The stereotype that actuaries can only work in the insurance industry focusing on reserves and premiums is wrong, and, unfortunately, they are stuck with this prejudice to this day. That said, we have to admit there is some truth to it as indeed the majority of actuaries are still busy performing their old school traditional roles. However, that could soon be a thing of their past.
A recent PwC study titled “Actuary of the Future Survey”, which we discuss in this blog, sheds some light on this problem and brings really good news; the actuary of the future will be less focused on boring calculations and busier with real problem-solving — and that is really promising. Today, successful actuaries are already more passionate and courageous when it comes to using their knowledge in any area and usually ask themselves two questions: What is the problem and how can I apply my expertise to solve it?
The purpose of this blog entry is to inspire, encourage and show that actuaries have full responsibility for their future, highlighting the importance of acting now to develop the right mix of skills to grow and keep up with the market’s needs.
The evolution of the actuarial profession
As with many professions, actuaries have been and still are experiencing a constant evolution in their work, which can be described through four primarily phases:
- In the past (phase one), actuaries were only performing classic actuarial activities, such as pricing and reserving. Nowadays, these types of activities are saturated, explaining why the need for “traditional” actuarial activities is slowly decreasing.
- As a result, actuaries began to expand into other types of activities, such as modelling, regulation, risk management, Assets & Liabilities management, among others. This can be described as the second phase.
- In the third phase, which is where we are today, the expansion reached areas such as Controlling, Data Analytics, Accounting, IT and Law/Ethics. This is where actuaries are currently in high demand and understaffed.
Looking into the near future, actuaries will take the lead on subjects such as machine learning, AI, Cloud Computing, Blockchain, InsurTech, Platforms, and New Data coming from sources such as telematics/smart home, cyber, climate, ESG, emerging risk, among others.
Some actuaries have already been left behind due to changes in their profession. In today’s reality, upskilling and the ability to adapt are key ingredients for an actuary to grow and keep up with the market’s needs. It’s interesting to see that six out of seven actuaries believe that they are responsible for their own upskilling, as opposed to being driven by employers or credentialing bodies.
Keeping up with change
Data professionals, modellers and various kinds of business analysts have sufficient technical background to build relevant models and develop solutions. However, the business side of things requires the involvement of specialists who have an understanding of the financial sector as well. Here, the actuaries are well placed to be translators of the business, solving important problems and communicating pertinent solutions.
The exhibit below from the “Actuary of the Future survey” demonstrates this clearly: human-centric skills are equally important and will help actuaries face the increased competition (more on that later).
Time spent per month, on average, upskilling each of the following skills:
Digitalisation, trending product design such as instant or dynamic pricing, and predictive analytics are technically covered by, for example, technical scientists. However, understanding the policyholder behaviour, incorporating management actions and wrapping up results to policyholders, boards and regulations requires adequate business and people skills.
By now it’s clear that learning new skills is important. But what type of skills will be needed? We tend to group these into technical and human-centric.
Technical skills are crucial for the actuary of the future
Acquiring the right technical skills will boost your effectiveness to do your job and achieve your goals. You can obtain technical skills through formal education, but also self-learning (for instance online lessons). The ones we found to be the most important (you might have a different opinion on this, of course) are the following:
In general, predictive analytics is used to apply statistical techniques which, based on historical data, estimate the likelihood of future outcomes by using, for example, linear regressions.
We give you, as an example, a project that required a complete re-pricing of all the health insurance products. We had at our disposal the company’s internal data as well as an external dataset acquired from an independent party.
After crossing the two datasets, it was impressive to discover so many things about our clients, including, on average, their detailed diet information (how much fish, meat, vegetables and fruits they consumed), sports routine, and hours of sleep, among other aspects. This allowed us to link everything to the probability of a person having a certain disease.
We also discovered that sometimes the data can trick us and that only applying statistical techniques can get one in trouble. Thus, critical thinking, brainstorming between teammates and communicating with other departments was essential to succeed in this project.
Another important skill is the ability to visualise the data. Actuaries need to be able to analyse and understand the in- and outputs of their work, but also to pass their message correctly to the reader.
One of the questions you should ask yourself is “Who will be the audience?” and adapt your presentation accordingly using dynamic graphs where the user can play with the options and get as much information as possible. Two powerful tools we use in PwC Luxembourg are PowerBi and Tableau. However, we bet there is an infinite amount of tools out there performing similarly.
We just highlighted a couple of examples, nevertheless, there are many more technical skills that an actuary can master if his/her role requires, such as: machine learning, multidisciplinary approach, neural networks, and the list goes on.
The way we see it is that the aim of the future actuary will be to be able to take advantage of those new technologies to enhance his/her work and take it to the next level. Just imagine how our daily work life would change!
What do other actuaries say?
The PwC study was conducted with a number of actuaries from all around the world from different fields, ages, levels of experience and level of technical skills.
Respondents’ perceived level of proficiency for each key emerging technical skills
Respondents’ perceived level of proficiency for each key emerging technical skills
The key takeaway is that there is a clear gap between the importance of the emerging technical skills and the number of actuaries that are proficient enough with these skills to use them in their daily life.
Human-centric skills are as important as technical skills
The survey also shows plainly that the significance of data analytics is increasing in actuarial. However, most actuaries aren’t really interested in turning into data analysts; instead they also want to focus on the business side and on honing their communication skills. Indeed, they are right. Their upskilling shouldn’t only be about mastering modelling or data capabilities; the human-centric ones are equally important. Surprisingly, the survey shows that actuaries are good at the latter already, which we believe to be a quite interesting finding. Even so, it’s good to see that important values such as adaptability, leadership or project management are highlighted too.
Without question, the actuary of the future will have to master their human-centric skills, including communication, adaptability, business acumen, leadership, and project management. The ones highlighted as the most important are:
Adaptability is the ability to re-adjust and adapt to a new reality. The actuary of the future should use what he/she knows no matter the industry he’s working in. Actuaries need to expand the same confidence they have in the insurance sector to new fields, where their expertise is needed and not be afraid to do so.
As someone in the PwC Luxembourg’s Actuarial Services team always says, “You guys are not robots, nor calculators!”, which is true. Besides calculating, modelling or making estimates, actuaries also need to have the ability to extract the most important conclusions and be able to transmit those to both technical and nontechnical people in a fluent and clear manner. Like a “story”.
The “Actuary of the Future” study revealed that actuaries have quite good human-centric skills; yet, there is still a wrong perception that they are technical experts, who lack human-centric skills.
The truth is, these skills are what differentiates actuaries from other technical people, and that should be used to their advantage.
Level of proficiency of human-centric skills:
So, what does the future hold for actuaries?
To wrap up, we believe that the actuary of the future is a person who is always curious and hungry for knowledge, is continuously learning the needed technical skills for her position to make the work joyful and efficient, and is flexible and easily adapts to different areas.
Finally, her most important asset is to be able to communicate in “human language” to people with different levels of expertise.
The actuarial professional is standing at a crossroad and there are just two choices: do nothing and risk staying behind; or act now and keep up with the fast changes. Which one will you choose?
What we think
We live in a dynamic and unpredictable world that is constantly changing. This change provides an opportunity to redefine our profession exploring new skills and areas where we haven’t stepped before.
The ability to change only depends on the willingness of the actuary to embrace this change! It’s up to us and only us actuaries to adapt, work smarter, learn new tools and skills giving a greater impact to this world.