Career Crossroads: Part 3

Reflections on the professional development of an actuary Benjamin Chen

Read Part 1 of this article series for more thoughts on the expanding role of actuaries. Read Part 2 for insights on streamlining processes and creating digital tools as demand for actuarial work increases.

Chinese Version

To understand gaps and limitations, it’s best to analyze the requirements and expected outcomes of the digital stages of actuarial science. In the electronic stage, the most complex part of the process is often identified, and a specialized system is implemented to achieve clear results and improve efficiency and reliability.

The emergence of actuarial software and Excel have broken the individual limitations of actuaries. The changes are no less than the increase in transportation capacity when humans started riding bicycles. Without electronic achievements, it’s likely that monthly assessments, pricing, second-generation compensation, International Financial Reporting Standard (IFRS) 17 and more would only be theories on paper.

Digitization has changed the requirements for actuarial skills. Before the widespread use of electronic tools, life insurance actuaries were most familiar with conversion factor tables. Sometimes, people call experts with outstanding skills in a certain field “old drivers.” A thick stack of actuarial factor tables and their relationships are the technical map in the mind of an old driver. When an old driver trains a new person, they pass on tips for using this map and ways to navigate it.

Electronic tools have changed everything, although history has an aside. In 1980, an essay published by an actuarial industry newsletter represented the defense of some actuaries. The author stated that conversion factor tables are irreplaceable in a pension actuary’s specialized work and criticized computer programs that attempted to question this stance. Some 20 years later, an actuarial old driver may be considered someone who is proficient in using the VLOOKUP function, various software functions, shortcuts and detailing the complex relationships in electronic models. These function tables and model structures are the technical maps and content to be shared with today’s beginners.

Growing Demand for Actuarial Work

After the widespread use of electronic tools, there were more demands on the profession. Net premium valuation (NPV) became gross premium valuation (GPV). More standards and scenarios occupied our time. Actuarial departments recruited more people, but they still needed more employees to keep up with the demands of the work.

Many companies turned to automation, and we have arrived at the next stage: minimizing the amount of time exhausted old drivers are struggling with connectivity and data cleaning. Through various scripts, nonactuarial work, such as data cleaning and docking, can be completed automatically. Many actuarial departments currently focus on multiple projects within these fields.

However, many actuaries have found that this solution is temporary and there needs to be a permanent fix to the problem. The core issue is that these solutions are designed to further empower experienced drivers, which may have short-term benefits but will eventually exacerbate the problem. Additionally, the design and development of these solutions are often centered on the ideas, experiences, habits and needs of experienced drivers, which makes them lack standardization. It also then is challenging to hand over maintenance work. Both factors combined create a significant sustainability risk when experienced drivers can no longer handle the workload. Some actuarial digitization projects cannot break through the automation stage because these methods violate the basic principles of automation.

Creating Universal Tools

At my technology company, we have both actuarial and IT departments that write C, Python and Java. Based on my experiences and observations working there, I found that almost everyone has their own development philosophy. An actuary’s development is sometimes focused on creating tools for themselves or others they can guide. Developing tools for themselves eventually will make them stronger. However, they still cannot break through the bottleneck of having a limited number of senior professionals on the talent pyramid and, therefore, cannot meet expansion and demand needs.

Long ago, I wrote models and scripts my colleagues jokingly called “Ben’s baby.” They could only run on my computer, and even if they were effective, they only offered limited help to the company. On the other hand, our IT development team focuses on creating tools for others to use and maintain. They generally consider the user’s average cognitive and operational habits and work to reduce the entry threshold, making a good product from which anyone can benefit.

As you may have noticed, many applications today no longer have full screens of menus and buttons. Most operations consist of a series of next steps where you simply follow the instructions to reach the subsequent step. The number of experienced drivers in the office, who used to be proud of “clicking this button first, then pressing that shortcut key combination,” is rapidly decreasing. Following the “next steps” series takes the navigation path that lives in the experienced driver’s mind and standardizes operations. Following the navigation instructions, new drivers can complete their work quickly—and often alone. Gradually, more navigation and lower technical thresholds for drivers can form a richer network of professional service capabilities. This is the core purpose of automation.

However, suppose automation is not designed according to these principles. In that case, experienced drivers armed with automation will have to teach their students the original technical map and add new maps for using and maintaining scripts, making it more difficult for students to remember what to do and get started in the first place. When students lose confidence, the risk of a shortage of experienced workers may appear. I think this is an important inspiration that the IT department brings to actuaries when promoting automation in various industries.

