Actuarial Roles of the Future

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Actuaries are tasked with measuring and providing suggestions to management to mitigate risk and uncertainty—but what about the uncertainty in the actuarial profession? Over the past several years, actuaries have seen a multitude of changes ranging from emerging technologies and regulatory developments to the hybrid work environment.

We anticipate the actuarial profession will continue to evolve—potentially at a rate greater than what we have seen in the last three years. In this article, we will discuss what the actuarial profession might look like in five years, including what we expect to see regarding roles, skills, training and development.

New Roles for Actuaries

The continued evolution of the actuarial profession will likely create new roles and ways of working for actuaries. We expect to see actuaries take on roles or increase their time spent in areas such as technology, capital and liquidity.

Technology Development

The rise of artificial intelligence (AI) has led to many new products and features in the manufacturing space. Specifically, within the automobile industry, AI has started to enable driverless vehicles, transferring road responsibility from the driver to the car manufacturer in some cases. If the technology fails, the manufacturer could be found liable for major damages resulting from insurance claims, according to ProActuary. To mitigate these risks, car manufacturers could begin turning to actuaries in the development of these features and the creation of risk management frameworks.

Likewise, in the life and annuity insurance industry, a significant number of future roles involving the use of emerging technologies such as AI may emerge for actuaries. This spans the insurance life cycle, including distribution, underwriting, claims, reinsurance administration and core actuarial services in reserving and financial reporting. Companies can use AI to reinvent how they perform competitive analysis and generate summary content to assess the company’s market position and outlook. AI may also be used to augment how actuaries perform model testing and conversions.

Capital and Liquidity Management

The insurance sector is seeing an increased focus on embedded value and value of new business. Currently, actuaries support asset and liability management, hedging, investment analysis and portfolio management, utilizing skills in forecasting and risk assessment. Actuaries apply their knowledge of financial strategies and market dynamics to evaluate potential trade-offs between risks and capital positions to manage the long-term financial health of their organizations. Given a variety of new emerging risks (e.g., climate change, AI, medical advances) and a focus on capital optimization and demands from external stakeholders (e.g., boards, regulators), insurers are looking for ways to understand the impact of extreme scenarios and forecast in the long term.

We believe there is an opportunity to expand actuaries’ roles in capital and liquidity management as actuaries model the impacts of a host of scenarios on their balance sheets and income statements. For more on this, read “Valuation of Insurance Companies Using Embedded Value” from Profectus Academy.

Financial Planning and Analysis (FP&A), Long-term Forecasting

There is increased momentum in the industry for enhancing FP&A capabilities given recent regulatory changes (e.g., long-duration targeted improvements [LDTI], International Financial Reporting Standard [IFRS] 17) and the need for companies to further explore the “art of the possible” in terms of tools, processes, insights, nimbleness and predictability. Insurance companies can improve these operational capabilities to drive more value for their enterprises. As a result, there is potential for growth in actuarial roles involving long-term forecasting, planning and extreme scenario analysis.

For example, the recent rise of weight-loss drug use and how it may affect society over the coming years could be explored. There may be an opportunity for actuaries to develop a better understanding of how this may affect state-by-state mortality and morbidity and how these drugs could impact competitive pricing, market share and long-term forecasting of top-line sales and bottom-line margin.

Centralized Roles

While actuaries continue to expand their skills and move into broader roles, there may still be a need to complete the traditional work associated with the profession and improve how these traditional roles are organized to deliver actuarial activities more efficiently. We have observed a recent shift in centralization and the creation of “centers of excellence” to realize operational efficiencies, standardization and improvement in work quality.

Some companies, such as Deloitte, have utilized a service delivery construct known as a center of excellence to deliver work in a more optimized manner. A center of excellence consists of subject-matter experts focused on completing certain tasks to increase efficiency and effectiveness. The expansion of actuarial roles could create a need for companies to bolster their capabilities by centralizing traditional actuarial work where possible. The traditional levers around process improvement and redesign might be integral in meeting these business goals.

What Skills Are Needed for the Actuary of the Future?

Expanding the actuarial profession into roles yet to be defined creates a need for actuaries to acquire new skills and further build upon existing ones. In the following section, we outline some useful skills to further actuaries’ abilities and ways to develop these skills.

Coding and Analytical Skills

Emerging AI technologies and their increased use by actuaries are causing a demand for a more formal background in coding and analytics. The Society of Actuaries (SOA) has begun to address this growing demand through the credentialing process with exams in statistical risk modeling and advanced analytics. These exams may be useful as AI technologies are integrated into actuarial processes. For example, actuaries potentially could use AI in the coming years for:

• Predictive analysis
• Automation of number-crunching
• Investment performance

As actuaries begin using AI more, we believe there also may be a need to monitor the systems so they are not overly relied upon and guard against hallucination and other ways AI can produce seemingly reasonable yet incorrect results. So, while AI may automate some actuarial work, actuaries will still need to maintain accountability, transparency, controls and professionalism.

