Inspiring New Methods of Pondering With Actuarial Innovation

An entrepreneurial and innovation dialog with Henry Chen, FSA, FCIA, MAAA
Interview by James Xu
July 2024

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Picture: Getty Photographs/Alones Artistic

Chinese Version

With the speedy development of synthetic intelligence (AI) expertise, the subject of innovation has garnered widespread consideration. The actuarial neighborhood, together with the Society of Actuaries (SOA), is actively partaking in vibrant discussions on how you can navigate the evolving challenges. As a steadfast advocate for actuarial innovation, the SOA persistently has been on the forefront of embracing new concepts and championing the spirit of creativity. Past internet hosting the annual Younger Actuary Innovation Competitors—a platform for rising actuarial abilities to showcase their progressive concepts—the SOA integrates innovation into its strategic planning and every day operations throughout a number of sides, together with analysis, schooling, member companies, content material growth and shows.

The Entrepreneurial & Innovation Section (E&I Part) throughout the SOA fosters and helps innovation and entrepreneurship amongst actuaries. On this article, the Part’s secretary, James Xu, FSA, FCIA, MAAA, FNZSA, interviews the chair of the E&I Part, Henry Chen, FSA, FCIA, MAAA.

Chen, who’s a senior supervisor of Actuarial Consulting at Ernst & Younger LLP (US), offers insights on nurturing the spirit of innovation throughout the actuarial area and shares his imaginative and prescient for the long run. He boasts over a decade of expertise in consulting and company roles throughout the insurance coverage {industry}, and his experience spans technical domains, together with actuarial transformation, the place he has performed a pivotal position in aiding quite a few insurance coverage corporations to navigate and implement large-scale actuarial transformation initiatives, devising efficient methods to handle related challenges.

Chen launched into his journey with the SOA’s E&I Part in 2021, assuming the position of vice-chair from 2022 to 2023 and subsequently moving into the place of chair in October 2023. However his involvement with the SOA extends past the E&I Part. He beforehand contributed as a council member of the SOA Expertise Part and has engaged in varied volunteer capacities. His roles have included serving because the chairperson of the Actuarial Innovation and Expertise Analysis Steering Committee on the SOA Analysis Institute, being a member of the SOA Volunteer Awards Committee and collaborating as a speaker and moderator at SOA annual conferences and workshops, amongst others.

Might you give us a short introduction to the E&I Part?

The SOA’s E&I Part is devoted to fostering innovation and entrepreneurship throughout the actuarial career. Our core mission is to function a conduit for dialogue and schooling amongst actuaries keen about innovation, entrepreneurship and the pursuit of novel methodologies and strategies in actuarial apply.

Our imaginative and prescient is to raise the actuarial career to new echelons by leveraging actuarial innovation and entrepreneurship to sort out advanced challenges, thereby producing enhanced worth for each the {industry} and society at giant.

What new roles do you see for actuaries sooner or later?

I typically talk about with colleagues the evolving panorama of the actuarial career and the SOA’s initiatives. Listed here are roles and alternatives that we see rising for actuaries sooner or later:

• Information scientists and analysts: With the rise of huge information, AI and machine studying, actuaries are well-positioned to evolve into information scientists who can handle, analyze and extract helpful insights from huge datasets to tell enterprise selections.
• Expertise innovators: Because the E&I Part promotes the usage of rising applied sciences like AI, blockchain and Web of Issues (IoT), actuaries may turn into leaders in growing and implementing progressive technological options throughout the insurance coverage {industry} and past.
• Strategic enterprise advisers: Actuaries have the chance to increase their conventional roles to turn into strategic advisers, utilizing their analytical expertise to assist companies navigate advanced danger landscapes, optimize operations and drive strategic progress.
• Entrepreneurs and startup founders: The E&I Part’s give attention to entrepreneurship encourages actuaries to discovered startups or lead entrepreneurial initiatives, particularly within the FinTech, InsurTech and well being tech sectors.
• Cross-industry specialists: As actuaries have interaction in cross-disciplinary collaboration, they’ll tackle roles that mix actuarial science with different fields, resembling well being care, local weather change and cybersecurity, offering holistic options to new and rising dangers.
• International market analysts: With the Chinese language market’s dynamic position and the worldwide perspective fostered by the E&I Part, actuaries can turn into specialists in worldwide market dynamics, serving to corporations navigate world dangers and alternatives.
• Educators and thought leaders: Because the career evolves, there will likely be a rising want for actuaries to function educators, trainers and thought leaders, sharing their experience and guiding the following era of execs.

