the exponential actuarytm...pixelating the opportunity set is important, which requires breaking the...
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Copyright © 2019 Deloitte Development LLC. All rights reserved.1
August, 2019
THE EXPONENTIAL ACTUARYTM
Emerging technologies and their impact on Actuarial practice
Copyright © 2019 Deloitte Development LLC. All rights reserved.2
Today’s Agenda
Exponential ActuaryTM Overview
The Need for Change
The “Art of the Possible”
Building the Exponential Actuary
Future skillsets needed to be successful
Technology, Tools, and Getting Started
Exponential Technologies, including RPA, Natural Language Generation, Natural Language Processing
Establishing an Exponential Actuary team and mindset
Key Takeaways
Unprecedented change and opportunity
Why and how the workforce is changing
Future of Work
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Future of Work
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Unprecedented change and opportunity
7Disruptors
Technology is everywhere
6.0 billion+smartphones in the world by 20201
AI, Cognitive Computing, Robotics
$500,000 in 2008$22,000 today5
Tsunami of data
9x more in last 2 years2
Major enabler of machine learning
Jobs vulnerable to automation
35% UK 47% US
77% China6
Diversity and generational change
Millennials 50%3
25% global pop in Africa by 2050 5
Longevity Dividend– 50 year careers4
Explosion in contingent work
US Contingent workers 40% by 20207
Change in nature of a career
2.5 – 5 years: Half-life of skills4.5 years: Average tenure in a job8
1 https://www.cnbc.com/2017/01/17/6-billion-smartphones-will-be-in-circulation-in-2020-ihs-report.html2 https://www-01.ibm.com/software/data/bigdata/what-is-big-data.html3 Annual Global Millennial Study, https://www2.Deloitte.com/uk/en/pages/about-Deloitte-uk/articles/millennial-survey.html 4 https://www.newscientist.com/article/mg23130810-800-the-100year-life-how-should-we-fund-our-lengthening-lives/5 https://www2.deloitte.com/content/dam/Deloitte/il/Documents/human-capital/Thriving_in_times_of_digita_disruption.pdf
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The two-part value equation
Productivity
Perform current duties faster, cheaper, and with less errors
Focus judgement and analysis on high risk issues
Enable workforce to focus on more strategic initiatives
Performance
Drive management action by moving from “Why” to explaining “So What”
Drive shareholder value through forward looking analysis to identify and manage risk
Expand role of the professional to drive business value
Exam
ple:
A
ctu
ary Automation of pricing models and analysis reduces time required and increases reporting frequency
More frequent reporting and capacity to analyze and recommend opportunity leads to real time insights
Identify expense drivers to redesign products to minimize costs
Capacity for Insight
Address “what if” questions live through interactive dashboards
Strategize solutions to drive better outcomes
Innovate strategies to empower new business models
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The Exponential ActuaryTM
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The need for change
CHIEF ACTUARY CHRISTINE
• Desires to serve business in a more proactive strategic capacity –insights vs production
• Wants to implement new technologies but believes they are too nascent and unproven
• Wants to position herself as a catalyst for change and an industry pioneer
• Struggles to know where to start, but wants to lead and share knowledge with team and senior management
• Need to consolidate or improve data capability, actuarial systems, and processes
• Respond to concerns around quality – e.g., observed errors, lack of consistency
• Cost reduction and related strategies to improve efficiency
• Keeping pace with evolving regulatory change such as implementing PBR and Targeted Improvements
HOW CAN I ENABLE MY TEAM TO BETTER RESPOND TO OUR STRATEGIC OBJECTIVES? HOW CAN WE PROVIDE MORE STRATEGIC INSIGHTS?
