The Untapped Potential of the Actuary
The relationship between actuaries and the industry they helped to build is a complex one. Within all forms of insurance, and plenty of other industries, the actuarial profession is heavily relied upon, highly respected and well compensated for their specific technical knowledge and analytical intuition. Yet, at the same time, almost in the same breath, they are often pigeonholed and underestimated.
From our experience talking to actuarial teams all over the world, it seems that often actuaries are highly valued, but not fully understood. The actuarial department is held separate from the business, a black box that’s almost mystical in nature. Numbers go in and numbers come out but the how and why is ignored by everyone except those with in-depth understanding. The shame of this is that life insurance companies are not fully realizing the powerful strategic potential of their actuarial team.
What we’ve also seen, is that it’s not really anyone’s fault. The reasons are many and have been developing over a long time. Actuarial modelling is complex, it takes years to understand its intricacies and not everyone in an insurance carrier could possibly understand them. On top of this, high demand for their skills (still one of the lowest unemployment rates of any profession in the United States), combined with antiquated tools, means actuaries spend a lot of time on building models, not analyzing them. This leads to them being underestimated. Despite being highly capable analysers, they are pigeonholed as just number-crunchers.
It should be noted that building models is and will remain important, but the balance needs to be right. We would argue that even more potential lies in the other skills inherent in their professional training. These skills all lend themselves to the business side of insurance - increasing margins, and driving growth.
Actuaries have brilliant analytical minds, and they understand their models better than anyone. Given the time and resources they can extract strategic insights from those models far beyond the simple analysis they have the time to produce now. They are born problem solvers and most of them are also, yes, great communicators. They have deep financial understanding, and good instincts for risk. If brought into the strategic decision making process they can add a unique, scarily well informed, point of view.
For this to be possible though, they need business processes designed to allow them to leverage ALL of their skills, and they need better tools. Most actuaries we know would love to be doing more strategically focused work, but the sheer time it takes to adjust and build their models is a huge preventative. The current processes that have grown out of these tools make it almost impossible for actuaries and decision makers to effectively collaborate.