Algorithm Auditing

With the increased use of AI in the actuarial profession, there is an emerging need for algorithm auditing skills. This refers to the ability to apply strategic thinking, professional judgment and testing to inspect AI algorithm design, coding and results to mitigate proxy discrimination, address unintended bias and increase transparency. This skill may be essential for actuaries to facilitate the safe and effective use of AI. Without algorithm auditing, the industry is susceptible to potentially inaccurate and discriminatory models given the opaqueness and complexity of algorithmic systems.

Entrepreneurship and Innovation

Actuaries can take what they’ve learned and forge their own paths. In our view, actuaries may increasingly be tasked with uncovering ways to enhance processes and address insurance companies’ most complex challenges. To do so, actuaries of the future may want to increase their entrepreneurial spirit, also known as intrapreneurship. Specifically, actuaries may want to innovate and grow in their ability to think strategically to address emerging changes, including AI and climate change.

An entrepreneurial mindset will require actuaries to have the skills to build business cases, know when to fail fast and be able to follow a design-thinking framework. We believe this mindset shift might be imperative to innovate processes and further advance the actuarial profession.

Broader Business Skill Set

The expansion of the actuarial profession ultimately may create a need for a broader business-minded skill set. Actuaries sometimes have been associated with stereotypes such as being number-crunchers, back-office help and people without interpersonal skills. That number-crunching, back-office work could be subject to automation, so actuaries may wish to focus on expanding their skills to include performing capabilities that aren’t vulnerable to automation and AI.

Skills such as agility, nimbleness, curiosity and empathy are examples of enduring proficiencies that actuaries should consider. In addition, actuaries may want to enhance their communication, collaboration and critical thinking skills. In our view, successful future actuaries will likely be those who integrate with parts of their organization outside of the actuarial function to understand not only the primary and secondary impacts of the outcomes they drive but also the tertiary and other correlations realized as they evolve to become future catalysts and strategists of organizational performance.

How Will Actuarial Training and Development Change?

The constant changes in the actuarial profession ultimately may cause the training and development of future actuaries to evolve. We outline two areas that employers may want to consider in the training and development of their actuaries—mentorship and the work-from-home environment—and one area that individual students or actuaries can take initiative to further their education—global regulations.

Mentorship

Regular updates to the actuarial professional development curriculum consistently enhance the credentialing process for future actuaries. However, in our opinion, these updates alone may not suffice to effectively prepare actuaries for senior management’s future expectations. For this reason, we believe employers likely may benefit from considering apprenticeship opportunities for their actuarial professionals who focus on broadening their business knowledge.

Much like the legal and medical professions, the actuarial profession requires a rigorous credentialing process and the presence of a governing body within the profession to assess the needs of the actuary. However, these other professions include apprenticeship models that help future doctors and lawyers understand how knowledge and skills translate into real-world decisions that affect their clients.

Given the effectiveness of apprenticeship models within these professions, actuarial talent could greatly benefit from the implementation of similar models centered on strategic decisions. We believe actuarial programs could benefit from having formally assigned mentors who help advise and aid actuaries during their careers (both pre-FSA and post-FSA). In addition, here are a couple of examples:

• On-the-job learning for junior-level actuaries with board meeting preparation and delivery
• Shadowing opportunities with the business unit or line of business CFO prior to earnings week

Work From Home

Many industries saw a large shift to a hybrid work environment after the COVID-19 pandemic. Many signs point to the hybrid work environment continuing, and actuaries should strive to reinvent and improve how they are developing their teams and skills. Companies may want to find a so-called “happy medium” to align with the productivity levels expected of their teams while fostering a more connected workplace. Companies have been successful in finding strategic opportunities to co-locate with their teams during project kickoff and delivery. In addition, organizations have built community and delivered value through in-office events such as hack-a-thons, “build an algorithm” days and lunch and learns.

Training in Global Regulations

Currently, actuaries in the United States are well-versed in U.S. regulations. However, there is a growing trend of insurers, reinsurance companies and private equity firms reinsuring larger portions of the risk. More often than not, reinsurers are located outside of the United States, and there are different regulations that affect actuarial liabilities and capital. For actuaries to better assess financial risk, they need to understand the regulations where the policy is reinsured, such as in Bermuda. Therefore, actuaries may want to continue to increase their knowledge of global regulations in addition to U.S. regulations.

Conclusion

From the rise of AI to asset and capital management, the role of the typical actuary has expanded beyond the traditional work associated with the profession for decades. As the actuarial profession continues to evolve, companies may want to be aware of these changes to enhance their processes, attract actuarial talent and maintain a competitive edge.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.

Copyright © 2024 by the Society of Actuaries, Schaumburg, Illinois.