DEMANDS DESIRES
PAIN POINTS & CAPABILITY GAPS
SPANNING:PEOPLE, PROCESS, TECHNOLOGY,
AND GOVERNANCE
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The need for change – emerging regulationsVolume of regulatory changes will create more work VM-20
EffectiveIFRS Effective
LDTIEffective
Emerging Change Magnitude of Impact Timeline
IFRS 17
Principles Based Reserving (PBR) for Life (VM-20)
US Tax Reform
IAIS ComFrame (Including International Capital Standard 2.0)
Solvency II
FASB Long Duration Targeted Improvements (LDTI)
1/1/211/1/20
Solvency II Applicable
VM-20 Introduced
ComFrame Introduced
IFRS 17 Introduced
Tax Reform Effective
LDTI ASU
IssuanceSolvency
II Reviews
1/1/2016 1/1/17 3/1/175/18/17
12/31/178/15/18
12/31/18
Introduction Effective Date
August 15, 2018 January 1, 2022
Introduction
New Methodology Effective
Applicable
ASU Issuance
ComFrame Introduction
Effective Date
Effects Complete
ComFrame Adoption
EIOPA Reviews
Effective: All Entities
December 31, 2027
January 1, 2020
November 30, 2019
December 31, 2018
January 1, 2021
January 1, 2017
December 31, 2017
March 1, 2017
January 1, 2016
May 18, 2017
Transition Date
Comparative Period
January 1, 2020
July 27, 2019
IAIS Global Seminar
May 1, 2016
Public Disclosure
LDTITransition
ComFrame Adoption
11/30/19
IFRS Comparative
1/1/221/1/19
*Timelines are not drawn to scale
NAIC QIS II
Statement of Position (SOP) 03-1
Financial Accounting Standards (FAS) 157
ASU 2010-26
December 31, 2009
July 7, 2003
September 1, 2008
December 15, 2003
November 15, 2007
December 15, 2011
September 1, 2006
October 10, 2010Effective
Approved Effective
Finalized
EffectiveIssued
EffectiveFASB Approved
VACARVM Effective
FAS 157 EffectiveASU2010-26
EffectiveSOP 03-1 Effective
11/15/2007
12/15/201112/15/2003 12/31/2009
Commissioners’ Annuity Reserving Valuation Method for VAs (VACARVM)
QIS II Begins
February 22, 2017
Recommendations Presented
December 1, 2017
QIS II Begins
2/22/17
12/1/17
QIS II Results
2019-2021
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The opportunity for Actuarial function to provide deep business insight is negated by overwhelming Operational and Stewardship Activities they perform today.
The need for change – Pain points in current actuarial processes
200+ spreadsheets linked together to calculate, capture, and allocate investment income
1500 hours spent annually drafting 500 actuarial reports after analysis has been completed
90 people involved in a 6 month process of updating regulatory AAT memos
10,000 unique tools and spreadsheets required for monthly actuarial reporting processes
1,000 model output files manually copied and aggregated to refresh Actuarial results
Life Insurance company doesn't know how many 90+ year olds they insure
300 plus Actuarial models all need to be maintained, updated, and launched manually and reconciled
Company produces 700 product filings every year
Decentralized business model has inconsistencies and redundancy in roles, tools, and approach
Users wake up at 2:00 a.m. to confirm models have successfully completed and to kick-off next job
Representative Actuarial Pain Points
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The nature of the Actuarial Professions is being disrupted by technological and talent/operating innovation. This will shift human work towards higher cognitive and value-added activities.
Future state of Actuarial functions
TimeAllocation
Higher
LowerNow10%
Future
45% 45%
Automation Spreading Across Spectrum of Actuarial Activities
Ideation / Hypothesizing
Application and Decision Making
Computation and Distillation
Level of Cognitive Engagement
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Companies agree that actuarial processes will look very different as they leverage emerging technologies.
A look at the not-too-distant future…D
ay 1
5:00 AM
6:00 AM
7:00 AM
8:00 AM
8:10 AM
8:15 AM
An automated robot completes running of actuarial models, reserves/DAC, and claim liabilities. Output is sent to its analytics engine
The data from the modeling engine or tools is staged on a Tableau or BI server and dashboards are refreshed
The natural language generator adds in narratives to the dashboard
The Chief Actuary has access to the updated reports and narratives as soon as he/she arrives in the office
The Chief Actuary interacts with the chatbot in natural language to drill down into splits by channel/product
The Chief Actuary further drills down into variance analyses for products/services with dropping margins
Imagine a world where… Actuarys can now spend their days driving business analysis and providing the intuition to …
• Identify management actions
• Uncover drivers of risk
• Develop pricing strategies
• Forecast financial results
• Increase capacity for growth
9:00 AM
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Building The Exponential Actuary™The actuary of the future will use a combination of core skill sets, including domain knowledge, and a diverse array of technologies to add increased value.
