This post was originally published on 23 May 2017 and updated on 8 February 2021.
With the challenges presented by IFRS 17 now well documented, and insurance companies at varying stages of implementation, it’s important that we learn from previous regulatory challenges such as Solvency II.
There are things we could have done differently; approaches and processes that need refinement this time around.
IFRS 17 is fundamental to the transformation of the insurance industry
IFRS 17 implementation continues to present an opportunity for transformation; a chance to save ourselves significant problems in 2023 and beyond. Over the past few years, many actuarial teams have been working out how to implement IFRS 17 alongside trying to manage their everyday workload. Some have made good progress whilst others are still struggling to create implementation roadmaps. I thought this would be a good time to explore the reasons transformation projects often fail in actuarial teams – and what we can do to give them the best chance of succeeding.
The impact of the changing role of the actuary
From the day the first life table sprang into existence, actuaries and insurance companies have been inseparable. The insurance industry has developed the actuarial profession as much as the profession has developed the industry and, for much of their shared history, it was impossible to imagine the one without the other.
For nearly fifteen years, however, cracks have appeared in this previously solid union.
In the past, actuaries not only developed the technical backbone of the insurance industry, but they also provided strategic insights at management and board levels. Recently, however, actuaries have taken on a more compliance-focused role, diminishing their visibility at and value to higher levels of the organisation.
The new generation of actuaries has spent so much time turning handles and churning numbers, that it is not equipped to contribute to strategic and commercial goals of insurance companies.
This is not optimal for the companies – which are paying expensive resources to do work that they are over- (or, in my opinion, often under-) qualified for – nor for the actuaries themselves, who are not given a chance to develop their hard-earned skills nor reach their full potential.
This phenomenon alone gives rise to the need for transformation projects in actuarial teams, but there is another relationship at play, the stunted development of which has resulted in untold frustration and inefficiency: actuaries and IT.
The IT challenge hampering actuaries
The world of actuarial and data technology, the present state of which is the result of years of significant underinvestment, is one of the few clunky relics still resisting the global technology boom of the current age. Also, actuaries are extremely resourceful in building their own ad hoc solutions where technology fails them.
It is unclear whether there is a causal relationship between these two factors and, if so, which came first. But the combination has resulted, I believe, in a generation of under-utilised, over-protective actuaries who are too busy guarding their inefficient models and unwieldy data to gain the experience required to meet the strategic needs of organisations.
Why transformation of the insurance sector is achievable
Transformation is needed, both at the level of individual companies, but also in the actuarial culture. Yet we see time and again, a reluctance from actuarial teams towards transformation projects.
And, given the high rate of ultimate failure of these projects, perhaps this reluctance is justified. But that doesn’t mean we should give up on the idea. In fact, we should strive to understand why these projects go wrong and how we can change our approach to ensure that they free up actuarial resources in a way which allows them to add strategic value as only actuaries can.
In the coming weeks, I will be sharing my thoughts on why transformation projects fail in actuarial teams. I hope the articles will be thought-provoking and even inspire future actuarial transformation projects that use the lessons learned from past failures.
Providing actuaries with the tools and support they need
Let’s equip actuaries to fully utilise their unique skill sets and help them transform themselves into business partners and leaders who communicate strategy and insight to their stakeholders by using efficient models, data processes and technology.
My next article looks at the power of actuarial leadership – a make or break factor in actuarial transformation projects.
If you would like to share your thoughts on this topic, please contact me.
