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Modernizing the actuarial operating model

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Article Synopsis :

This paper from Deloitte examines the drivers, components, benefits, and challenges of modernizing the actuarial operating model and suggests specific actions to help prepare insurance companies for the future of work. Here’s the upshot in critical areas:

 The Digital Insurer reviews Deloitte’s Report on Modernizing the actuarial operating model

Digitally-empowered actuaries – Catalysts for strategic change?

People and talent

How companies traditionally have thought about it:

  • Talented employees rise through the ranks of the organization in a linear, vertical fashion
  • Talent development is conducted through a formal process, primarily led by employees’ direct supervisors
  • Talent is relatively immobile (outside of common actuarial rotation programs) due to restrictions based on which unit hired the employees or pays their salaries and an inability to match actuarial work with the skill sets of employees elsewhere in the organization

A new view:

  • As organizations move from a functional structure with strict hierarchies to one that is more team-based and/or matrix-oriented, companies should place renewed emphasis on talent assessment, acquisition, development, and mobility
  • Supervisors should identify actuaries with unique skill sets (such as modeling expertise) and leverage those skills to influence as many projects (and peers) as possible
  • Management should allow (and encourage) actuaries to assume more strategic, non-traditional roles—risk, underwriting, finance— to drive value-added work
  • As processes are automated, actuaries will have to learn traditional actuarial concepts currently acquired through the trial and error of executing lower-level tasks. This will force actuaries to focus on the application of these concepts instead of just the calculation process itself
  • Activities will be completed using contingent, freelanced, and contract professionals

Process

How companies traditionally have thought about it:

  • Actuarial processes are time-intensive and difficult to automate
  • Actuarial processes are “too nuanced or specialized” to delegate to non-actuarial teams
  • Actuarial work is often manual in nature and must remain that way due to its complexity

A new view:

  • Outside of analysis, actuarial processes often may be more efficiently handled by other teams or processes
  • Companies should seek out and leverage technology that can be applied to actuarial processes:
    • New software applications can accelerate data manipulation
    • Natural language generation (NLG), advanced scripting, and robotic process automation (RPA) can free up actuaries’ time to focus on analysis and strategic, value-added activities

Service delivery

How companies have traditionally thought about it:

  • Actuaries are heavily involved in all processes affecting actuarial balances including data preparation, model building, infrastructure development, data warehousing, and reporting/analysis
  • Actuaries are organized by function (valuation, enterprise risk management [ERM], asset/liability management [ALM], pricing, reserving) and within line of business (annuities, life insurance, personal, commercial, retirement, etc.)
  • Actuaries often are centralized in one geographic region—for example, at the company’s headquarters

A new view:

  • Service delivery should focus on deploying mobile teams with targeted skill sets across the organization such as a modeling center of excellence (CoE)
  • Shared services models can be used to centralize and more effectively execute processes (e.g., valuation production)
  • Non-actuaries can support certain actuarial tasks, such as project management, process management, operations, and data management
  • Increased use of flexible actuarial pools—talent that can be deployed across products/functions/business units—can help meet fluctuating demand
  • Companies should consider non-centralized staffing models that move or outsource work to lower-cost geographic regions or to specialized staff

Data

How companies traditionally have thought about it:

  • Actuaries are regarded as data experts due to a history of manipulating data to make it fit for a specific purpose
  • Actuaries own the data through the entire process of acquiring, cleaning, processing, and evaluating it
  • Actuaries rely on legacy administrative systems as their core source of data, although these systems were not developed specifically for actuarial use

A new view:

  • Actuaries should not continue doing “data jockeying” work as the organization’s focus shifts to improving speed and reliability
  • Actuaries should develop better business requirements to enable IT and other integrated services to deliver the support actuaries require
  • Actuaries should use tools that support data management to improve data processing
  • Where possible, actuaries should look beyond administrative systems and databases developed by actuaries for places to obtain and store actuarial data

Technology

How companies traditionally have thought about it:

  • Technology tools can help actuaries work more efficiently, but often times, actuaries end up in charge of implementing the technology itself
  • Actuaries often believe that technology partnerships on actuarial initiatives lead to long implementation timelines and cost overruns
  • Actuarial system conversions will solve all actuarial process and analysis problems

A new view:

  • Legacy systems may not help actuaries execute as efficiently as they should; however, updating actuarial technology should add demonstrable value, such as providing better access to data (touchless valuation)
  • In a modernized operating model, technology is implemented and owned by IT; actuaries build business requirements and provide insight and assistance during development
  • “Applicable technology” is no longer limited to actuarial platforms. Actuaries should access the broad spectrum of technology to improve process and performance

Link to Full Article:: click here

Digital Insurer's Comments

Insurance actuaries have traditionally played a stewardship role, focused mainly on the blocking and tackling of producing financial statements for compliance purposes. Today, and moving forward, senior executives need actuaries to be more proactive and strategic.

By embracing a new, technology-powered operating model that frees them from the constraints of business as usual, actuaries can provide valuable information and insights more quickly and inexpensively, expand their skill sets, and become catalysts for strategic change.

Link to Source:: click here

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