cognitive skills and to appropriately allocate their time and resources to areas of higher-level strategic thinking—expanding the capabilities of the professional to further drive performance improvements. Many companies are in the middle or ahead of this fundamental shift within the workplace. According to Deloitte’s 2017 Global Human Capital Trends report, 31 percent of companies are in the process of implementing robotics processing and automation, while 34 percent are in the process of piloting such processes.4

Actuaries are using these revolutionary technologies to strategically improve the roles they perform. Technology enhancements will likely be embedded within each layer of work actuaries carry out. Any repetitive exercises, such as rate filings, data entry, in-force file processing, formulaic calculations or even collecting data from the web, can be done within a computer-coded software. Automating data preparation is simplified by utilizing data wrangling modules and valuation functions to improve accuracy and efficiency. For data analysis, diagnostics, predictive analytics and cognitive assumption testing, actuaries computerize the procedures within programs—enabling the synthesis of data in a condensed amount of time. Lastly, utilizing NLG, actuaries can report and validate memos and project visualizations of data.

Every actuary needs to ask themselves this question: Do I have the digital fluency, communication, leadership, interpersonal and critical-thinking skills that will be expected of the future actuary once routine processes are automated and removed from my day-to-day work? And companies need to ask themselves: How can we get our actuaries the skills they need to succeed in the workplace of the future, especially actuaries who are decades into their careers? Training may need to come from a combination of company-led and external education to round out the skill sets required.

Competition as an Emerging Driver of Change

As the nature of the workforce changes for actuaries, they can take on positions outside of traditional actuarial roles and look to provide value in other analysis-driven activities. For example, insurance companies are now looking to integrate data science skill sets into their organizations to implement advanced analytics capabilities, such as machine learning and predictive modeling, to help improve key actuarial functions—especially in underwriting, in-force analytics and potentially in reserving.5 The growing amount of data available has allowed insurance companies to find potential in combining multiple data sources to enhance customer and business insights. These trends have introduced more sophisticated tools and techniques to help analyze the data and understand how it can be utilized optimally.

Icon 2Due to the surge in the scope and availability of data, employers are demanding an increased level of granularity, greater quantity and quality of analyses, and higher productivity at lower costs.

Actuaries traditionally have assumed the role of performing data analysis within an insurance company to manage future risk and uncertainty, as they possess strong quantitative and problem-solving abilities developed from extensive math and statistics training. While actuaries have experience executing robust, standardized and proven problem-solving approaches, there tends to be less training and focus on computer programming, data mining techniques and analyzing unstructured data.6 To exploit the data analytics opportunities to the fullest capacity, more advanced skills are necessary, and actuaries can develop these skills to move into more machine learning and predictive modeling work. Some actuarial employers already expect prospective actuaries to possess more advanced programming capabilities and knowledge in statistical modeling.7 Due to the rigorous quantitative and technical training they already undergo, actuaries are in a prime position to take advantage of these data-science opportunities as the demand for these abilities continues to rise.

In addition to the expansion of desired technical skills and the movement toward integrating data science capabilities, there is also an increased awareness of the value and applicability of the actuarial skill set outside of traditional insurance roles, especially as technological advancements become more integrated across industries and technical backgrounds are in demand. For example, actuaries have expanded into the technology industry in actuarial roles at companies like Uber, and even in nonactuarial roles such as risk management.8,9

Companies are looking to employ more analytically rigorous and sophisticated techniques to manage risk and uncertainty. The business objective of an actuary’s work is to “put a price on risk,” and although the insurance industry has been a natural application, this broader mindset of placing a value on risk can be applied across industries. Actuaries can capitalize on this opportunity and move into nontraditional roles in industries such as telecommunications, consumer services, retail and technology. The resulting transformation of the actuarial talent pool and extension of actuarial skill sets can open the door to a greater number of possible career trajectories for the profession.

Change is Here

Change is inevitable and all-encompassing when it comes to the future of the actuarial profession. To stay at the forefront of these changes, employers may need to modify the training, workload, benefits and roles for actuaries, and actuaries should adapt their skill sets and abilities to the shifting demands of the profession. By changing with the times rather than remaining steadfast in old ways, companies and actuaries can utilize this technological and social evolution to their advantage.

Tony Johnson, ASA, MBA, MAAA, is a senior manager at Deloitte Consulting LLP in Chicago.
Seneca Smith is a manager at Deloitte Consulting LLP
in Chicago.
Kara Ross is a consultant at Deloitte Consulting LLP in New York.
Catherine Yang, ASA, is a consultant at Deloitte Consulting LLP in Chicago.
Taylor Patterson is a business analyst at Deloitte Consulting LLP in New York.

Copyright © 2019 by the Society of Actuaries, Chicago, Illinois.