An Actuarial Forecast2020 outlook on the future of our profession October 2020
In 1974, Jack Bragg wrote an essay predicting the evolution of the actuarial profession through the year 2020. He credited the essay with launching his rise to Society of Actuaries (SOA) president in later years and explained the goal of his essay was to help steer the direction of the profession.
In his “The Future of the Actuarial Profession as Viewed in A.D. 1974” essay, Bragg wrote: “The future will come half by chance and half by design. If fully half is to come by design, then futurism, which can seek to steer that design, is a worthy science. The study of the actuarial profession looks upon as of greatest relevance those design steering aspects which can lead to a greater future.”
Three years ago, we had the pleasure of interviewing Jack (who was then in his 90s) about those predictions. It was effectively a qualitative experience study comparing actual to expected results. Before Jack passed away in 2019, he passed the torch and suggested we write the next set of predictions with the same goal as his original essay.
To bring our new predictions to life, we’ll tell the story of two very different actuaries starting their careers today. They are fictional characters created to illustrate our predictions.
Meet Marco, the process improvement expert, and Layla, the actuarial data scientist. Marco and Layla’s careers are both shaped by the macro trends that will impact the profession in the years to come, but they evolve differently. Marco experiences incremental changes in traditional actuarial roles, and Layla creates disruptive changes through nontraditional opportunities.
As Jack noted, and as Marco and Layla will see, we all have the power and responsibility to shape the future of the actuarial profession.
Career Trajectory: Marco
After graduating in 2020 from a Midwestern college with a math degree and four exams under his belt, Marco joined a midsized multiline insurer where he previously interned. Starting full-time employment entirely remotely felt a little strange, but it was a sign of the times in the COVID-19 era. It helped that he already knew his manager and some of his other colleagues.
Marco’s Career Path
Joins actuarial development program; works entirely remotely
Earns fellowship (despite recent changes in requirements)
Moves across the country and joins an established consulting firm as a consultant; is also a frequent industry speaker about operational risk
Promoted and directs major client engagements related to regulator takeover and audit material weakness remediation
Leaves full-time job and spends time being close with family and working on the backend of a personal finance resource for low-income families
Stays professionally engaged by volunteering for a fellowship exam committee
Starts a consulting firm that specializes in helping companies that seek to develop talent, manage risk and improve their financial operations
Joins the Board of Directors of a mid-sized insurer (former client) as an operational risk subject-matter expert
Retires as a founding partner from consulting firm, but continues to serve on the SOA exam committee
One of his very first assignments was to debug a complicated and broken spreadsheet. It was the sort of task that every actuary gets at the start of their career, and Marco did his best to solve the problems. In addition to streamlining and improving the workbook, he created documentation that laid out the standard procedure. After a while, Marco worked with his manager to batch that task with other similar production tasks and leveraged an offshore resource to produce the results during the reporting cycle.
Armed with this visible accomplishment (and a speedy FSA), Marco’s responsibilities increased rapidly. He stayed in his valuation role, and after a slew of retirements, became a key person for maintaining the various legacy systems at his company. Marco regularly called the vendor to work through issues caused by the most recent patch and figured out how product feature customizations could be carried forward.
Once things stabilized after the post-pandemic global recession, Marco’s management team finally listened to his insistence that the data, modeling infrastructure and the end-to-end process needed significant investment. His firm hired consultants to lead a modernization exercise, and they were met with mixed enthusiasm. In the beginning, Marco was excited at the chance to share his frontline expertise. However, the approach felt formulaic, and ultimately Marco ended up with more projects to add to his regular work. Marco tried to reach out to colleagues to keep the momentum going, but he found he did not have a very strong internal network, perhaps because of his completely remote working situation.
Eight years later, Marco moved across the country, got married, left his firm and joined an established actuarial consulting firm. It was a summer of immense change, but Marco was excited by the prospect of traveling and working with clients directly. The skills he honed while sorting out issues with legacy systems and data were in great demand. There was even a diversity initiative at the new job that let Marco have a direct impact on shaping the culture of hiring, retaining and engaging actuaries across the organization.
It was all very exhilarating. Marco was able to make the transition naturally and stepped up to support a variety of insurers with lingering audit control issues and shore up their technical debt. He became one of the firm’s subject-matter experts for operational risk. Marco’s knack for evaluating valuation processes and data flows, combined with exposure to different platforms, positioned him well for a promotion that he earned during his third year at the firm.
Work was plentiful. The industry was struggling because of increasing socioeconomic disparity both globally and domestically. When a multiline insurer with significant pension obligations went into state receivership, Marco was enlisted to lead remediation efforts related to cost-cutting protocols and operational controls. However, instead of finding it new and engaging, Marco felt like the same set of problems kept surfacing. He found this disheartening, and the long hours started to take a toll on him.