Inputs Outcomes
Actuarial and/or Data Science Expertise
Highly trained professionals with industry expertise and extensive training
Integrated use of RC&A technologies, including machine learning and predictive analytics, natural language generation and processing, and robotic process automation
Exponential Technologies
Flexible and adaptable workforce, with a focus on open talent networks, organizational redesign, and reimagining learning and development
Organization & Workforce Change
Improved Productivity, Accuracy, and Reliability
Leveraging automation technologies reduces the risk of error and eliminates costly re-work, allowing more time for analysis
Actuaries will be the heart of finance organizations and generate more strategic analysis to drive key company decisions
Increased Value-Add Contributions
As actuaries move away from repetitive process-oriented work and develop new skills, morale and job fulfillment rise
Stronger Morale & Employee Retention
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Future skillsets needed to be successful
Cross Collaboration
Data Science
Communication
Marketing / Branding
Leadership
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Technology and tools
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Many companies attempt to start by developing an “opportunity log” of existing processes that can be automated, but this gives an incomplete picture of the value that Exponential technologies, process redesign, and workforce changes can bring.
Identifying, evaluating, and executing on the opportunity
Evaluating Your Company’s Exponential
Potential
• Pixelating the opportunity set is important, which requires breaking the spectrum of work and entire end-to-end process into bite sized chunks
• Don’t just focus on your company’s current workload - identify processes that are not being performed today, due to resource limitations, skill deficiencies, or technology constraints
• Consider implications for Actuary operating and talent models, such as the change in how we source talent and design organizations – encompassing an array of resources, both internally and externally
• Actuaries need to continue to meet professional and accountability standards and how these are met will evolve as processes change
• Learning and development programs will need to change as these technologies and approaches are embedded throughout your organization
KEY CONSIDERATIONS
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Exponential ActuaryTM solutionsOur approach coupled with a suite of solutions addresses all aspects of the actuarial profession and is unlike anything being offered in the market.
Ideation / Hypothesizing
Application and Decision MakingComputation and Distillation
Prepare Data Analyze Validate & Report
Data Wrangling• Experience studies• Valuation data preparation
Enterprise Content Management (ECM)• Linked multi-document creation
(e.g., actuarial memorandum)• Workflow managementRobotics Process Automation (RPA)
• Experience studies• Valuation kick-off and
calculation
• Experience study data gather
• Repetitive, manual analyses
Natural Language Processing (NLP)• Capture unstructured and metadata• Digitize and standardize contract terms• Data X-Ray
Natural Language Generation (NLG)
• Rate filing document writing• Quote document writing• Experience study or financial reporting analysis outcome summaries
Experience Investigation• Source of earnings analysis• Sales force analysis• Claims management analysis
DATA X-RAY
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Opening email and attachments
Logging into web/ enterprise applications
Moving files and folders
Copying and pasting
Filling in formsReading and writing to databases
Scraping data from the web
Making calculations
Connecting to system APIs
Extracting structured data from documentsCollecting social media statistics
Following “if/then” decisions/rules
RPA is… RPA is not…
Computer-coded software
Programs that replace humans performing repetitive rules-based tasks
Cross-functional and cross-application macros
Walking, talking auto-bots
Physically existing machines processing paper
Artificial intelligence or voice recognition and reply software
RPA is delivered through software that can be configured to undertake rules-based (deterministic) tasks; it is not actual robots in a production line.
What is robotic process automation (RPA)?
What it can do
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Natural Language Processing reads and Natural Language Generation writes.Natural language processing vs. Natural language generation
Natural Language Processing Natural Language Generation
• Ingests unstructured data (emails, tweets)
• Output designed for machine consumption
• Cognitive capacity lies in ability to disambiguate variations in speech
• Driven by machine learning
• Ingests structured data (spreadsheets)
• Output designed for human consumption
• Cognitive capacity lies in ability to imitate natural variability in human speech
• Driven by rulesets
Linguistic corpusOntology
Structured DataStructured Key Info
Varied Natural Language
Structured Data
Machine Learning Engine
Unstructured Text
Deloitte. Document Review Platform
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What is Enterprise Content Management?Processes and technology used to manage information – from capture to disposition – for the purpose of creating documents and content for various stakeholders’ needs
Data Actuarial Memo
Analyze data to determine static vs dynamic content and reusability
Static Content is updated by Super User on infrequent basis
Dynamic Content is entered by User using UI
Reusability of Content• Ability to utilize system templates to structure unstructured
data• Ability to automate the production of documents using a “single
source of the truth” concept
• Ability to change information in one part of tool and have changes cascade to all other documents that utilize same data set
Blacklining• Ability to blackline changes between
two versions of a document
• Ability to reconcile data across documents
Shared Content and Editing Ability to allow multiple users in a
document at once
Allow users to annotate and provide comments when reviewing document
Ability to show progress /status of various sections of document
Connectivity to External Applications
• Integration APIs for other systems to consume
• Ability to import structured dataseamlessly
Governance and Control• Ability to manage documents and version control• Allow the user to utilize workflow tools to manage, draft,
review and approve document
• Robust audit trail using access rights and permissions
• Record retention capabilities for storage and retrieval of documents
ECM Process
Functionality & Benefits
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Use case: Premium Rate Filings
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Each year, actuarial, compliance, and product personnel spend countless hours performing the rate filing process – deploying expensive knowledge workers on repetitive administrative tasks.
