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As the insurance industry continues to evolve at an unprecedented pace, firms are reviewing their front, middle and back-office functions to support growth strategies and deliver against business objectives. Insurance leaders acknowledge the important role of the actuarial function, as they look to improve processes, enhance risk strategies and deliver operational excellence.

The actuarial function is central to the insurance proposition. Actuaries not only allow insurers to properly assess and price policy risk, but they also play a key role in helping insurance organizations manage their own enterprise risks and opportunities and optimize capital. In addition, leaders are looking to their actuaries to expand their support into evolving areas such as quantifying ESG risk, financial planning and analysis enhancements, artificial intelligence (AI) integration and identifying new market opportunities. Insurers want their actuaries to be delivering better insights, across a broader range of topics that are more aligned to the business.

How can actuaries get organizations closer to the customer?

The actuarial function can help insurance organizations unlock deep insights into their customers and enhance customer experiences. Actuaries are using enterprise data to better calculate customer lifetime value, enabling the business to tailor their strategies based on value. Others have used their data science capabilities to more accurately segment their customer markets in order to shape their marketing efforts.

Making this a reality, however, will require four things to come together — perspective, data, skills and technology. Actuaries will need to understand what insights the business requires in order to drive their strategy; they will need the right data, skills and capabilities to help them unlock those insights; and they’ll need the right technologies and tools to help the business visualize and understand the insights they are providing.

Five considerations when modernizing the actuarial function

  • Set your vision and align with the business strategy. The actuarial function is difficult to transform in small, isolated steps. It should be embedded within a wider finance transformation and aligned to the overall strategy of the business. Chief Actuaries should be thinking about what problems they are trying to solve for the business, and then looking at their role in the full end-to-end process and value chain to see how they can enable that future state operating model.
  • Master the data. Data is one way for Finance to unlock business intelligence and deliver insights and value. Consider the enterprise data requirements – the information needed to deliver value, including the traditional financial data – to identify priority areas and potential areas of risk. The key isn’t just in controlling the data, but the ability to standardize it.
  • Understand the technologies. Actuarial transformation must be business-led and tech-enabled. That means starting with the problem that leaders are trying to solve for the business and then selecting the relevant technologies that can help you solve those problems. Many firms are automating spreadsheets, consolidating multiple models and platforms, and re-designing (or replacing) legacy systems to improve speeds, reduce manual intervention and have better controls and governance across the process.
  • Transform the people. Actuaries love what they do. In fact, the job is frequently ranked amongst the most attractive in the world. Yet there is tight competition for actuaries — particularly those with the key business and communications skills needed in today’s environment. Actuaries want to deliver valuable and transformative insights to the business using the latest technology enablers, and they are looking at better ways to optimize what was previously manual and complex workflows.
  • Manage the change. One key challenge for CFOs and Chief Actuaries is in achieving sustainable transformation while successfully maintaining operations. That requires a clear transformation roadmap that outlines practical and incremental steps along the journey, supported by robust project management skills to ensure the program is delivered within timeframes and cost.

Transformation never stops. Neither do we.

KPMG professionals believe transformation starts with people. Our global network of experienced insurance professionals provides clients with deep industry knowledge, actionable insights and implementation expertise, helping to realize the full potential of their people and technology, and working together to achieve successful transformation. Because when people and technology are in harmony great things happen.

Making a world of difference

KPMG people can make all the difference on your transformation journey. Together we can help you to orient your business around the customer, optimize functions for a new era, manage enterprise risk and regulation for a safer future, rise to a new level of value creation, and create an environment for managing ongoing change.

The excerpt was taken from the KPMG Insight: https://kpmg.com/xx/en/home/insights/2023/11/actuarial-transformation.html

© 2023 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

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This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.