BY BRIAN Z. BROWN on CASACT
As I have traveled the world, it is apparent that actuaries are working in new areas and the demand for people with technical skills is increasing. Those with skills in predictive analytics who also have insurance expertise are in extremely high demand.
Predictive Analytics Opens Doors
Greg Hayward, assistant vice president & actuary at State Farm, manages a group of actuaries and data scientists specializing in predictive analytics. He observes that actuaries are using analytics to help claims adjusters better manage claims, marketing personnel improve the customer’s experience, IT departments manage peak demand cycles, as well as several other areas. Greg has never seen actuaries with analytics skills in higher demand.
Claudine Modlin says actuaries are bringing more and more value to claims departments. Claudine, a former consultant and leader in Willis Towers Watson’s group working in predictive analytics, is now the new head of strategic planning & competitive intelligence for Farmers Insurance. Powerful analytics tools help claim adjusters better identify fraud as well as salvage and subrogation opportunities. These tools also provide more information to better manage claim outcomes. They can mine the notes of claim adjusters, nurses and doctors, turning unstructured text into meaningful data that can be used to lower claim costs. Claudine says that predictive analytics tools can ultimately be used to improve the customer’s experience.
Advancing to Senior Levels
Actuaries are expanding beyond their traditional roles at insurance companies into senior management. Currently, we have 114 members whose job title is president or CEO. This is not surprising as actuaries are very bright and understand insurance operations very well.
If a CEO is an actuary, he or she understands the value of actuaries and is more likely to hire actuaries to work in many nontraditional actuarial roles. I spoke with three such actuaries who are senior officers: Janet Katz, executive vice president and CEO at American Agriculture Insurance Company; Brian Duperreault, president and CEO at AIG; and Charlie Goldie, CEO, P&C, at Partner Re. They have all elevated the roles of actuaries at their companies.
“The breadth of knowledge learned on the actuarial exams helps prepare actuaries for executive roles,” says Charlie. He further adds that actuaries need to develop excellent communication skills, be able to understand their audience and tailor their presentations for them.
Janet also acknowledges the value of rigorous testing. “Actuaries are well suited to be in senior roles as the exams expose them to the detailed entries on financial statements as well as all of an insurance company’s operations (claims, underwriting, finance, etc.),” she says. She offers three pieces of advice for actuaries aspiring to be senior leaders: 1. Remain curious — keep learning; 2. Work with other departments (claims, underwriting, etc.); and 3. Understand yourself — know what you are good at what you are not good at, and work to improve your skills where you identify a shortcoming.
Brian believes that at its basic level “good insurance practice is to use data to make good decisions.” Actuaries have always used data to solve problems. With more data and tools becoming available, actuaries with the right skill sets will be in very high demand.
If a CEO is an actuary, he or she understands the value of actuaries and is more likely to hire actuaries to work in many nontraditional actuarial roles.
“Realize that you cannot do everything and need to rely on your staff,” Brian advises. “A great manager is someone who can ask the right questions to evaluate people’s abilities,” he says.
“You also need to become comfortable with taking risk and owning the risk instead of advising someone else on whether they should take a risk.”
A Global Need
Detariffication or pricing deregulation is spreading throughout the world — China, Saudi Arabia, Malaysia and Turkey are just a few examples — and as countries move away from tariffs, companies need actuaries to help devise new rating plans. Companies with well-designed rating plans will have a clear competitive advantage. Detariffication also means that regulators see a strong need for actuaries to be involved in financial statements. Many countries are requiring actuaries to play a role in financial statement attestation.
Kenny Tan, a chief actuary at AmGeneral Insurance Berhad, moved back to Malaysia a year ago. He said that the regulators are now requiring each company to have a qualified actuary perform an independent review of the financial condition and provide a report to the board. Companies are adding actuaries to develop prices in the new competitive market. Adding to all of these changes, the International Accounting Standards Board’s IFRS 17 will also increase the demand for property-casualty actuaries to help companies meet these new accounting regulations.
Novel and Conventional Markets
Actuaries are also making in roads into banking and insurtech as well as the familiar mortgage insurance market. In banking, Scott Hallworth, chief data officer & chief model risk officer at Capital One Financial, drives the company’s data strategy and leads the advancement and management of models, enabled in part by enhanced methods and tools. He thinks it is an ideal time for more actuaries to work in banking. Banks are required to develop models and manage their on-going performance in a transparent manner across all of their functions (e.g., risk segmentation, capital modeling, forecasting, marketing). Scott says that actuaries are well suited for this work due to their combination of deep analytic skills, rigor in providing evidence to support development choices, and comfort with managing large, unstructured datasets. With the help of the Actuarial Society in South Africa, the CAS is also working to expand our member’s footprint into banking. About 10 percent of the credentialed actuaries in South Africa work for banks, thus offering the CAS a guide on getting more CAS members into this industry.
Sheri Scott, a consultant at Milliman specializing in insurtech, predicts that the demand for actuaries will expand tremendously in the next several years. Insurtech companies are run by incredibly smart people, Sheri says, but many of these companies do not have backgrounds in insurance and the concept of state regulation of rates is very foreign to them. They need actuaries to help them understand the insurance rating and regulation.
CAS Board Director and Uber Chief Actuary Frank Chang agrees that the demand for actuaries in insurtech is growing, mainly to keep up with the explosion of start-up insurtech companies. The insurtech market has gone from a $1.4 billion investment with 144 companies in 2015 to a $4 billion investment with 328 companies in 2017. Frank currently manages a group of 15 actuaries at Uber, and he believes that most or all insurtech companies will need actuaries to help price and analyze products.
Actuaries are also doing more work around mortgage default risk. Our members have traditionally worked for mortgage insurers and are required by the NAIC to give actuarial opinions on mortgage insurers’ reserves. Recently, Freddie Mac and Fannie Mae have been deleveraging their balance sheets by selling bonds backed by mortgages and entering into reinsurance agreements with P&C companies to limit their risk. Many of our members have been pricing and reserving these new reinsurance structures.
Ben Walker, senior managing director at Aon Benfield, says that in 2013 only a couple of companies were active in mortgage transactions. Currently, however, more than 40 companies are active with actuaries working on evaluating mortgage risk — work that can translate into other areas. “Actuaries can export the mortgage skills to related financial credit products (e.g., student loans, auto loans etc.),” Ben says.
In traveling to visit CAS members throughout the world, I have heard a very clear message in many countries: We need more P&C actuaries, and we need them now!
The news at home is also very encouraging: Glassdoor, the jobs and recruiting site, rated data scientist as the number one job. Without a doubt, the CSPA credential will provide actuaries and others with the new skills to flourish in today’s job market. It is certainly an exciting time to be an actuary.