Pandemic Shines a Light on Technology Needs of Actuaries
By Diane Robinette
Actuarial Technology Today, May 2021
The COVID-19 pandemic has disrupted the global economy at a level never imagined. The economic fallout has been catastrophic. Record high unemployment, staggering revenue loss, bankruptcy and an uncertain future have businesses—and consumers—searching for a beacon of hope. In the quest for a lifeline, actuarial teams are quickly being thrust into the spotlight.
The role of actuaries is more essential than ever to the survival and long-term success of many businesses and their customers. As insurance and banking institutions navigate the current financial crisis, data generated from intricate models created by actuarial teams plays a vital role in stabilizing organizations—while simultaneously rebuilding trust with consumers. These decisions, based on data assumed to be accurate, will lead businesses to succeed or fail.
When the pandemic hit, the world quickly spiraled out of control. Astounding mortality rates and hospitalizations, along with widespread business closures, rendered void 2020 predictions that actuaries worked so hard to develop. Even with so many unknows, actuaries then had the daunting task of going back and remodeling business predictions; each model had to be tested to see if assumptions still applied. Adjustments were made, and new models created. Time was of the essence to minimize damage and to plan for an unknown future. Further complicating matters, everything had to be done remotely. In the process, technology challenges associated with Excel—that have existed for decades yet were simply ignored or accepted as par for the course—quickly became a source of frustration for many actuaries working tirelessly to ensure data accuracy.
The Case for Automated Technology
Maintaining the integrity of spreadsheet data is an arduous task. No matter how rigorously a team proceeds, errors are likely to slip through the cracks—and remain undetected—when working in large, complex spreadsheets. Excel offers some auditing and troubleshooting capabilities but when dealing with large models, these features are not always enough.
For example, during the pandemic assumptions had to be reassessed and calculations shifted, these activities were extraordinarily complex as they relied on and referred to other spreadsheets. When users alter the structure of a spreadsheet, the model and how it was built, it is easy to unknowingly break a crucial code within the spreadsheet. For example, there are many interconnections between spreadsheets. Spreadsheets commonly have 30, 40, even 50 tabs or more. Each tab rolls to the right and scrolls down, and there are external references. On average a spreadsheet will have eight to 10 external references, not including cross-sheet references. When managed manually, there is “hope” that the spreadsheet is not broken. And if something is wrong, without spreadsheet management software, users must manually go through calculations, references, etc. to determine the cause.
When making adjustments to large spreadsheets, it is easy to overlook things. Similar to assumptions, references also require meticulous attention to detail. Everything must be formatted properly, and references must be the same. If references are not consistent, results may not be reliable. Monitoring references and ensuring that any changes made to spreadsheets are what the user intended are keys to ensuring accuracy. Otherwise, significant time will be spent manually looking for errors.
The pandemic has also changed how actuaries collaborate. Fluid conversations typical when working in an office environment have been replaced with emails, phone conversations and web calls. And while it is too soon to tell what office life will be like in a post-pandemic world, a hybrid model is highly likely which means a lot of blind collaboration and version control issues for those working from shared drives.
When working in shared drives, a simple double click of a folder allows users do their work, hit save and move on. Version control is limited to a time-and-date stamp, for those who notice. There may be a conversation and an assumption of what was changed, but no details. In an office environment where conversations were fluid, actuaries got by with this siloed approach. In a hybrid model where interaction is more formal and not always in person, version control issues are more difficult than ever.
Modernize how Spreadsheets are Managed
An actuary’s job has never been easy. The added stress of the pandemic, work-from-home distractions (and isolation) combined with accelerated deadlines, greatly increases the likelihood of errors. Solutions exist that provide greater visibility into, and control over, spreadsheets while allowing teams to continue working seamlessly within Excel. Automated risk and analysis solutions take a modern approach to spreadsheet management. These solutions are efficient and provide spreadsheet users at every level the much-needed insight into potential errors and risk that may be hiding in the depths of spreadsheets formulas. For example, automation capabilities test for accuracy in both formulas and calculations thus reducing time-consuming, error-prone manual processes. Interactive capabilities provide an easy way to drill down into cells to see why formulas are not calculating correctly or working as expected.
Automated spreadsheet management technology also solves version control issues by providing a controlled environment for spreadsheets. Every change is tracked, revisions are saved and are easily viewable for future reference and comparison. If something happens and minds are changed, users can revert to earlier versions.
When you consider actuarial teams frequently develop and maintain hundreds of spreadsheets on an ongoing basis, maintaining the integrity of spreadsheet data is an arduous task. Today’s distraction-rich environment further complicates matters. Modernizing the actuary function with automated technology lessens the burden on already overtaxed actuaries.
During these uncertain times, a company’s financial agility determines its success. Simply putting numbers into a spreadsheet and handing it over to the executive team is not enough. Afterall, decisions made are only as good as the information that fuels them. Empower actuaries with automated spreadsheet management technology and ensure the data from which business decisions are made is accurate and consistent.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the editors, or the respective authors’ employers.