Insurance AI & Analytics Summit USA

June 2018, Chicago, USA

From Insight to Impact

A new series on The Exponential Actuary of the Future

Back to Part I 

The future of actuaries cannot be ascertained without looking at the macro "meta-trends" working in the larger scheme of things... In the second post of a new series on The Exponential Actuary of the Future, which outlines multiple scenarios for the future of the actuarial profession, we look at the relevance of meta-trends to actuaries: the social, technological, economic, environmental and political forces shaping our reality and future.

 

Relevance of Meta-Trends for Actuaries

Meta-trends are the underlying macro forces that shape our reality and future, impacting across the STEEP spectrums of Social Technological Economic Environmental and Political forces. It is necessary that we consider the future of actuaries as being interlinked with, and affected by, the macro-context and trends. PwC defines Mega-trends (same as meta-trends) as: “The megatrends are the tremendous forces reshaping society and with it, the world of work: the economic shifts that are redistributing power, wealth, competition and opportunity around the globe; the disruptive innovations, radical thinking, new business models and resource scarcity that are impacting every sector.”

Some of these meta-trends relevant for our discussion are:

  1. Future of work: will we be automated away? Will talent inequality lead to high wage differentials like very high pay for top talent but meagre amounts for the rest? Will corporate insurers with their huge office buildings and 9-to-5 structured job routine still be relevant in the future? Or will startup/Insurtech mentality take over insurance that builds an autonomous organization where only the highly skilled are hired and remaining work is automated? Or be like Sweden, which cares about people and not jobs due to its excellent welfare system. We are not alone in this haunting feeling of obsolescence; all professions are facing the same anxieties of being made irrelevant by AI; even the data scientists as they continue automating data science itself.
  2. Future of education: today's pace of change is so rapid that any structured education path that takes a long time will be outdated by the time the person is qualified; how do we counteract that? Will MOOCs like Coursera, edX, Udacity create the jobs of the future? Most actuaries’ societies are built around professions, and the inner logic of ‘professions’ is limiting titles to a few select specialized groups of experts. Will this ‘secret society of specialized experts’ logic still be relevant with crowd collaboration and hive minds? What are the skills relevant for the future? There are 7 skills that seem likely; 1) critical thinking and problem solving, 2) collaboration across networks and leading by influence instead of hierarchy, 3) agility and adaptability, 4) initiative and entrepreneurship, 5) effective oral and written communication, 6) assessing and analyzing information and 7) curiosity and imagination. How many of these skills do we actuaries have already and how can we further strengthen these? There are so many exciting MOOC courses out there! like Nanodegree in programming for autonomous vehicles powered by open-source Apollo software of Baidu, self-driving car engineer, deep learning, data science from Microsoft, blockchain programing, understanding smart cities and so many more. Would you rather do these than repeat that failed actuarial paper again that focuses more on testing than on learning?
  3. Fourth industrial revolution brought about by AI: given the rapid pace of technology, will actuaries still be relevant in the face of driverless cars, quantum computing, blockchain, space mining and exploration, gig economy and trends like these? Of course, these will change the exposure of the insurance and assessing these changed exposures will still be analytically required from actuaries by the insurer.
  4. Emerging risks and challenges; climate change, ageing population, economic and cultural polarization, economic crises, supply chain disruptions, increase in natural and man-made catastrophes, cyber wars, nuclear war, regional war, pandemics, world war 3, the list is endless. How will we as actuaries face these challenges? Are we part of the problem or the solution or just indifferent to it for as long as we can be?
  5. Social challenges; living in bubbles, information determinism, polarization, use of big data for nefarious purposes like propaganda or unethical uses like fake news, recent Facebook scandal involving Cambridge Analytica (Palantir technologies might be under the spotlight for unethical big data soon, too).
  6. Wild cards and extreme ‘black swan’ events. Reality is more extreme then we think because we tend to normalize our behaviors to ‘averages’ and discount the part that randomness plays significantly. Any one of these extreme events can perpetually change the fate of actuaries and the broader societies that they live in; for example, 2008 financial crisis, if China falls, if climate change ruins earth irreversibly and we start seeing climate refugees and wars and extreme weather conditions etc. Never underestimate these fat tails. These wild cards in reality throw away any predictions; like for example, if the tech singularity occurs by 2045 as predicted by Ray Kurzweil and we merge humans with machines in a Brain Computer Interface to reach IQ level of 10,000 (instead of average 110 IQ), then we will become fundamentally different human beings and will not be worried about future of actuaries as we well reinvent everything then. If this sounds outlandish, it probably is, and we urge ourselves to keep Amara’s law in mind, which says that we overestimate the future in the short run and underestimate the future in the long run; Bring any person from the 1900s to a big metropolitan city now and he/she would certainly be bewildered by the ‘Magic’ that we are using in our everyday lives.
  7. Whether we make a collaborative front or fragment into the Wild West; this is an important determinant; will the professional actuarial societies like SOA, IFoA, CAS still care about being extremely exclusive? Will we as a profession handle challenges together? Or will it become ‘every one for himself/herself’ like older generations earning more money and leaving actuarial trainees at the mercy of automation and so on. Will we fragment and break down or become stronger and more resilient (and possibly anti-fragile)?
  8. Every projection must have feedback loops, recognize complex inter-dependencies and chaos events. It’s not a simple 'this will happen then that will happen then that'; when something happens, there will be a response reaction from the participants themselves and that response will influence what happens next; we cannot simply forecast that for example, actuaries are doing routine work and so will be automated away because actuaries might become cognizant of this fact and learn higher skills in time to avoid being automated away. We cannot simply say that autonomous vehicles will become mainstream because it depends upon public confidence, if cyber hacking is within limits etc.