Most of Marco’s work was still remote and, over time, he felt the enduring effects of being disconnected. He mentally benchmarked himself against colleagues focused on innovation while his work focused on problems from the past. It was certainly interesting and essential work; however, Marco realized he wanted to apply his skill set to fixing broader problems and attempt to get ahead of some of the risks he was witnessing unfold.
Marco planned on taking some extended time off after the birth of his first child, but when an old college friend called with an idea about starting a business, it turned into a permanent leave of absence. He spent a year deeply involved in his family life while he joined a startup and built out the backend of a personal finance-related resource for low-income families. It was extraordinary and led to some intense soul searching about what he wanted to accomplish next.
To stay professionally engaged, Marco also started to volunteer for the Society of Actuaries (SOA). One of the upper-level risk-based exams was a great fit, and Marco found himself leading a major syllabus refresh. He added topics focusing on operational risk and evolving regulations related to privacy and underwriting.
To pivot back to a career in industry, Marco pursued an MBA at a top school. He connected with people involved in data, information technology and marketing, and others with nonactuarial backgrounds. As a part of the program, Marco led a consulting project for the United Nations that focused on identifying the root causes of elevated maternal mortality rates in developing nations and proposed changes to public health programs to reduce mortality. Marco found this to be one of the most exciting projects of his career—he could see the value of his work and how it could benefit society.
After graduation, Marco formed a partnership with his core group of MBA friends and started a consulting company. The focus was on bringing a cross-section of technical and operational expertise to bear on common operational problems for companies seeking to modernize. Although the firm primarily focused on risk management projects, Marco was particularly engaged by their pro bono projects in public health.
When a former client asked him to join their board of directors as an operational risk subject-matter expert, he was flattered and thrilled to give back.
Career Trajectory: Layla
Leaving her Statistics Ph.D. program early and entering the world of industry was a tough decision for Layla. However, it was driven by two undisputed facts: the odds of landing a tenure track position in academia were slim, and her student loans needed to be paid off sooner rather than later. A close friend suggested that Layla take a second look at actuarial positions, and before long, Layla was the newest member of the actuarial development program at a leading mutual insurer.
Layla’s Career Path
Joins actuarial leadership development program at a leading mutual insurer
Joins a joint actuarial/data science program and becomes passionate about algorithmic underwriting
Shortly after she obtains her fellowship, her division is acquired by a West Coast technology giant
Started exploring real-time underwriting and risk selection using big data and predictive analytics methods
Her team makes a breakthrough using digital footprints and biometric data to predict insurability risk; guards against discrimination and privacy invasion
Recognized as an industry thought leader in underwriting for all types of individual insurance
Took on the Chief Data Ethics, Governance and Privacy Officer role at her company
Pivotal biotech breakthrough in 2040 in gene editing sent shockwaves across society
Joins Consumer Financial Protection Bureau to spearhead the proposed regulation regarding data sources for all individual insurance underwriting
It was humbling to switch careers and have fewer actuarial exams completed than her peers, but Layla’s technical background enabled her to progress rapidly and point out a business need for a hybrid data science/actuarial rotation. Layla became one of the first members of a joint actuarial/data science program. It was a consulting-style group that jumped from project to project leveraging data science methods and tools on traditional actuarial topics. One project that hooked Layla’s interest was related to algorithmic underwriting so consumers could get insured without a paramedical exam or having fluids drawn.
Partially a casualty of their own success, the underwriting and risk selection technology stack proved so successful and reliable that the otherwise struggling parent company monetized its early investment by selling that part of the business to a West Coast technology giant.
With her FSA in hand, Layla jumped at the opportunity to continue her work exploring real-time underwriting and risk selection using big data and predictive analytics methods. Data that had once been used primarily for advertising could now help determine lifestyle, behaviors and habits that affect mortality, morbidity and financial risks. Layla’s responsibilities quickly expanded, and her team grew to include more technical, medical and other experts. More than once, Layla and her team had to grapple with ethical and legal topics that had far-reaching consequences.
Using a digital footprint plus biometric data to predict risk was extraordinarily promising, but it was also a very sensitive field. Similarly, advances in personalized medicine where treatment is based on a person’s DNA was having a profound effect on the cost, treatment and longevity of cancer patients. Regulations always lagged behind technological advancement, but Layla still worked hard to guard against discrimination and privacy invasion.
Layla regularly presented at local and national actuarial club meetings and became recognized as a thought leader in underwriting for all types of individual insurance. Her passion and focus on ethics led to the creation of a Chief Data Ethics, Governance and Privacy Officer role, which Layla was proud to hold for more than a decade.
A pivotal gene editing biotechnology breakthrough in 2040 sent shockwaves across the industry and society. The topic was previously so controversial that research was banned in some places and done secretly in others. However, once the technology became viable, parents could prevent their kids from being predisposed to high blood pressure, diabetes or a variety of other health conditions. Medical tourism undermined domestic restrictions, and many parents who could afford the cost faced very challenging choices.
Using genetic information as part of the risk selection process had been banned for many years, but questions remained about the degree to which genetic editing was private, public or could be used in any way was still being hotly debated. Layla’s work in data privacy and underwriting put her in the very center of the discussion.
