The AAIS Pulse newsmagazine recently featured AAIS Chief Pricing Actuary Mike Payne and Somil Jain, VP & Consulting Actuary at Lewis & Ellis Actuaries and Consultants, spotlighting forces reshaping the role of pricing actuaries.
In many ways, the actuarial roles have stayed constant over the years, with reserving actuaries setting loss reserves to ensure that carriers can meet their claims obligations, and pricing actuaries ensuring adequate premium is collected for taking on the underlying risk. As the world changes, the roles of actuaries are changing too – and pricing actuaries will be called upon to use their skills in new ways to solve emerging business problems and enable companies to capture new opportunities.
Central to the changing world is technology, which is creating new exposures (think IoT and autonomous vehicles) and redefining how risks can be assessed and priced, while also enabling better customer experiences and improved profitability. Then there are the growing number of insurtechs—a term Somil noted has numerous meanings today.
“While at one point in time an insurtech was a new insurance company, often going after a niche market, now we see entrants in various parts of the insurance ecosystem – like data providers,” Somil said. Technology (and insurtech) is also impacting claim settlement, he added, citing the use of drones as one of the next frontiers, with companies providing services and software for these drones.
While the core function of pricing actuaries will remain constant, there are going to be new demands and opportunities for these professionals. These will come from both traditional insurers and insurtechs as they deal with new risks and new, fast-amassing data, as well as the venture capital firms supporting new entrants who want to understand and value their investments. Pricing actuaries will increasingly be called upon to answer the key question, “How fast can I grow?” Somil said.
Investors want growth, while regulators want stability, and it is pricing actuaries who can help companies balance these seemingly competing interests by maximizing growth while maintaining all-important stability.
Looking to the future, pricing actuaries will also have more and more data elements to consider in pricing, and will take a more active role in developing new insurance products and competitive analyses. As pricing actuaries develop more predictive models and draw from more data sources – fueled by rapidly evolving AI and data analytics -- they face numerous challenges. One especially notable challenge is ensuring there is not bias in data that has an unfairly discriminatory impact on pricing results. (Conversation also touched on a recent Netflix documentary, Coded Bias, which investigates bias in algorithms.)
After touching on insurtechs and new modeling techniques, Mike brought the conversation back to traditional insurers: Somil noted that traditional carriers are also evolving, and pointed to a new trend toward collaboration with, for instance, insurtechs and traditional reinsurers carving out new entities.
Discussion made it clear that change was coming. The entire insurance industry is evolving – that includes traditional markets and the broad universe of insurtechs. Already, the role of pricing actuaries is being reshaped. And with change expected to accelerate, actuaries everywhere … watch this space.