Global Actuarial Modernisation Survey 2023

Executive summary (excerpt)

The importance of achieving a successful actuarial modernisation has never been more important, after surveys in 2018 and 2020, our third global actuarial modernisation survey is our largest survey ever with over 200 companies participating.

Multiple drivers of initiatives

The insurance industry is undergoing unprecedented change and a well-functioning actuarial function of the future is critical to support the rising demand for deeper insights for the management to better manage finance, risk and capital of insurance companies.

Nearly all survey participants indicate two or more drivers spurring their need to modernise. Not surprisingly, the top catalysts are improvements to process efficiency (77%), regulatory and accounting changes (63%), enhanced process quality (60%) and improved management insights (58%).

The implementation of IFRS 17, additional future ESG requirements as well as new IT requirements are putting actuaries under pressure and forcing change. The amount of work for actuaries is enormous—efficiency is not negotiable. 

Modernisation roadmap

Modernisation initiatives are well underway, with around 75% of participants (up from 70% in 2020) embarking on multi-year modernisation journeys. However, only 14% have a clear modernisation roadmap in place, while others need to move quickly to get a good handle on their plans and budgets. Every third insurer is expected to invest at least US$5m over the next five years on actuarial modernisation, about every tenth insurer at least US$20m.

Insurers recognise the importance of modernisation but need to better manage the pace of execution. Half of the participants are two or more years into their modernisation journey, yet around 35% still have at least another three years to go on their current roadmap. Internal resource capacity is cited as the main constraint throttling the speed of modernisation. But if day-to-day business is always prioritised over modernisation, the pressure only increases. 

Process excellence

Despite multiple years of modernisation efforts underway, respondents cite that a significant level of manual processing still exists across the actuarial function. Process efficiency is now a top priority, as a contribution to the insurer's overall efficiency and automation strategy and as an essential way of dealing with the problem of resource shortages.

Quick insights and direct steering impulses are a decisive success factor for insurers and actuaries need to deliver results much faster. One example: most participants are striving towards a goal of saving at least three days from their financial close cycle. This is particularly true for the new IFRS 17 closing process, where survey respondents indicated that they are currently 10 days behind their target state.

One key area where the closing process could benefit from actuarial modernisation relates to improving data sourcing for the actuaries - 55% of survey respondents indicate that their actuaries spend more than 50% of their time on data issues.

Actuarial skill set landscape

Overall, the proficiency of actuaries lies in more traditional skill sets such as financial reporting, regulatory knowledge, financial planning and analysis, and product development and pricing. Comparatively, there is only a baseline level of proficiency for most companies in the ‘skills of the future’, such as advanced data analytics. In fact, 43% of respondents identified advanced data analytics as a key area in which they would like to build competencies. There is a gap between interest and current skill levels in some of the newer subject areas.

Bridging the knowledge gap

As the role of the actuary expands to include new and 'non-traditional' areas, with it comes the need to develop and enhance skill sets to accommodate these specialty functions within the actuarial function. The strongest demand for specialist roles is concentrated in key areas such as data scientists (85%), business analysts (67%), data engineers (66%) and actuarial platform engineers (63%).

Currently, upskilling is the preferred method to meet demand in most areas for the actuarial function's staff. However, this will not be enough to close the knowledge and resource gap. To address this challenge, companies consider accelerating their modernisation initiatives to reduce the process burden on their actuaries and allow them to focus better; recruit 'non-actuarial' professionals to complement what their actuaries do, outsource certain non-core tasks - and collaborate better.