The role of the actuary is evolving rapidly. Historically, actuaries focused primarily on compliance, ensuring business practices, outcomes, and processes are in-line with increasingly complex regulatory requirements.
Compliance will always be an important piece of actuaries’ work, but there are increasing opportunities to expand the value they deliver to the business. Actuaries’ roles have historically been all consuming, due particularly to the extensive and manual number crunching they’re accountable for.
Decision Science offers an opportunity for actuaries to move beyond this strictly data-based role and become more strategically oriented and insights-driven, rather than compliance-driven.
Decision Science in Action: Value of New Business
Let’s see how this model plays out in a short case study: value of new business (VNB).
Insurance executives often tell us that, when they ask why embedded value (EV) has negatively shifted, the answer rarely allows them to pinpoint a problem and address it. In some cases, the answer arrives late and the damage is already done and the problem is beyond addressing.
Pinpointing what part of the portfolio is affected and why is key for executives to remediate losses in EV. Understanding the problem properly, therefore, is critical. This is where Decision Science makes all the difference.
Typically, actuaries might say the EV has moved because more policyholders with medical cover lapsed than expected. While there’s nothing incorrect about this answer, it lacks the granularity executives need to address those lapse rates.
A better answer would be X% of policies without underwriting issues sold by XYZ advisor groups lapsed, and it happened when one of the key competitors was executing a campaign. An answer like this allows executives to act, particularly when it’s received promptly.
The discrepancy between these two answers is not on actuaries, but rather on their tools. The key is having models which better understand customer behavior, take into account market data, and update in near real-time. Existing actuarial models don’t do this, but models hosted on a Decision Science platform do.
How Decision Science takes actuaries into a new, future role that delivers greater insights and value
Actuaries already possess the skills needed to move into a more insights-driven role, what they’ve lacked is the models capable of delivering the granular answers executives need to take decisive action.
In the example above, actuaries can leverage a Decision Science platform to specifically communicate their understanding of VNB and how different situations and outcomes impact it. This empowers actuaries to positively impact company strategy and boost operational performance, and deliver incredibly valuable insights while doing so.
A Decision Science platform also allows for effective and continuous monitoring and measuring, accommodating company-specific parameters and objectives in the process. This leaves actuaries free to do more than address compliance. They instead can prioritize answering key executive questions, providing crucial input to drive business performance and overall strategy.