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Are Actuaries being replaced by algorithms – PWC Report

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Article Synopsis :

Technological advances and the increased use of connected devices are driving an exponential shift in customer expectations and behaviours. They’re also changing how insurance is priced and sold. However, digital technologies such as big data, analytics and cloud computing provide ways to meet new expectations and build enabling capabilities.

 The Digital Insurer reviews PwC’s Report on Insurance 2020: Are Actuaries being replaced by algorithms

Plotting the future with powerful, self-learning algorithms…

In the report “Insurance 2020: Are Actuaries being replaced by algorithms?”, PwC explains why actuaries should embrace digital allowing insurers to offer products tailored to customer needs by applying self-learning algorithms adapted in-step with human interactions.

The report names the following macro drivers impacting global development:

  • Social: Customer behaviours, talent drain, demographic shifts, stakeholder trust and corporate social responsibility
  • Technological: Information and analytics, devices and sensors, software and applications, medical advances
  • Economic: Urbanization, new growth opportunities, fiscal pressure, inflation/deflation, risk sharing and transfer, social security and benefits, distributor shifts and partnerships
  • Environmental: Climate change and catastrophes, sustainability and pollution
  • Political: Regulatory reform, geo-political risk, rise of state-directed capitalism, terrorism, tax, Sharia compliance (Takaful)

Of the above, in the near term, technological advances and economic factors are driving most of the change. How?

  • Adoption of information and analytics and developments in devices and sensors are generating vast amounts of customer data and corresponding insights which can have strategic implications on the overall business
  • Demographic shifts and urbanization are causing massive shifts in customer demands and expectations

On the technology front, what do customer insights lead to?:

  • Adequate risk pricing
  • Sharper customer engagement activities, better underwriting and more customised solutions
  • Needs-based product offerings, offered at the right time  catering to specific life stages or individual circumstances
  • Increased demand for micro products, flexibly priced and tailored to customer profiles
  • Real-time risk pricing models with self-learning algorithms

Insurers can prepare to adapt to changes by investing in new/emerging methods of data capture, using data lake technologies and driving a culture based on innovation.

Link to Full Article:: click here

Digital Insurer's Comments

Facebook, Amazon, Google, and dozens of other technology natives have been using AI for years, refining tools and approaches bringing them almost mainstream. Forward-thinking insurers are moving toward algorithmic underwriting, especially in the areas of sensors and telematics where risk data is streamed and should be processed in real-time.

We believe that a combination of algorithms and human input is the best approach with bots crunching data and actuaries and underwriters developing data-driven new product strategies.

Link to Source:: click here

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