Preparing for the best, or the worst?

This year has thrown a great many challenges at an industry that was already in a state of flux. An uncertain economic environment, risky investment markets, high levels of competition between carriers, growing regulatory compliance pressures, and most recently the disruption caused by the coronavirus pandemic present a wide array of potential outcomes for insurers at a major crossroads.

We believe that many of these factors, if managed well, can produce better outcomes for insurers in the long run with the right approach – diminishing negative impacts and leaving insurers to focus on serving their customer base, to grow, compete and even to expand into new markets. Insurers that can look ahead and embrace the opportunity that change can bring, stand to gain from this truly disruptive time; rather than preparing for the worst, instead they can start preparing for the best.

The key to unlocking these new opportunities lies in obtaining greater value and meaning from an explosion of digital information – optimizing efficiencies and delivering critical structured analysis to protect margins and reduce loss ratios.

The actuarial function of today has more sophisticated tools at its fingertips than ever before, allowing insurers to imagine a better outcome for the business and create a better future for their customers. Actuarial modeling tools have become a hugely important strategic tool for firms, providing reliable and efficient cash flow modelling for internal risk management and the board, as well as information for external regulatory reporting needs. The added functionality that makes these tools popular for day-to-day use means they are often the beating heart of so many companies' risk and finance functions in a world of big data, hyper-connectivity and ever-hungrier competition.

With IFRS 17 looming, it is fair to ask if now the best time to embark on any digital transformation project. Regulation may be more synonymous with cost and onerous processes, but for companies that look at the implementation of new standards from a different perspective, the exercise can be turned into an opportunity to really get to know the driving factors for change in the business. And the reality is that that black box systems are simply not up to that task. Whilst they have achieved varying degrees of preparedness and ownership, insurers can use the implementation delay to ensure they completely understand the calculations and that they are completely satisfied with the mechanisms they have in place. For those that have not yet started at all, it is paramount to do so as soon as possible, as many of those companies may not anticipate the full complexity of the new requirements or indeed the potentially lengthy timescales. All these themes are examined in our first major research project, ‘The Modernization of the Actuarial Function’, which dissects the changing industry and role of the actuary today.

In the whitepaper, we talk about the complex web of highly dynamic risks faced by insurers as they grapple with the concurrent challenges of today's economic environment, investment risk, competition between carriers, regulatory compliance; the disruption caused by global-scale events such as digital transformation and now COVID-19. We also look at some of the potential solutions to the digital skills shortage and to the challenges of scaling operational capabilities by deploying simple, affordable cloud-based innovation to create a flexible toolkit that insurers can build and change whenever they need, however they need to.

A commitment to replacing legacy software will always be an investment in long-term results, but it is not an overnight panacea. Integration with other applications is the key here, and we believe we have developed a truly unique solution to many of the hurdles insurers face here.

From small insurance companies to multinational corporates, technology is helping to provide actuarial functions with the insights they need to prepare for the best possible future outcomes by rationalizing increasingly complex operations and data in a way that meets the exacting demands of accounting and regulatory reporting requirements using a transformational combination of advanced analytics, big data and vast computational power.

You can download ‘The Modernization of the Actuarial Function’ here.