Executive Summary of White Paper by the Society of Actuaries’ Task Force Released Feb. 13, 2012
By Society of Actuaries
If we look for “analytic certification” on Google, you will find many organizations have already offered training/certifications on analytics, e.g.:
- Certified Analytics Professional
- Certified Business Analytics Expert
- Certified Health Data Analyst
- Workforce Planning and Analytics Online Certification
- Master of Management Analytics
Analytics is nothing new, as actuaries have long been using numerous analytic approaches to provide business insight to insurance executives for their critical business decisions. So it is not surprising that the SOA launched its own strategic initiative, Business Analytics for Actuaries, in 2010. A white paper “Actuaries in Advanced Business Analytics” was published in February of 2012. We believe most Technology Section members will be excited about this new initiative, so we are reprinting the executive summary in this CompAct edition.
Analytics has been called the industrial revolution of data. The Society of Actuaries board added a market research project on business analytics to the list of strategic initiatives in October 2010. The board had two charges:
- Are there significant opportunities for actuaries in the area of business analytics?
- If so, what recommendations do you have for the Society of Actuaries?
The many labels (often used interchangeably): analytics, predictive modeling, infomatics, and data mining; and job titles that include director of Clinical Outcomes and Analytics, chief of Health Care Economics, and chief Science Officer, added to the complexity of this initiative.
In areas of underwriting, marketing and auditing, actuaries have been involved in analytics for decades. How to distinguish “Advanced Business Analytics” (the term the team agreed upon) from more familiar territory? The team built a definition for actuaries.
Advanced Business Analytics for Actuaries is a set of tools and techniques used to describe, predict and recommend business courses of action that take into account consumer, provider and distributor behavior. It draws from many disciplines. It relies heavily on vast amounts of data and computing power. Practitioners use statistics, modeling, optimization, clustering, and market research. Combined with actuarial judgment, using Advanced Business Analytics provides employers with insight for decisions related to managing complex risks and optimizing product design, as well as improving outcomes and value for consumers.
The team established a three-year planning horizon. The U.S. Department of Labor predicts significant growth in analytics through 2018. McKinsey (May 2011) predicts phenomenal growth in analytics, including a total 1.5 million managers and advanced analysts needed by 2018. The team views the opportunities for actuaries in Advanced Business Analytics as follows:
- Current jobs, historical employers—performance improvements.
- New roles, historical employers in centralized analytic departments.
- Target more senior positions—leaders, overseers, makers of analytic conclusions, people who integrate results with business decisions.
This approach builds on the reputation actuaries have with their current employers: trustworthy, data-based decision makers, and business acumen. It offers new career options while also being a defensive move, so actuaries do not lose ground to other professionals where actuaries have home field advantage. Success will open more doors for actuaries and attract the best to the profession.
Analytics can be useful to any organization, but certain practice areas have more readily apparent applications: P&C, Health, Risk, and Life. The role of the SOA should be to provide members with the appropriate knowledge and experiences to prepare and position the profession to claim a share in the anticipated growth and to promote the value of actuaries. This project may also enable actuaries to branch into other industries requiring related analytics; however, this is not a team goal within the three-year planning horizon.
The initiative involved environmental scanning, analysis, market research, and surveys. In addition to the potential job market and other professionals competing with actuaries, we looked at what organizations are providing education. There are a substantial number of university programs and providers of continuing education for both for-profit and not-for-profit alike. Members of the team developed the list and importance of the skills involved for practitioners of Advanced Business Analytics. This was compared with the current SOA syllabus and continuing education offerings for gap analysis. SOA members were surveyed on a range of issues—the sophistication of analytics in their organizations, their perception of actuaries as leaders in analytics, and their regard for the SOA as a supplier of education in analytics. Important outcomes were that a significant number of those surveyed are interested in learning more about analytics and trust the SOA as a provider of that education.
Another aspect of the project was a qualitative employer survey that provided anecdotal insights. Although several market research firms thought they could also obtain information from a large number of firms, this turned out to be impractical. As mentioned earlier, names for analytics, job titles and where the work is performed vary substantially from organization to organization. IPSOS, the firm selected for the task, performed the qualitative research successfully but not the larger employer survey.
In summary, the research identified a potential demand for actuaries in this analytics role and an interest from actuaries to develop these skills.
The second part of the charge from the Board, impact the following areas: professional development (continuing education), prequalifying education (basic education), research, and marketing. The SOA can play a role to prepare actuaries for the expected growth in analytics. The SOA can build or refresh knowledge through basic (prequalifying) and continuing education programs. The SOA can help brand actuaries as quantitative and risk management leaders.
The team is making the following recommendations:
- In 2012 and 2013 large meetings should include an overview (new) session on Advanced Business Analytics.
- The SOA should develop online and e-learning courses that involve case studies.
- Development of a map for people interested in rounding out their knowledge in Advanced Business Analytics.
- Development of an in-depth seminar in Advanced Business Analytics, available once or twice a year.
- Additions to prequalifying education.
- Research projects to build credibility for the SOA.
- Develop a consistent marketing message.
The highest priority is in continuing education. This is where the SOA can respond rapidly to the changing educational needs of our membership in analytics. A key recommendation is the development of an in-depth seminar that includes demonstration of mastery of the material. Next, the development of online courses in this area can assist existing practitioners as well as be used for prequalifying education. SOA research efforts can help build both the content and the reputation of actuaries in this area. And marketing a consistent message to our members about SOA offerings and the market potential will help build support. Another key recommendation is to create an ongoing analysis of job vacancies for actuaries and key words associated with them. This information can be used to guide SOA educational efforts to ensure it is providing what is valued in the marketplace.
The Advanced Business Analytics team was formed primarily to conduct marketplace research. The team will be disbanded after representatives have met with the possible implementation areas. The recommendations are frameworks, not blueprints, because the team believes ultimately the decisions as to how to integrate and implement programs are best made by the volunteer and staff experts in those areas. Acceptance of its findings should mean that the ideas from this initiative are considered very seriously by the areas responsible for them. Status reports should be made to the board through the Cultivate Opportunities Team.
The team also recommends including metrics associated with the success of these efforts. In three years have our membership become more aware of the opportunities for them in Advanced Business Analytics? Have they participated in the education the SOA is offering? And what is the quality and quantity of the SOA offerings? The metrics should be suitable to the actions the SOA takes and have some weight in the organization.
Download the full White Paper.