And how do actuaries fit in all of these meta-trends? Or more importantly, “what is the future of actuaries in the exponential society?”: is it being augmented, or is it being automated away? And will it be downgraded as profession because of this? How are we as a profession preparing for the tech singularity? How do we encourage risks and innovation rather than labeling them as failures and misfits in our profession? We are also increasingly prone to being siloed as quantitative analysts instead of corporate leaders. It is rare to find actuaries in Fintech/Insurtech and trail-blazing areas. We need the opportunity to join the future-makers instead of serving the conventional, traditional workplace, which usually abhors research and futurist thinking.

Technology, futurism, emerging-risks analysis; these are the framework of what we need in terms of mentality. Our usual scientific thinking is too critical and skeptic to allow for innovation. Of course, new startups and trends will bring huge uncertainties along with them but we shouldn’t be looking for DEFINITIVE PROOF of success and only then adopting these trends. That is the path to complacency. The culture at the office also matters; if the culture is risk-averse and the VPs abhor research people and label them as misfits, then the pressure to conform will lead to only a few deviant actuaries opting to create the future. “You are what your employer is”. It is as simple as that. 

We cannot be innovative as actuaries if the majority of our employers (i.e., insurers) are risk-averse and frozen in time. Of course, there are no easy answers like that we can just join startups to make our impact. This is because lack of work-life balance in fast moving startups, lack of job security and huge uncertainties mean that we will not be able to study for actuarial exams. But does this mean that innovation should be left only to fellows? What skills are useful and what will perish? It’s important that we start discussing such points instead of ignoring them, to improve our understanding of structural barriers that actuaries face in innovation and how we can solve those. There is no concrete answer here but more points and questions for discussions emerge throughout this piece.

 

SWOT Analysis of Actuaries

Moving on, let’s make a SWOT of actuaries to assess the strengths, weaknesses, opportunities and threats.

  • Strengths; intellectual curiosity, adapters, domain expertise, refiners of oil of data and context-givers, critical thinking, rigorous training papers; volunteering. Volunteering is more important because it taps into the crowd wisdom of many actuaries and encourages open-source learning. Learning by job is no more the monopoly because of working parties from volunteering. Job work is also shrouded in mystery and is propriety but you can show through volunteering 'here is my work'; Instead of just reading your CV, you can showcase your published work directly to employers to give them better visibility over your skills.
  • Weaknesses: stuck in corporate bureaucracy jobs, you are what your employer is, lack of soft skills, programming skills, communication, used to linear mindset and technologies and not exponential technologies, the actuarial papers are not catching up with the future; complacent on designations and credentials instead of adding real value; Can’t collaborate much over job as stuck in propriety silos; too niche and specialized; more focus on testing in papers then learning; do non-traditional jobs pay as much as a qualified actuary gets in a traditional company?
  • Opportunities: diversify to other industries doing the same work or different work; increase data science work within traditional settings; take entrepreneur road like Insurtech etc. Skillset can diversify to climate change, complexity science, blockchain etc.
  • Threats: will become a compliance function only if there's no step up from complacency, will be downgraded as a profession; junior actuarial entry-level posts to be automated by AI. As Michael Schrage clearly says, we can chose to be partners or subcontractors in the innovation process.

PwC has released a pioneering report on the convergence of skills between data scientists and actuaries in US careers. The report highlights key challenges facing actuaries and data scientists, and how to overcome them. PwC also shares its outlook on what key domains will remain with the actuaries in the future or will migrate towards data scientists.

A key illustration relevant for our SWOT analysis is shown as follows:

There are also some considerable trade-offs here as well:

  • Credentials; actuaries pass exams and get credentialed, which leads to standardization; this runs the risk of being outdated by the time the actuary qualifies due to fast pace of change. At the same time, data scientists lack a dominant credential, so there is a huge difference between data scientists as well as no common framework of requisite skills.
  • To open own startup or continue job? Actuaries might feel more fulfilled by opening their own analytics/Insurtech startups, but a lot of protection from traditional employment will not be available anymore then. Protection instances are progress in job role and salary from passing papers, work-life balance so as to allow time for studying actuarial papers and reasonable job security and avoiding the rollercoaster ride that entrepreneurship is.
  • Freshers/actuarial trainees struggle with ability to apply the knowledge acquired on a computer in practical life. Many of them can get overwhelmed with having to learn so much. They also face the threat of being automated away more than middle or senior actuaries.
  • Seniors actuaries struggle with trying to get similar positions and salaries within data-scientist positions and have little incentive to start from scratch in programming and innovation now.

 

See also: Artificial Intelligence and the Actuary of the Future

 

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