An innovative actuary is someone who's inquisitive. Innovative people are willing to go beyond boundaries. They think about the work in front of them in a broader way. They're willing to take some risks. A conflict that I see is that companies may not have adequate resources or have a tolerance for the trial and error that may be necessary when trying new ideas. The more innovative actuaries are willing to break boundaries in a way that doesn't offend their bosses. Can people think a bit more deeply about what it is that they're trying to accomplish, and what it is they need to accomplish? And can they do things in a better way than what they've done before? Can they anticipate risks better than they might otherwise because they thought about what might happen down the road?
Many actuaries don't do well with soft skills, and that's where I think actuaries need to spend more of their time and effort. One soft skill is communication. You do this body of work and most people around you don't know what to do with it. How do you distill it into its essential elements? How do you communicate the key findings that are there so that they're actionable to somebody else who's not an actuary? I think it's those sorts of things that take away from the value that actuaries bring to the table. People have actuaries because they have no choice. Someone has to sign the statement of opinion and the credentialed actuary is the one to do it. So how does the actuary show their value? It's not by putting together elaborate spreadsheets. It's by putting together things that are comprehensible and actionable.
"Reduce the information to a few key bullet points or a graph."
For example, summarizations of information can be used to show to people who don't need to know what went into creating all that stuff. When you're getting ready to show findings to a non-actuary, it must be something that they can absorb. That speaks not to their intelligence; however, it does speak to their technical discipline and to their time.
I was reading something recently that said when you meet with someone observe the following: be relevant, be clear, be concise, be gone. So how do you get there? It's not by going in unprepared and rambling. It's by doing all the hard work to make it easy for people to understand what it is you are trying to convey. Reduce the information to a few key bullet points or a graph. If someone wants more information, they will ask for it. And be prepared to provide it. If actuaries do that, they will be much more valuable.
It's going to continue to be technically complex. For example, there's a new reserving paradigm that's been developed over the past fifteen or so years. It is expanding to fixed annuity products. The new paradigm is model-based and is coming on board for fixed annuities with a targeted implementation date of 2025 with a three-year transition. So, you could be an early adopter or you could wait until 2028, but it's coming.
The ability of the actuary to evaluate risk, identify opportunities and communicate findings in a comprehensible way will continue to grow in importance. At one time, if you wanted to be a technical actuary sitting in the back room cranking out numbers, there was a place for that. There's less of that opportunity available. Calculating values is only part of the job. At the end of the day, your work has to be explained to people.
There's going to be more automation that continues to come along that will make some of the more routine tasks doable by machines. A lot of processes can be automated. What can’t be easily replaced is the thinking that actuaries do with the information that's been created. The opportunities for actuaries will continue to exist. The key will be to make sure that they stay relevant by creating value. If they want to crank out numbers, do the math, hand it over in a form that nobody can relate to, then people might feel they're not helping in a meaningful way. That should not happen if we evolve the way I hope we do.
If there's a problem that's been set in front of you and I, we should be able to do a better job at figuring out a result than either of us alone. Two heads are better than one. With a data scientist and an actuary, you have two people who may think about or attack a task or challenge differently.
The most obvious way is that it solves some sort of a problem. It's not terribly innovative to run reserves for the fifteenth time. What’s innovative might be some way that I could do the reserves substantially faster. Are there some analytical, insightful reports that I could create that are better? Are there better controls that I can create? Can I modify product design to solve a consumer need? Meaningful innovation is something that's going to help people in some way, shape, or form.
The work that actuaries have done with life insurance underwriting engines has been pretty impactful. The underwriting engine gave companies the ability to process applications faster with fewer invasive procedures like collecting fluids, while using fewer resources. Questions are asked and answered through an electronic process. The underwriting engine evaluates the information provided through questions and third party data and makes a decision. The company can either issue a policy straight off the bat, or the applicant can be referred to the underwriter for a quick look.
Both the underwriters and actuaries have key roles in the development and use of an underwriting engine. The actuary needs to evaluate the tradeoffs of collecting some kinds of information and not collecting other information and what impact the tradeoffs have on future mortality. If I do not collect fluids and I collect third party data from Vendor A instead, how much will future mortality change and will mortality increase or decrease? In other words, does the data that can be gathered electronically replace invasive underwriting procedures in terms of its predictive value? As more cases are underwritten by engines, actuaries will have the opportunity to evaluate the results and make recommendations to modify the algorithms used in the engine.
It’s important to develop soft skills, to become better communicators, and to understand what their customer really wants. Don't tell them what you want to tell them, tell them what they want to know. Figure out what the question is that's really being asked, not the one that is asked. There's often a question that's behind the question that is asked out loud. What is the person’s concern? What are they worried about? Actuaries developing those capabilities combined with their technical skill will be extremely valuable. They would understand what is being asked of them from a technical standpoint and be able to relate it back to what their customer actually needs from them.