These roles mirror a broader, extra dynamic future for actuaries pushed by innovation, expertise and a world perspective.

How do you see areas for actuarial innovation evolving?

Actuarial innovation is evolving in a number of key instructions, reflecting each technological developments and altering market wants. Listed here are among the vital tendencies and areas the place I see actuarial innovation persevering with to evolve:

• Superior information analytics and machine studying: Actuaries more and more are leveraging subtle information analytics and machine studying fashions to reinforce predictive accuracy in danger evaluation, pricing and reserving. These instruments allow actuaries to investigate advanced datasets extra successfully, establish patterns and make extra knowledgeable selections.
• AI integration: AI is reworking the actuarial discipline by automating routine duties, enhancing decision-making processes and enabling extra personalised insurance coverage services. AI additionally may also help in fraud detection and claims processing, making operations extra environment friendly.
• Threat modeling for rising dangers: As new dangers like cyber threats, local weather change and pandemics emerge, actuaries are on the forefront of growing new fashions to quantify and handle these dangers. This includes integrating nontraditional information sources and creating progressive danger administration frameworks.
• Product innovation and personalization: The rise of InsurTech has enabled the creation of tailor-made insurance coverage merchandise based mostly on particular person behaviors and preferences. Actuaries are essential in designing these merchandise, utilizing information to craft protection that higher meets buyer wants whereas optimizing pricing.
• Well being care analytics: With the well being care {industry} present process speedy adjustments, actuaries are important in analyzing well being care information to enhance affected person outcomes, handle prices and develop new medical insurance fashions that accommodate evolving care paradigms.
• Sustainable and moral practices: Actuaries more and more are concerned in incorporating sustainability and moral issues into their work, particularly within the context of environmental, social and governance (ESG) components. This contains assessing the long-term impacts of investments and insurance coverage merchandise on society and the surroundings.
• Regulatory and compliance innovation: As laws evolve, particularly in response to new applied sciences and dangers, actuaries are key in growing progressive compliance options that guarantee {industry} practices align with regulatory requirements whereas sustaining effectivity and competitiveness.
• International market dynamics: Actuaries are increasing their roles to grasp and navigate world market dynamics, notably in quickly growing markets like China. This includes adapting fashions and practices to completely different regulatory environments and client behaviors.

These evolving areas mirror the dynamic nature of the actuarial career and its adaptability in addressing new challenges and alternatives by way of innovation.

What are some new apply space developments?

The actuarial career is increasing into a number of new apply areas because it adapts to altering applied sciences, societal wants and financial tendencies. Listed here are some vital developments in new apply areas for actuaries:

