Actuarial Modernization on a Shoestring Budget

By Amy Nelson, Vance Forrest and Nate Pohle

Actuary of the Future, March 2024

Actuarial functions are regularly being asked to do more with less. Business partners rightfully challenge actuaries to deliver more value through insight and foresight. Actuarial functions typically sit on a lot of information, but that information isn’t always accessible, clearly organized, or repurposed when needed for stakeholder requests. So, while we regularly hear that actuaries should be providing more insights for the business, there is rarely specificity around what that means and the challenge may seem unclear or daunting.

During the 2023 SOA Life and Impact meetings, several sessions were held to unpack what actuaries can do with limited investment to deliver exponential returns for their companies. Small changes were identified to help increase the perceived value delivered by actuaries. The key themes that emerged were:

1. Actuaries can better anticipate and plan for what their stakeholders need.
2. Actuaries can more clearly communicate with stakeholders.
3. Actuaries can better leverage existing analysis and sensitivities in new avenues.
4. Actuaries can assess and streamline existing processes and reports.
5. Actuaries can ensure their teams continue building skillsets and cultivate talent for the future.
6. Actuaries can create more capacity in order to focus more of their time on value-add insights.

Actuaries should continue to foster a culture of challenging the status quo and being more vocal to identify emerging trends and insights, ensure to comment on the “why” and “so what.” The next natural question then follows: How can these be achieved without a significant investment? This article is intended to provide actuaries at all levels actions to help achieve more insights.

Alignment with stakeholder needs

Stakeholder alignment has always been important, but as companies move into a post-LDTI/IFRS17 world and the economic climate continues to shift, stakeholder needs will continue to evolve. How can actuaries better understand and anticipate stakeholder questions?

Tactically, actuaries can perform the “start, stop, continue” exercise to receive direct stakeholder feedback on which activities, processes, or reports they should start, stop, or continue. This simple conversation can help you and your leaders challenge the status quo and the work that has always been done in order to find better ways to serve stakeholders and prioritize your valuable time.

Given market and other industry trends, actuaries should consider proactively running additional sensitivities to better understand results drivers and financial impacts to help predict future trends and impacts. Then when the need arises to draw upon that additional analysis, it is at the ready.

Actuaries can more clearly communicate with stakeholders: Focus on simple storytelling, don’t geek out on the technical details for a less technical audience

Generally speaking, actuaries should strive to spend more time preparing for stakeholder presentations, such as doing “dry runs” of presentations and pre-socializing results before larger meetings. That preparation can go a long way in ensuring that insights are received by stakeholders.

When delivering communications, actuaries shouldn’t always lead with a deep dive into analysis or detailed numbers. Rather, peel back the layers of the onion to meet the audience where they are and take them on the journey. Helpful classes from consulting companies or Toastmasters can help, or ask a peer, mentor, or boss to practice and be open to feedback.

Leveraging and repurposing analyses and sensitivities in new avenues

A key theme that emerged during these sessions was that actuaries should take the time to better understand the nature of stakeholder requests, particularly ad-hoc requests. Oftentimes actuaries don’t ask the right questions of a senior executive, and they rush off to start the analysis without taking the time upfront to ask key questions and see what off-the-shelf analysis might fit the purpose. Many times, a range or directional answer may suffice without spending weeks getting to the perfect answer.

Actuarial departments are looking to better integrate their insights from product ideation to in-force management, including information into underlying product risk drivers, future performance expectations, policyholder behavior, and in-force management levers. This cross-pollination seeks to find ways to better integrate across the enterprise and repurpose analyses. Actuaries should look for ways to leverage skills and insights cultivated from core BAU work in these areas.

Actuaries can enhance their existing processes and reports

In general, management wants more and more, so the number of reports and processes continues to build, sort of like barnacles on a ship. It is important to regularly assess current processes and reports. For reports and data visualizations, more advanced tools have become more commonplace; however, data visualizations alone do not always tell the reviewer if the trends and numbers are as expected.

A simple enhancement can be the addition of expectations and tolerances, such that reviewers can more quickly understand when results are deviating from expectations. These small improvements enable actuaries to more easily identify drivers of results and don’t require significant investments from the organization.

Another simple exercise can be performing cross-department comparisons on similar reports to identify best practices that can be applied from other departments.

Cultivating talent

There continues to be a significant demand in the marketplace on actuarial talent and actuarial managers should continue to monitor and develop future skills for themselves and their teams.

Look for ways to pilot new technologies and techniques. Plus, devote sufficient time for skip-level 1-on-1 meetings (e.g., if you are a manager, meet with staff two levels below you) and consider including team members into leadership conversations so they can better understand how their analysis impacted decision making. In some cases, actuarial team members can listen in as “silent observers,” as not to interrupt the conversation, but will still lead to learning and development.

Create capacity

“Just-in-time” results do not leave time to deliver insights. There are multiple steps that actuaries can take to reduce rushing results and, in doing so, freeing up additional time to focus on providing insights. By creating capacity, actuaries can spend more time delving into model results or analyzing complex actuarial assumptions. A few examples include:

• Modeling: When it comes to modeling, many actuaries use a guess-and-check approach for model preparation and production. In this approach, an actuary kicks-off a model during the quarter close with the expectation that it could crash. Actuaries can perform test runs with new plan codes and model updates in advance of the close in order to have the model running correctly. These test runs can be performed to only run for the first few time periods of the projection period to save time. Actuaries can also take advantage of overnight runs, a grid system, and automation to free up additional capacity.
• Data: Simple checks can go a long way. For example, before using data, quickly scanning the first few rows or running a quick summary table can validate data accuracy and integrity. This can identify data issues and eliminate issues/outliers before running further analysis.
• Automation: Actuaries are very familiar with automation and should continue to look for ways to leverage emerging technology to improve. Processes should be revisited every few years for ways to incorporate new techniques or technologies.
• Use of temp resources: Many organizations are also seeking to bring in temporary resources, either within our outside a company, to help create capacity during critical periods.

Conclusion

Opportunities exist for individual actuaries to create further business insights without breaking the bank. This starts with better stakeholder alignment and being open to feedback from stakeholders on what can be improved. Based on that stakeholder information, actuaries can create capacity in their teams for areas of increasing demand and look for ways to further develop their talent. Simple improvements to KPIs, reports, and processes can go a long way during key periods and also better anticipate deviations from trends and expected experience. By making these changes, we can inspire others within and outside of our organizations to do the same and enact even greater change, as we look toward the future of work for the actuarial profession.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.

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Amy Nelson, ASA, is a senior consultant, Deloitte Consulting. Amy can be contacted at amynelson@deloitte.com.

Vance Forrest, FSA, is a manager, Deloitte Consulting. Vance can be contacted at vforrest@deloitte.com.

Nate Pohle, FSA, CERA, is a senior manager, Deloitte Consulting. Nate can be contacted at npohle@deloitte.com.