Actuaries versus Technology

In my previous post in this series, I looked at the importance of investing in IT relationships and infrastructure. Sticking with that theme in this week’s article, I take a step back to explore why actuaries are sometimes reluctant to embrace new technology – even if it promises to help them to be more productive and efficient.

Using technology to drive progress in actuarial teams

Many professions seem to revel in the introduction of new technology to their professions. They realise that every time a tool is enhanced, it enables them to be better at their jobs – whether it be in the operating theatre, on a construction site or in a tech sandbox.

Over the many years of being involved in transformation projects, I have observed that actuaries, specifically actuaries in back office and client service teams, are often reluctant to embrace new tools and techniques, preferring instead to stick to the old systems they know and trust – however inefficient and unsustainable they might be.

Are actuaries reluctant to embrace new technology?

Tan Suee Chieh, President of the Institute and Faculty of Actuaries, opened his June 2020 Presidential Address with the following quote by Actuary of Immunisation Theory fame, Frank Redington:

“I do not think that the profession has any besetting vices, but I sometimes think that perhaps it has besetting virtues. As a profession, we are apt to be accurate, cautious, consistent and reticent, and in these lies our strength; but if they do not leave enough room for impulse and imagination, they can be a weakness. The actuary who is only an actuary is not an actuary.”

The perception (and, perhaps, truth) of the accurate, cautious, consistent and reticent actuary persists to this day.  Risk aversion is drilled into actuaries from the start of their education. As actuaries, we tend to be risk-averse by nature, and thus drawn to a profession that methodically provides for all contingencies.

Strict regulation governing the insurance industry – and the responsibility of protecting policyholders’ assets – ensures that actuaries do not take any unnecessary risks in the workplace either. This extends to the use of the technology they use to do their jobs.

Transformation projects may involve the introduction of new systems which promise to streamline computing requirements and automate manual processes. They may also involve the development of bespoke solutions to best meet a company’s specific needs (as is commonplace in the banking industry).

Such claims and ideas are often met with mistrust, and actuarial teams can be unwilling to invest in these solutions. Technology is expensive and the perceived benefits do not necessarily warrant the cost involved.

Sometimes it only takes one success story to have a cascading effect throughout the industry, but nobody wants to be the first to take the plunge.

In defence of actuaries though, they may be unwilling to spend the money simply because the budget is not available. Those who hold the purse strings often tend to see the actuarial back office purely as a reporting function and do not fully appreciate the value they can add to the wider business needs. They may, therefore, be less willing to invest in the technology supporting these teams, due to the low perceived returns. This makes it difficult for the affected actuaries to support the wider business needs, as their systems do not allow them to do so, and they may find themselves in a Catch-22 situation: unable to add value because of out-of-date systems, and unable to invest in new systems because they aren’t perceived to be adding value.

There is a need for strategic and progressive thinking

Whoever the decision-makers may be, the fact is that at some point, it becomes risky not to invest in new technology. A lot of older software is not designed to cope with the volumes and complexities of today’s insurance business, and processes characterised by manual adjustments and physical handovers are disasters just waiting to happen.

Fear of being made redundant by computers may partly explain this desire to hold onto the past. However, the profile of the ‘typical actuary’ is changing to something closer to Redington’s impulsive and imaginative ideal.  Chieh himself is leading the call to re-invent the profession for a transformed and dynamic future via a Vision, Skillsets, Mindsets, and Domains (VSMD) approach.

Speaking of mindsets, we are observing the evolution of a new generation of actuaries who are embracing a growth mindset of perseverance, experimentation and continuous learning; a generation inspired by the innovation of the digital age and eager to use technology to propel the profession to greater heights.

The attitude and ideas are there, or, at least, getting there. And only when they are met by a level of investment that shows confidence in the actuary of the future, can the profession meet the rapidly changing demands of the public it serves.

At MBE, we are passionate about harnessing the power of technology to add value to our clients’ businesses. We offer bespoke or off the shelf solutions, depending on each client’s need. We also believe in helping clients make the most of the tools they already have.

To discuss how MBE can optimise your IT infrastructure, please contact me.

This post was originally published on 22 June 2017 and updated on 10 March 2021

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