“Actuaries can use their skills to optimise the pricing of risks and also to cover those who may have been previously uninsurable,” said Institute and Faculty of Actuaries immediate past president Marjorie Ngwenya at the 20th Global Conference of Actuaries held in Mumbai in March this year. Ms Ngwenya also shared her views on issues like emerging risks, AI and big data and changing role of actuaries.
Actuaries are very adaptable to changing environments to remain relevant and add value to the organisations they work for. Institute and Faculty of Actuaries (IFoA) immediate past president Marjorie Ngwenya said, “The actuarial skillset naturally lends itself to data science techniques. In turn, data science holds huge potential for changing the way in which actuaries work.”
Big data, data analytics and changing role of actuaries
Ms Ngwenya said, “We can collect, store and draw insights from data like never before, with the potential to transform both traditional actuarial fields and open up new sectors and industries. Consider how the personal computer changed the way actuaries could collect and analyse data just a few decades ago.”
“Actuaries add value beyond the traditional role of the data scientist through their professional standards and the ethical requirements,” she said.
“We also bring subject matter expertise with training and experience that allows us to understand the wider context and business implications of our area of work.”
New and emerging risks
Actuaries have a long track record of using a range of structured techniques to make sense of the future. In an increasingly complex and fast-moving environment, dealing with risk has been and will always be a continuous learning process for actuaries.
Ms Ngwenya said, “We need to evaluate the current situation, learn from what brought us here, and then make predictions about what might happen next. Considering these possibilities in a structured way is where actuaries can help to bring rigour and insight as ‘new’ risk categories emerge.”
She said, “New technologies, such as AI now enable a wider set of unstructured information also to be used. This allows actuaries to help companies anticipate and spot trends earlier rather than having to wait for traditional data to reveal them.
“If you can anticipate what could happen, you can identify a potential issue much earlier and be ready to respond. We now live in a world where reacting, once an event has begun, can often leave too little time to intervene effectively. In this way, actuaries can help companies to focus their attention on levels of acceptable risk around major goals and consider the outcomes that matter most.”
Training of actuaries to cope with a more ‘social’ world
Ms Ngwenya said, “Social media provides a platform to reach diverse and far-flung audiences. This means that the professional conduct of actuaries is potentially subject to greater scrutiny. We must continue to uphold our high standards, bearing in mind that we are increasingly in the public eye.”
This advancement in technology and the way that communities now prefer to interact, also means that we have to consider and tailor our messages to the varied audiences we may reach when we communicate over such media.
Ms Ngwenya said, “Today we live in increasingly data-driven societies. This is an opportunity for actuaries to innovate the way in which we work. We are able to play a role in the interpretation of large data sets, identifying insights such as causal links within data; which may have previously been deemed irrelevant.
“We can use these skills to serve the public interest – optimising the pricing of risks and also covering those who may have been previously uninsurable.”
Regulators and a two-way dialogue
Usually actuaries in insurance companies are the first responders to any queries from the regulators. Ms Ngwenya said, “We have strong bilateral relationships with co-regulators in different parts of the world. We always seek to have a proper two-way conversation and we are proactive in our discussions.
“Our role, as established by our royal charter, means we are a professional regulator of our members and we aim to work in a holistic and integrated way with relevant sectoral regulators. In the UK, we sit on the Joint Forum for Actuarial Regulation to coordinate relevant regulatory activities.”
Interaction with Asian regulators
Speaking about Asia, Ms Ngwenya said, “In Asia, we’ve engaged with regulators in a number of countries, including Hong Kong, Malaysia and Singapore, when we launched our quality assurance scheme in 2018.”
“Regulators are regular invitees to IFoA events as attendees and speakers. Dr Moses Cheng, chair of the Hong Kong Insurance Authority and Waiyi Lee at the Monetary Authority of Singapore have both spoken at IFoA events. Dr Zhao Yulong of the China Insurance Regulatory Commission is an honorary fellow at the IFoA and will co-chair our conference in Chengdu in May this year,” said Ms Ngwenya.
Changing role in the years ahead
Speaking about the changing role of actuaries in the years ahead Ms Ngwenya said, “Today actuaries increasingly act as advisers but in tomorrow’s world, the computational elements of our training will be automated by AI. As actuaries, we will translate the outcomes into meaningful guidance for real world businesses and public sector challenges.
“Our skills then will be to simplify complexity, communicate the ideas and forge relationships based upon them and uphold high standards.”
“If the actuary of yesteryear was primarily a mathematician, the actuary of today is primarily a communicator of the outcomes of the mathematical puzzles that we face. The actuary of tomorrow will be a skilled and highly valued consultant, guiding clients and the societies in which they live, through the complex challenges that they will be facing,” she said.
Actuaries and cyber risk coverage
The characteristics of cyber risk represent a major challenge to actuaries. Ms Ngwenya said, “If we consider the indiscriminate nature of the WannaCry ransomware attack in 2017 and the sheer cost of NotPetya, it illustrates how the scale of an industry cyber event could be on a par with major natural catastrophes.”
She said, “Cyber is an emerging area of risk and there is no consensus so far on the best response. Actuaries use a range of approaches including additional scenario analysis and the use of third-party vendor models. Each approach has its own advantages and disadvantages but all can be useful in supplementing the limited historical data that is currently available. The quality and availability of data is likely to improve over time.”
In the global cyber insurance market, premiums reflect increased demand which is being offset in part by increased competition.
Ms Ngwenya said, “Actuaries are working to understand the coverage of the cyber risk and the premium which should be charged for such coverage. They can go on from this to determine the range of losses that could arise from cyber events.” A