Graham Robertson explains the advantages of embracing technological advances and the consequences of ignoring them
Recent technological advances have given insurers more data and processing power than ever before. Insurers are using new information, such as driving telematics, to better understand customer behaviour. They are also changing their business models to keep pace with the outside world. Gone are the days when management information was out of date by the time it reached executives. Managers want real-time information on which to base decisions, and technology has caught up. Real-time business scenarios can be run remotely on phones and tablets. So, with this backdrop, how will actuaries evolve to keep up?
Understand the data
Having lots of data is one thing, but the ability to segment this data in multiple ways allows managers to understand the business better. The same is true of financial results and performance indicators. Visualisation tools can help to digest information in order to get to the root cause of trends or results quickly, and allow drill-down into particular segments. This information can better inform business plans and scenarios, giving an insurer competitive advantage, and actuarial input into their design is paramount.
Technology in a global world
Global insurers should use technology that can be accessed, executed and reported upon from anywhere in the world. Consistency across business segments drives quicker and better understanding by management and leads to better decisions.
As an example, consider a global insurer, whose planning process involves linking together large numbers of spreadsheets to get to its business plan. The planning process takes considerable time and new iterations of the plan cannot be achieved quickly. Producing the business plan requires much manual intervention in data processing and that time could be better used formulating the strategy and plan itself.
Compare this with a global insurer that has a consistent enterprise planning solution, accessible from any country and requiring minimal set-up or manual intervention. More time can be spent on planning and analysis to help to ensure business success. Add in extra technology-driven capabilities such as reforecasting, integration with the capital model and scenario modelling, and you quickly see how much value is derived from having better technology.
Horsepower = insight
Improved technology also enables more extensive data capture and manipulation. Available data has reached a level that is changing the way we model risks. We see this in driving telematics, where continuous data on driving ability is being used to analyse risks more accurately.
Analysing large data sets has been problematic historically but is becoming achievable as technology advances. Increased processing power has enabled enhanced techniques, and newer actuarial disciplines, such as predictive modelling, have taken a quantum leap forward. Analytics teams are running intelligent algorithms on large data sets to provide new insights. Trends and indicators emerge to inform judgements.
Where do actuaries fit in?
Actuaries must strive to be at the centre of these initiatives. Combining our insurance insight with advanced modelling will take the industry forward. Actuaries do not need to be experts in technology, but we do need to understand it to improve our contribution. The profession has come a long way - from pencil and paper, through spreadsheets, and onto enterprise tools and advanced analytics. More accurate, relevant, transparent modelling, using superior technology, will optimise decision-making, and actuaries should lead this initiative. Our expert judgement will be enhanced and this will benefit our profession, the industry and consumers.