The Consumer Financial Protection Bureau offered Layla a position to spearhead the creation of a new regulation to be proposed to Congress regarding data sources for all individual insurance underwriting. She was later called to Congress to defend the proposed regulation and illustrate the consequences to society if limitations on data sources were not placed—primarily an exacerbation of income inequality.
Layla worked tirelessly for responsible and practical solutions for the remainder of her career. Although she faced some public criticism, in general, she was held in high regard by the public as a trusted professional with true integrity.
Takeaways from Marco’s and Layla’s Experiences
In their early careers, both Layla and Marco joined different types of development programs that offer study support.
Over the last decade, rotational programs with roles spanning one to two years in a department have been commonplace in the insurance industry. A new trend is showing greater benefits from interdisciplinary and agile teams, with students focused on projects and working directly with their counterparts in IT, marketing, operations, finance and other actuarial groups. This is similar to fixed rotations that expose students to multiple disciplines as they build their core actuarial skills and decide how to specialize. However, this more dynamic approach has the potential to establish stronger cross-functional teams across lines of business and with nonactuarial groups, including IT and finance.
Layla’s interest propelled her in the direction of disruptive change as she focused on future possibilities. On the other hand, Marco’s career focused on making incremental changes as he managed systems of the past.
As an actuary, seeking disruptive change is challenging to say the least. The systems implemented over recent decades are so entrenched in the way we operate. How many of us are guilty of jumping to a spreadsheet for our analysis despite the fact there are more effective data analytics tools—like PowerBI or Tableau—that are readily available to streamline analytics? The rationale might be “we’re comfortable with what we know” or a lack of time to learn to use new tools, but consequently, it may also prevent us from keeping up with the times and make us resistant to change. We must stay open to embrace modern tools to do our analysis most effectively.
In addition to embracing modern technology, the profession also needs leadership from actuaries like Layla who can go beyond the traditional actuarial boundaries. The profession will not innovate merely by adopting new tools and skills; rather, we must use them to do things that have not been done before.
In the second part of their careers, both Layla and Marco switched companies.
Recent trends suggest a more mobile actuarial workforce. Increased remote work will sharpen this effect, and companies should prepare for greater turnover. For example, a company that currently relies on subject-matter experts sticking around for decades may face major challenges if it fails to adapt.
Marco primarily worked remotely, and it affected him both professionally and personally. He experienced how a weak internal network during his early career impacted the modernization project, and his late efforts to address the issue were not enough to sustain him professionally. Marco’s activities later in his career (volunteering for the SOA and contributing to pro bono projects) were engaging and rewarding experiences where he found fulfillment. Layla didn’t experience the same emotional setbacks and found more opportunities to connect with her network.
Over the next two decades, the internal and industry groups we form will play a greater role in the profession’s strength. Sections, research groups, local actuarial clubs and regulatory committees will become as much a part of our community as our neighbors. As already noted, companies will need to find innovative ways to build their actuarial community and provide opportunities for professional engagement.
Similarly, in the fight for top talent, companies need to engage employees beyond a salary. Projects that tap into employees’ values and passions will increase retention and long-term satisfaction.
Layla held a hybrid data science/actuarial role throughout her career.
The data science/actuarial field is currently on the forefront of innovation in the insurance industry. The billions of dollars invested into InsurTech in recent years are aimed primarily at harnessing data to select the right risks and developing new channels to attract and engage customers. Layla, and the actuarial profession, will need to grapple with the ethical and legal issues relating to privacy and the rights of the consumer. The tough questions will go far beyond just a simple digital footprint. Facial recognition, gene editing and DNA-based medical screening will all be part of a technological arms race for risk selection.
The actuarial profession will not be alone in grappling with these changes, and we will not have the power to set the agenda on a global scale. However, as a profession, we have the responsibility to act in the public’s best interest and steer insurers and regulators in responsible ways.
In conjunction with technological advances, levels of inequality in the United States and around the world are expected to rise. The products that companies make and how those products are distributed will need to adapt to meet the needs of both the affluent and middle-market groups. Further, socioeconomic disparities will have profound effects on longevity, and companies that ignore those trends do so at their own peril.
Toward the end of their careers, both Layla and Marco took on a level of service to drive the profession forward.
As actuaries, we can all find our own ways to leave our mark on the profession outside of our day-to-day work. If the profession is to maintain its position in creating value for society, trusted and influential actuaries must seek out opportunities to further the profession in their careers so we can move forward collectively.
The evolution of the actuarial profession will inevitably be determined by the actions we take collectively. If the future comes half by chance and half by design, then that design is a complex mixture of creating change within our domain and reacting to outside influences. We hope these stories have triggered some thought as to the type of change you’d like to embrace or create.
Although no one actuary defines the profession, the paths we pursue individually may leave a lasting impact on the profession.
Copyright © 2020 by the Society of Actuaries, Schaumburg, Illinois.