Insurers Rethink How to Deploy Their Elite Teams of Risk Gurus

By Cyril Tuohy, LifeAnnuitySpecialist.com. Reprinted with permission.

Lauren Canfield, a long-time actuary at The Standard, represents the future of a profession undergoing big changes.

Last month she was promoted to a key job that involves rethinking the role of a life insurance actuary in order to respond to rapidly changing market conditions, according to a news release that the insurer put out.

Actuaries are seeing their roles transformed. Under pressure to rein in costs and struggling to keep pace with fast-changing technology and new regulations, insurers are keen to put the risk evaluation skills of these professionals in the service of the company.

Actuaries have been on a path from pricing insurance products to engaging in broader financial risk management, Canfield said.

“We’re applying our skills to move all parts of the company forward,” she said in an interview.

Why the Change

The jobs are changing for two reasons, she said.

Changes are looming for accounting standards that govern the many long-duration contracts that insurers have on their books. That is increasing the need for employees comfortable with complex data sets and actuarial assumptions, she said.

Also, the digital transformation sweeping through the industry has sped up how a modern insurer needs to do business. Now there’s an expectation that carriers should be much faster in issuing new products, or changing existing ones.

The Standard, based in Portland, Oregon, employs about 100 actuaries. They are the statistics geeks expected to know at what age a 68-year-old male who works as a construction laborer is expected to die, for instance, and how much premium he should pay for a life insurance policy.

The company sells a lot of group and voluntary benefit products, but also provides individual annuities and disability income insurance.

Roy Goldman, president of the Society of Actuaries, said that a decade ago, insurance products were often designed by marketing departments. “Some of the components of the policy didn't make sense from an actuarial point of view,” he said. Translation: An actuary would have killed the product because it wouldn’t be profitable.

Now actuaries are likely to be called upon at the beginning of the development of a new life insurance contract or new annuity income rider, which thrusts them into more of a product development role, he said.

Products that integrate health metrics into life insurance, like John Hancock’s Vitality program, or life insurance products where pricing changes frequently, need to involve actuaries too.

Actuaries are also applying their quantitative acumen to analyze how products are sold and administered, and to dig into claims data, said Dale Hall, managing director of research for the Society of Actuaries.

There are about 9,000 Society of Actuaries members in the life practice area, according to the organization.

A Different Approach

Matthew Berman, chief distribution officer for Foresters Financial, said he works closely with his company’s actuarial and pricing teams at the fraternal life insurer.

“More and more in the life insurance community there are actuarial transformation teams to align with changing trends in the industry,” he said.

Under pressure to rein in costs and struggling to keep pace with fast-changing technology and new regulations, insurers are keen to put the underwriters’ risk evaluation skills in the service of the company.

“It’s a different way of getting work done with a new set of tools and a strategic mindset,” said Andy Ferris, a member of the American Academy of Actuaries, who said new software tools are helping actuaries complete work in a different way.

Traditionally, they found themselves having to manipulate data in spreadsheets, first on paper and then on desktop versions of Excel. Now much of that work can be completed by software, algorithms and artificial intelligence.

These smart programs can handle the grunt work, merging information from a prescription drug database, an electronic health record database, and a motor vehicle database, and then matching that to policyholder ID numbers, Ferris said.

That frees up actuaries to focus on the higher value tasks of looking for insights and thinking about risk.

Ferris, who serves on the American Academy's Data Science and Analytics Committee, calls this transformation or modernization the “journey of building an actuarial operating model for the future.”