Modernizing the insurance actuarial operating model

The changing role of insurance actuaries

The insurance industry landscape is changing at an increasingly rapid pace. Evolving market and technology trends—from political and regulatory uncertainty to data security and privacy—are generating new opportunities and challenges for insurance companies across all industry segments—life and annuities (L&A), property and casualty (P&C), and health care.

As part of these industry dynamics, today's insurance actuaries, particularly the chief actuary, are being asked to take on an expanded role with more strategic responsibilities—including risk manager, business advisor, and industry leader. Just as the chief actuary's role is evolving and growing, so too is the actuarial organization as a whole.

It is no longer sufficient for insurance actuaries to exclusively model, analyze, and estimate. Company leaders expect actuarial employees at all levels to provide business insights and value drivers to aid strategic decision making. However, many actuarial organizations lack the advanced capabilities, processes, and technologies they need to meet stakeholders' changing expectations. In response, forward-thinking chief actuaries are exploring how to modernize the way their department operates so they can meet stakeholders' changing expectations while improving efficiency and controlling expenses.

The transformation of the actuarial organization should not be undertaken in isolation; it requires a holistic, enterprise-wide view that considers what the actuarial function does, how it delivers, where the work is completed, and how it is governed—a next-generation actuarial operating model.​

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Defining the insurance actuarial operating model

An operating model is variously defined as the overall approach an organization takes to complete a task using the resources available to it or how an organization uses people, processes, and technologies to meet the needs of its customers. More simply put, it's the who, what, where, when, how, and why of getting work done.

Many of the inefficiencies in today's insurance actuarial operating model center on the who and how of getting work done. It is becoming clear that not all actuarial work is truly actuarial and certain tasks (e.g., data manipulation) should be automated, transferred, or shared with other departments. This is leading C-suite executives to rethink what an actuarial organization should look like, how it should operate, and what it should cost.

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The benefits and challenges of modernization

Modernizing the insurance actuarial operating model can help companies assess and transform processes, systems, and people in both centralized and decentralized operating models. When designed and implemented hand-in-hand with senior management and other key corporate functions—especially finance and IT—modernization of the insurance actuarial operating model can improve the overall efficiency and influence of the actuarial organization, producing a host of potential benefits including:

• Reduced technology and operating expenses
• Faster and more accurate actuarial analyses
• New depth and granularity of insights
• Improved responses to regulatory and market forces
• Engaged, satisfied, and strategically focused insurance actuaries

But implementing modernization programs across the enterprise has its challenges. Acknowledging that change is necessary, securing stakeholder buy-in, strengthening the relationship among the IT, finance, and actuarial organizations, and finding the time to modernize can potentially stand in the way of progress​.

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The way forward

To holistically update the insurance actuarial operating model, companies first need to understand the traditional and new views of seven key operational components and the ways they interact: people and talent, process, governance, service delivery, data, technology, and policies and procedures.

To jumpstart the modernization effort, actuarial organization executives and functional leaders can hold a workshop to discuss and align around their vision of the future organization and address specifics within these seven operational components.

Companies that make these comprehensive efforts to modernize the insurance actuarial operating model stand to benefit from a technology-powered team of insurance actuaries that is liberated from the constraints of business as usual, equipped to provide valuable insight more quickly and cost effectively, encouraged to expand their skill sets, and empowered to become catalysts for strategic change.

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