Challenge: Inefficient Premium Rate Filing Processes
Time consuming due to manual
nature and number of state and product
variations
Disparate Processes
Filing creation is comprised of
multiple, manual processes that
produce redundant information
Higher Error Rate
Lack of controls and automated solutions leading to higher potential
for errors
Underutilized Resources
Processes performed by
several highly-paid,
overqualified actuaries
Limited ability to quickly respond to
management feedback that
cascades through multiple documents
Time Consuming
Inefficient File Structure
Limited ability to track, analyze,
and act on industry product and filing
trends
Limited Access
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Automation Enabled Future: Technology SolutionsThe product filing process will be enhanced using natural language processing, robotics process automation, natural language generation, and enterprise content management
Technology used to read and ingest text from large quantities of documents to extract key elements of text, analyze text, and identify trends across documentsExample: Analyze every regulator objection for a given product for trends
Robotic Process Automation
NaturalLanguage Generation
Technology delivered through computer-coded software that can be configured to undertake a variety of rule-based (deterministic) tasksExample: Gather data and summarize data from an admin system
Technology used to automate analysis and the generation of text summarizing analysis, trends, and insights through rules based logicExample: Write each section of an actuarial memorandum
Technology used to create and manage large documents by dynamically linking to memo inputs from various sources and updating in real-time as the inputs changeExample: Dynamically populate all elements of a rate manual
NaturalLanguageProcessing
EnterpriseContent Management
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FactsData InformationActuarial
Memo
GenerateInferAnalyze
Analyzes data to extract a set of
facts
Draws inferences to determine what is most interesting &
important
Utilizes NLG to write language relevant to
the intended audience
1 2 3
NLGNLP
Automation Enabled Future: Four-Prong Portfolio SolutionThe product filing process will be enhanced using natural language processing, robotics process automation, natural language generation and enterprise content management to monitor requirements, perform analysis and accelerate the creation of required documentation.
Universe of Filings
Ingest universe of rate filings
1
Machine Learning
Machine learning analyzes patterns,
State specific requirements & key drivers for approval
2
Ontology
3
Production of database
containing data-driven insights
about State specific
requirements
RPA
Gather census information and/or initial analysis from source systems
Sample Tasks
Perform initial and/or final analysis on source data
Prepare .JSON file for consumption by NLG engine
Perform batch processing to generate memos for all states
Rate Increase AnalysisMarket Analysis Document Generation
ECM
Manual Memo
Assess
DynamicReusable
Analyze memo(s) to identify sections
which are dynamic versus boilerplate /
reusable
Create Containers
Create “containers” to store tables & link to documents across the
enterprise
Enhanced Workflow
Enhanced and consistent
documentation from a single source of truth
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In the current state, the majority of the steps involved in preparing and submitting a premium rate filing are manual and time consuming. The implementation of one or more automation tools can greatly reduce manual effort and automate a majority of the steps required to prepare and submit a rate filing.
Premium Rate Filing Process: Current and Future State
Current State Automation-Enabled Future State
Gather data and perform
initial analysis
Determine magnitude of rate change
Create new premium rate
tables
Review drafted memos
Draft cover letter and other required forms
Submit rate filing
Gather state specific
requirements
Gather inputs for actuarial
memorandum
Draft actuarial memorandum
2 3
4 5 6
7 8 9
1
Gather data and perform initial analysis, determine magnitude of rate change, create new premium rate
tables
Review drafted memos
Submit rate filing
Gather state specific
requirements
Gather inputs for actuarial
memorandum
Draft actuarial memorandum
2 3 4
5 76
1
Draft cover letter and other required forms
Key Manual RPA NLGNLP ECM
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Automation Enabled Future: The Impact to Your OrganizationFor an illustrative carrier with ten products filed in 40 states, the potential time savings are significant. Once realized, additional benefit accrues from optimizing newly available time on strategic priorities
Premium Rate FilingsCovering 40 states and 10 products
02400
5
ActuariesResponsible for premium rate filings
Hours Per actuary per filing to complete the end-to-end process
Annual HoursPer premium rate filing cycle4,000
Current State
1.5400
3.01,800
Automation Enabled Future State
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Automating the filing process drives efficiency, lower costs, and reduced risks.