• Local weather danger and sustainability: Actuaries more and more are concerned in assessing and managing the monetary implications of climate change and environmental risks. This contains modeling the impression of extreme climate occasions on insurance coverage claims, growing methods for sustainable investments and advising on climate-related danger administration for companies and governments.
• Cybersecurity and information privateness: With the rise in cyber threats and information breaches, actuaries are essential in quantifying cyber dangers, pricing cyber insurance coverage merchandise and growing frameworks for managing information privateness and safety dangers. This space requires a deep understanding of each the technical features of cybersecurity and the potential monetary impacts of breaches.
• Well being expertise and telemedicine: The combination of expertise into well being care, together with the usage of telemedicine, wearable devices and AI for diagnostic functions, creates new alternatives for actuaries. Actuaries can work on pricing and danger evaluation for brand new medical insurance merchandise, analyze well being information to enhance affected person care and develop fashions to foretell well being care prices on this evolving panorama.
• Behavioral economics and client conduct: Actuaries are utilizing insights from behavioral economics to grasp how shoppers make selections about insurance coverage and monetary merchandise. This helps in designing more practical merchandise and communication methods that align with how individuals assess dangers and make selections.
• Pension innovation and retirement options: As populations age and conventional pension techniques face pressures, actuaries are on the forefront of growing progressive retirement options. This contains creating new kinds of annuities, advising on pension danger transfers and growing fashions to make sure the sustainability of retirement techniques.
• Rising markets and world insurance coverage growth: Actuaries are taking part in a key position in growing insurance coverage merchandise and danger administration methods for rising markets the place insurance coverage penetration is rising quickly. This includes adapting actuarial fashions to native circumstances and regulatory environments and understanding the distinctive danger profiles of those markets.
• InsurTech and digital transformation: The digital transformation of the insurance coverage {industry} by way of InsurTech startups and initiatives has created new areas for actuarial apply. Actuaries are concerned in growing and validating fashions for digital platforms, engaged on data-driven underwriting processes and exploring progressive distribution channels.
• Ethics and equity in algorithmic decision-making: As algorithms and AI play a bigger position in insurance coverage and monetary companies, actuaries more and more are targeted on guaranteeing that these techniques are clear, truthful and moral. This contains assessing algorithmic biases, guaranteeing compliance with regulatory requirements and growing frameworks for moral AI use in actuarial work.

These developments mirror the increasing scope of actuarial work because the career continues to adapt to new challenges and leverage alternatives throughout various sectors and areas.

What are the alternatives and challenges to entrepreneurial progress within the discipline?

Within the actuarial career, entrepreneurial progress presents each vital alternatives and notable challenges, reflecting the evolving panorama of the {industry} and the broader financial surroundings. Determine 1 particulars some alternatives and challenges that I see.

Regardless of these challenges, the actuarial career is well-positioned to steer and thrive in entrepreneurial ventures, particularly because the demand for progressive options continues to develop within the insurance coverage and monetary sectors. By leveraging the alternatives and successfully navigating the challenges, actuaries can contribute considerably to the entrepreneurial panorama inside our discipline.

How are improvements usually understood and utilized in actuarial work? Are you able to give us some examples of one-time novel methodologies and strategies which have turn into broadly accepted in actuarial apply?

Within the actuarial area, innovation is usually acknowledged as enhancing danger administration by way of new methodologies, strategies, services or products. This includes leveraging cutting-edge information analytics, AI, machine studying and broader tech improvements to reinforce the accuracy, effectivity and scope of actuarial fashions. Moreover, actuarial innovation additionally contains the creation of novel insurance coverage merchandise, refinement of pricing methods, optimization of asset-liability administration approaches and exploration of recent markets and buyer segments.

What are the challenges to selling innovation usually within the discipline? What are the alternatives?

A main problem includes rising consciousness of the significance of innovation. It’s essential to underscore the worth of innovation each for particular person profession development and the broader development of the {industry}. Moreover, the inherent risk-averse nature of the actuarial career could impede the acceptance of recent approaches, methodologies and improvements.

Nevertheless, the panorama can be ripe with alternatives. Actuaries possess sturdy technical backgrounds and in depth {industry} expertise, that are helpful belongings for driving innovation within the {industry}. As technological developments proceed and market calls for evolve, there are elevated potentialities for the actuarial career to undertake new applied sciences and interact in cross-industry collaboration. For instance, actuaries can apply their experience to new situations, creating new options and enterprise fashions.

As somebody with a Chinese language ethnic background, what’s your opinion on how the E&I and different SOA sections may also help Chinese language actuaries?

With China’s evolving position and rising prominence within the world economic system, actuaries in varied industries, resembling insurance coverage, are offered with distinctive alternatives and challenges. The SOA sections, together with the E&I Part, serve all SOA members, together with these practising in China. Part knowledge- and experience-sharing, world networking, innovation and entrepreneurship upskilling, and cross-cultural communication and studying are all readily accessible to Chinese language actuaries—and fairly useful.

Statements of truth and opinions expressed herein are these of the person authors and are usually not essentially these of the Society of Actuaries or the respective authors’ employers.

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