The importance of technological innovation in the actuarial industry
The Fourth Industrial Revolution brought about by Artificial Intelligence has caused a tidal wave of possible change in the actuarial profession. Their success will depend on how they adapt to future innovation.
Actuaries were the original data scientists (apart from intelligence societies in the militaries) and insurers were innovators of their time in being data-focused, predating calculators or computers. Current actuarial functions are at full capacity but arguably not at full potential. with the key drivers being an outdated tech stack. being handcuffed to legacy systems and data science methodology creeping in fast.
Technology can most certainly be leveraged to impact the actuarial profession. It will depend though on host actuaries react to these changes:
Requiring a different mindset: The technologies are not always familiar to most actuaries. It will require a bold mindset that is kept updated due to the rapid pace of these technologies. Having a beginner’s approach instead of expecting to be an expert and open-mindedness to future possibilities is a must.
Changes required in skill sets: Programming, strategically evaluating the results of these technologies and understanding the context of the new models is crucial.
Enabling different business models: Peer-to-peer insurance, crowd-wisdom pricing insurance instead of traditional, blockchain-based Insurtechs – this is leading to many corporate insurance giants disrupted in various market segments through models which promote a new-age social impact approach.
Tech changing meta-trends: Technology is radically changing the broader social context for actuaries as well. The future of work is changing due to an on-demand workforce, flexible sharing collaborates, telecommuting and crowd-wisdom startups.
The future of education is also changing. Will this ‘secret society of specialised experts and logic of professions still be relevant in crowd collaboration and hive mind theory? And how do actuaries fit into all of these meta-trends? Or more importantly, what is the future of actuaries in the exponential tech society? Is it being augmented or automated away? Will its usefulness be downgraded as a profession? How is the actuarial profession preparing for the tech singularity? How do we encourage risks and innovation rather than labeling it as failures or spearheaded by misfits? We are increasingly prone to being siloed as quantitative analysts instead of corporate leaders. It is rare to find actuaries in Fintech/Insuretech and trailblazing areas. We are thus stepping up and joining the future makers instead of serving the conventional R&D departments, which usually abhor research and futurist thinking.
Technology, futurism, emerging risk analysis; these are the frameworks of what we need in terms of mentality. Our usual scientific thinking is too critical and sceptic to allow for innovation. Of course, new startups and trends will have huge uncertainties, but we shouldn’t be looking for definitive proof of success and only then adopting these trends. That is the path to complacency.
The traditional culture within an office is shifting. If the culture is risk-averse and the executive committee abhor research people and label them misfits, then the pressure to conform will lead to a few deviant actuaries opting for creating the future. “You are what your employer is”. This is as simple as that.
We cannot be innovative as actuaries if the majority of our employers (i.e. insurers) are risk-averse and frozen in time. In our opinion, the South African actuarial industry is not only stepping up to the challenges mentioned, but in certain circumstances leading the charge.
Written by Syed Danish Al