How AI, Big Data and the IoT have remoulded the future of actuaries
The insurance sector has undergone rapid changes in recent years, with every firm implementing new strategies to remain competitive in a challenging market. With the rise of digital technology, there’s more potential for uses of artificial intelligence, big data, and the Internet of Things within the insurance sector. Many organisations are trying to find actionable ways to use data and technology to drive insights. Indeed, technology is set to transform the profession and redefine the future of actuaries. But what changes have we seen so far?
New approaches to data
It’s no secret there’s a large amount of data in the world. After all, your data is collected every time you view a piece of content or open an app, and then it gets stored, and used as a way to predict online behaviour. It’s been estimated that an astonishing 463 exabytes of data will be created each day globally by 2025. Research has shown that many businesses fall victim to breaches due to not investing in enough cybersecurity protection.
Fraud has long been a major issue for insurance companies, but today, new advancements in data science have enabled actuaries to identify fraudulent activity more accurately. It’s important to recognise the positives around data and that actuaries are now using statistics to forecast risk. Actuaries have always heavily relied on technology, but further developments in data modelling have paved the way for these professionals to be able to model and analyse data from multiple new sources.
This provides more accurate fraud detection by understanding user behaviour in real-time, which has the potential to enable actuaries to become much more agile in the future. Through the use of self-learning algorithms, actuaries can focus on automatically predicting outcomes of customer interactions, and block fraud. However, actuaries must be able to interpret the data to produce results. Thus, when it comes to problem-solving and data, the human element will always be key. In the future, a hybrid approach to data may begin to emerge, with actuaries relying on both human decisions and AI tools. With this combination, we can expect to see actuaries produce better prices and products. Both finance and insurance companies are changing their approach to data and there are huge benefits of predicting risk scores in real-time.
As the industry gains more data and with the rise of IoT, trust and transparency for customers have become all the more important. Over the years, there has been much research around consumer faith in the insurance and financial sectors. The 2020 Edelman Trust Barometer report showed the financial services to be one of the least trusted industries, below other sectors like energy, entertainment, and health care.
However, the growth of IoT – devices that are connected to the internet – will bring some key benefits to insurance, as outlined in Lloyd’s emerging risk report, which discusses the potential and opportunities that come with having many devices all sharing data. Many of these benefits are already emerging today. For example, the IoT is having an impact on supply chain insurance. Data from IoT makes it easier to evaluate risk and provides greater transparency around goods as they move through the supply chain. All of this may help actuaries evaluate problems more efficiently, making the profession even more data-driven in the future.
The actuary of the future
Actuaries will continue to play a big role in shaping the future of insurance. The role of the actuary has always been integral to the insurance sector and it’ll no doubt be redefined by digital technology. With more data to analyse, actuaries will be able to calculate risk in greater depth and deliver an improved service to customers. These emerging technologies also give actuaries the chance to play a more complex role in organisations. Deloitte – one of the biggest accounting firms in the world – believes that the rise of technology will help actuaries become more strategic, as outlined in an industry report. There seems to be a bright future ahead for actuaries. The profession is always evolving, but there are now more opportunities for innovation than ever before.
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