Benefits: Automation-Enabled Future State
Significantreduction in
manual effort and time spent on the
analysis and production of filings
Integrated Processes
A streamlined, automated, and integrated filing
process
Lower Error Rate
Well-defined, controlled, and
auditableprocesses to create
filings
Optimal Use of Resources
Redeploy highly-paid, overqualified
actuarial resources to
perform analysis and tackle languishing strategic initiatives
Increased ability to quickly respond to
managementfeedback
Increased Efficiency
Efficient File Structure
Increased ability to standardize,
synthesize, and transform rate filing metadatainto insights and
competitive analysis
Increased Access
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Actuarial case studiesThe following Actuarial Processes have been enhanced through automation technologies.
Metric Amount
Prior Execution Time 2,400 minutes
Prior Execution Frequency Annually
RPA Execution Time 90 minutes
RPA Execution Frequency Quarterly
Reduced execution time allows for more frequent process execution, trend monitoring, and rate filings.
Eliminated almost all manual copy-paste work, which will reduce the risk of errors and improve controls.
Improved the organization and standardization of Excel files throughout.
Premium Rate Increase Process
Actuarial Content Management –Cash Flow Testing Memoranda
Health Underwriting Quote Testing Automation
Process Overview Benefits / Enhancements Key Metrics
The RPA Process automates the collection, manipulation, and use of data for calculating lapse rates, projected premium, and projected claims that are used to select the rate increase for each Block.
The ACM solution reduces the time required to produce regulatory documents through standardized tools and templates, streamlined content management, and efficient workflows.
Reduction of time spent on memo generation, allowing actuaries to spend more time performing analysis.
Improved governance, control, and audit trail of documentation
Increased consistency and accuracy of information across the organization.
Metric AmountCurrent FTEs (Hours Equivalent) 20 FTEs
Future FTEs (Hours Equivalent) 15 FTEs
Estimated Savings 25%
The Health Rate Testing Bot automates the entry of thousands of test cases into a company-specific underwriting user interface, stores rate quote results, and compares them to independent values.
Allows for continuous testing of the system, for product and rider combinations that were rarely tested.
Increases accuracy of underwriting quotes, leading to fewer quote errors, more accurate pricing, and increased customer satisfaction.
Metric Amount
Prior Execution Time N/APrior Execution Frequency N/ARPA Execution Time ContinuousRPA Execution Frequency 24/7/365
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Getting Started
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Join an immersive experience (e.g., Actuarial and FinanceTM Lab) to explore the
“art of the possible” and determine a future state vision, goals, and benefits
Immerse Yourself in Innovation
Use an agile, iterative piloting approach to move from strategy to prototyping as
quickly as possible – “fail fast” and achieve rapid results
Prove it Works (Quickly)
Evolve your Actuarial organization by collaborating with other business functions,
BPO providers, and digital vendors
Build Your Ecosystem
THINK BIG
Disconnect from the core business and set up a digital leadership team to assess
disruptive opportunities within the organization
Scaling the Edges
START SMALL ACT FAST
ESTABLISH AN EXPONENTIAL ACTUARYTM LEADERSHIP TEAMIdentify a visionary program leader and assemble a team to accelerate your digital goals. Determine a governance model and understand
policies that might need to be adapted to execute successful change management and ensure the solution is absorbed into the business fabric
Prioritize your desired tactics and pick just one or two to get started in order to
establish proof of concept
Pick One or Two Plays
Seek opportunities to share digital experiences with other functions –
knowledge share
Market Your Own Success
How to get started
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Key takeaways
Disruption will impact Actuaries and other white-collar professionals, in addition to those blue collar professions that we typically associate with disruption (e.g. Uber/Taxis)
Actuaries need to continue to meet professional and accountability standards and how these are met will evolve as processes change
Pixelating the opportunity set is important, which requires breaking the spectrum of work and entire end-to-end process into bite sized chunks
Examples of change/disruption are manifold and include technology enablers such as robotics and cognitive automation
There are significant implications for actuarial operating and talent models, such as the change in how we source talent and design organizations – encompassing an array of resources, both internally and externally
The outlook for the future is bright and will enable actuaries with the right skillsets to add more value to organizations through more strategic activities
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