Actuarial science is a small world. There are not that many credentialed actuaries, but even if you expand it to those who are actuary-adjacent, it's still not a large world compared to all the accountants out there.
So, most innovative actuaries are willing to talk to anybody at any level. A lot of people are busy, but many of them are open to talking because you never know where an idea may come from. That's one of the most important aspects -- you should try to pull from many different areas when you're working on ideas. A lot of the people I've known who've done innovations in the actuarial sphere have pulled ideas from outside of the actuarial world. In general, be open to looking around at all sorts of possibilities.
"You have to allow yourself at least small failures."
Finally, a lack of fear of failure is a characteristic. There are different levels of risk when you're trying to innovate. There can be big failures, but many innovations start out as small risks. Most actuaries are risk averse, but frequently they are not seeing what the magnitude of the risks are. They are magnifying what the downside potentially is. We're coming from a background where we did well in school and any failure is too much. To be able to innovate, you've got to get away from that. You have to get out beyond the solutions that you know into territory where those known solutions may not work. You have to allow yourself at least small failures. If you don't allow that failure to occur then you're never going to try to innovate, and that's one of the problems.
We're subject matter experts and that's coming from a position of strength. People often approach us for that knowledge, and so we have that credibility. That is a base of strength that you can start from, but you need to tie it to strategic knowledge. If you want to have an impact in a broader organization, you need to go beyond the technical side of things. Ideas are cheap, but you have to execute and deploy. You can leverage being a subject matter expert within your organization, but you don't want to get stuck. You have to have big picture thinking and not just be hung up on the details. Details are important, but you have to show that you understand how the detail fits into the larger picture if you want to influence strategic direction.
More data science, machine learning, and predictive analytics will be incorporated. A lot of this already existed within pricing and underwriting in the property and casualty field, and it's getting more incorporated in life insurance. We need to be able to understand and interpret the tools. We need to understand what the strengths and weaknesses of these models are. We might have to start getting some additional data science-related or modeling-related certifications because, to remain relevant, we really are going to have to dig into these areas.
Coming from life insurance, things have changed in valuation -- now you have to unlock and revisit the assumptions that you’ve made. There have been large changes in standards. You can't just lock things in because we know the reality, we went through a pandemic. Now the regulations and standards are catching up to that reality, and we have to reflect that. But it’s difficult now – when life insurance gets interesting, that’s very bad – and we need to consider how to incorporate recent experience into what we expect going forward.
A lot of times you’ll never know what the impact is. You don’t know what the magnitude of the effect is until later, most of the time. What I've found is a lot of these things are cumulative, from each small change. You might not know the impact for twenty or thirty years. That's the thing with actual work, whether innovative or any kind of substantive work, you may not know the impact until you're gone.
Think of cryptocurrency. I've been reading the Society of Actuaries research on decentralized finance. It's not a big part of insurance yet, but it may be the cornerstone of insurance in the future. Once upon a time it used to be all barter and trade and then it became coin, then we had pieces of paper as our unit of exchange, and then now bits in the electronic system, and then maybe it's decentralized finance next. But how long will that take to get incorporated?