Continuous Improvement and Innovation

Of course, there is another interesting principle in the IT field. Let’s call it “Andy Bill’s Law.” Andy gives, and Bill takes away. Andy was the head of Intel, and Bill Gates’ new system quickly used up the hardware performance he worked hard to improve, so the hardware had to be updated continually. Therefore, demand likely would always outpace capacity and, ultimately, any physical limitation would become a new bottleneck.

We also would find such rules if we deduce the story of experienced drivers and automation. No matter how advanced the navigation system is, someone must drive. When the demand for transportation continues to increase, drivers and driver’s licenses become the bottleneck. What is the next solution? Naturally, everyone thinks of autonomous driving. This is what is happening in the professional driving field. Perhaps some people are confused now: How can driving be called a profession? It should be noted that 100 years ago, driving was indeed a common profession.

Returning to the actuarial profession, in the informatization stage, the goal to be achieved after automation is akin to autonomous driving. Referring to other informatization scenarios, we can combine mature calculation and analysis processes with the “next step” route commonly used in automation applications, package them with agreed parameters and create a service that can be called upon at any time to assist more users.

The prototypes of actuarial autonomous driving applications on these “analysis routes” are formed. Branch users can employ such applications to connect to their data, obtain the required profit source analysis or value results, and promote the self-driven operation and management of institutional leaders according to the CEO’s value lending ledger. The marketing department and target customer group can adjust parameter ratios based on these kinds of applications and provide feedback on the company’s product design and pricing. In the popular participatory interactive mode, the marketing department and target consumer group can work with the company to design and sell products. After the product is sold, weekly—or even daily—policy and claims data would be input to the data platform, and the system automatically can analyze deviations, update the institution’s value lending ledger and give suggestions on how to adjust the basic variables of the product design.

These requirements may come from any group and scenario with infinite combinations. People expect an immediate response, and the best way forward is to use automation to meet these expectations and let their professional capabilities flow into day-to-day work. Of course, in places with professional risks, actuaries will have more time to focus, analyze, restrict and guide the utilization of these automation tools. This is a vision of the informatization and actuarial era, and it is hoped that these achievements can enable actuaries to catch up with or even lead the pace of informatization in the insurance industry, bringing about enormous changes to the digital insurance experience.

Looking at the digital development trajectory of actuarial science in insurance, we can see that its progress is consistent with the various stages of professional development. Electronic tools have broken the boundaries of personal capabilities, giving actuaries more power to provide more reliable results and become experts in the field.

Automation is the goal and outcome of standardizing processes. After making individual features less important and instead emphasizing working as a team, organizations can become more efficient and respond to more demands. The leadership team can evolve into a more efficient provider of professional capabilities. Ultimately, all steps converge to form a new paradigm using information and digital tools, allowing actuarial abilities to meet the needs of all stakeholders and the public through the information platform tools. Along the way, the audience for actuarial professional capabilities and achievements likely becomes increasingly diverse, and the number of problems solved may increase significantly. Naturally, the market and societal value of actuarial work becomes increasingly important.

The Value of Actuaries

I think actuaries need to reposition their value, just like they did 30 years ago when they embraced electronic spreadsheets and programs. Actuaries who work to better themselves and improve will be the designers, maintainers, drivers, innovators, and users and trainers of ever-advancing technologies. They will be the ones pushing for actuarial technologies to be more widely accessible throughout the entire market and society, making it easier for the market to discover the value of insurance, insurance products and insurance companies. These actuaries also will help consumers understand the price of the risks they care about more conveniently and intuitively.

For this reason, we need a higher technological vision and a larger, broader development perspective. I believe actuarial professionals should embrace the era of information technology with an open mind.

The ultimate and greatest value of developing any profession, occupation or technology related to helping the public is allowing anyone who needs it to obtain its service value with minimal barriers at the lowest cost. With the support of digitization, this evolution will be faster. When actuarial services are available everywhere in the cloud, and everyone can have the product design and business guidance they need, insurance—and actuarial science—inevitably will enter a new era.

I imagine the day everyone truly will feel the economic and lifestyle value actuarial science brings to their lives because our abilities have been transformed into the tools we design and our industry is serving everyone who needs it. If you must ask, where are we, the actuarial professionals? We will be smiling at the thought of how modern actuarial science and insurance reform have grown. We also will find joy in the important role we are playing in continuing to promote the industry’s more profound development in the future.

Benjamin Chen, FSA, is founder and CEO of DeepLight Technology Ltd. in Shanghai.

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 © 2023 by the Society of Actuaries, Chicago, Illinois.