Q&A

HOW TO TACKLE TARGETED IMPROVEMENTS WITH INNOVATIVE TECH

Q1: What’s making LDTI such a complex challenge?

Robert Barg: LDTI is prompting U.S. insurers to make significant adjustments to their workflow, for two main reasons.

First, you must now update your assumptions on a regular basis, rather than locking them in for good. That means periodically reviewing, analyzing and – if required – modifying your assumptions, before testing, documenting and justifying their use in your models to auditors.

In other words, a process as seemingly simple as updating assumptions will involve a host of new stakeholders and systems – and add multiple steps to your workflow.

Second, LDTI’s rollforward disclosure requirements will mean you’ll have to perform multiple model runs every month. In this case, you’ll need to track and systematically archive the details of your processes so you can make sense of them downstream.

As well as disrupting workflow, LDTI will require insurers to more closely analyze results and the drivers of income. When firms transition to LDTI, there could be large swings in surplus as assumptions and discount rates are unlocked. As a result, who knows what reactions we will see in the market.

Additionally, LDTI is expected to increase volatility in reserves on an ongoing basis. So, it will be vital to understand and explain the underlying drivers of that volatility.

Q2: Can automated technology ease the pressure on operations?

RB: Absolutely. When processes and workflows start getting too complex, it makes sense to automate them as much as possible with technology.

In fact, without higher levels of automation, insurers will almost certainly need to increase their workforce to meet the demands of LDTI.

Two types of automation are particularly proficient at handling the complex workflows that LDTI will generate – business process management (BPM) and robotic process automation (RPA).

Are long-duration targeted improvements (LDTI) to U.S. GAAP complicating your operations? With the right modern tools, you’ll soon be in a stronger position to simplify your workflow and manage your data. Just ask FIS’ actuarial expert Robert Barg, who’s got all the answers to frequent questions about regulatory change and emerging technology.

Q&A

Q3: What’s BPM?

RB: BPM, also known as business process automation, is geared toward improving whole processes. For example, many modern insurers already use BPM to automate the processing of claims.

Think of the BPM tool as a manager whose job it is to orchestrate – rather than carry out – a process from end to end. While running a real-time swimlane diagram in the background, the tool will notify people when they should complete a task and route further tasks based on their responses.

If your technology environment is made up of multiple underlying applications, as is often the case, BPM tools will mainly control these applications with APIs. So, when you’re implementing a BPM tool, you’ll need considerable IT support to help you access and connect the applications and coordinate the whole process.

Q4: How can BPM help actuaries with LDTI?

RB: For LDTI, the potential of BPM is enormous. If you’re carrying out multiple runs to generate disclosure rollforwards, a BPM tool could help you kick off the whole process automatically, once the right data becomes available and the assumptions are approved.

BPM can also address another complication of LDTI – the need to feed historical actuals back into the current period’s process. Typically, this would require you to coordinate efforts across administration, finance, IT and actuaries. Here, the BPM tool will greatly assist by creating an automated, synchronized and repeatable process, with stages that each of these teams will need to check and approve.

On a broader scale, actuaries can use BPM tools to totally industrialize their operations. With BPM mapping and tying together tasks from administration systems to the general ledger, you can turn the end-to-end actuarial production process into an efficient assembly line.

Q5: Does RPA mean I’ll be working with actual robots?

RB: The rumors aren’t true – you won’t be sharing your workstation with a robot quite yet. RPA tools are really just computer programs that act like people, otherwise known as “bots”.

Unlike BPM tools, RPA bots don’t work behind the scenes in a managerial capacity but perform the actual tasks – taking manual processes that are typically carried out by humans and completing them automatically.

For example, just like you and me, bots can switch between applications or open a web browser, drop in a user name and password, visit a website and download a file.

Crucially, bots are easier to deploy the BPM tools. As you might do with a macro, you can record what a human would do in a situation and teach the bot to do the same, rather than having to write code and script to access APIs. That makes RPA tools useful for managing legacy software, which may not come with APIs.

Q6: Can RPA and BPM tools work together?

RB: Yes – even though they operate differently, RPA and BPM tools are complementary technologies that work very well in tandem.

Not surprisingly, the two technologies are often confused with one another, so it helps to remember that RPA is mostly – though not always – a subset or component of BPM.

Consequently, many of the steps within a BPM end-to-end process can be automated by RPA – often as part of the same robotic process. And while RPA usually takes care of standalone tasks, BPM is concerned with completing the full end-to-end process, including both automated tasks and stages that require human intervention, like approvals.

In other words, BPM-automated processes can call on RPA bots to carry out tasks, with the BPM tool acting as the manager and RPA tools as supplementary members of your workforce.

Q7: With so many results to produce, what’s the best way to write data under LDTI?

RB: If you’re running thousands of calculations at a time, which may well be the case under LDTI, you need a distributed database to rapidly save the results.

Rather than overloading a single file server and causing a queue, distributed database technology allows you to save compressed files to a network of multiple interconnected databases – housed on different servers but managed by one database manager.

Also known as NoSQL or non-relational databases, distributed databases are much less rigid in structure than more traditional SQL or relational databases. So, they are ideal for the near-simultaneous writing of high volumes of projection results.

Q8: And once the results have been saved, where should the data be stored?

RB: With such large quantities of results to sift through at any one time, you need somewhere to store the data that makes it easy to access, organize and analyze. Depending on your analytical requirements, there are three main options.

A data warehouse will aggregate data from various sources or databases but compiles the data in a highly structured, standardized way. You might use it to store actuarial results from all your various models, encompassing multiple platforms and lines of business.

For more detailed, specific analysis, a data mart will store a defined subset of the data warehouse, such as data on payout annuities, and can be structured to suit exactly the kind of analysis you want to conduct.

Finally, a data lake will provide an unstructured repository for your whole universe of data – and the perfect architecture for big data analytics. Thanks to their sheer lack of structure, data lakes are less suited to business users than data scientists, who can use it to identify new correlations and relationships in your company’s data.

Q9: Be honest – will automation put me out of a job?

RB: No – while computers and robots may be here to stay, they pose little threat to qualified professionals like actuaries. Think of automation as being here to support, rather than replace, human brainpower.

By ridding actuaries of low-value, mundane manual tasks, automated technology allows them to use their time and minds more effectively – and focus less on producing the numbers and more on analyzing and explaining what the results mean.

Even as a greater proportion of processes become automated, there will still be a need for people to monitor, improvWe and sometimes rewrite the automation programs. And no matter how much we automate, people will remain the most valuable resource.

IT’S TIME TO WAKE UP TO THE POWER AND POSSIBILITIES OF AUTOMATION AND EMERGING TECHNOLOGIES. EMAIL GETINFO@FISGLOBAL.COM TO LEARN HOW FIS’ INNOVATIVE SOLUTIONS CAN HELP YOU COMPLY WITH LDTI AND OTHER COMPLEX REGULATIONS.

About FISFIS is a global leader in technology, solutions and services for merchants, banks and capital markets that helps businesses and communities thrive by advancing commerce and the financial world. For over 50 years, FIS has continued to drive growth for clients around the world by creating tomorrow’s technology, solutions and services to modernize today’s businesses and customer experiences. By connecting merchants, banks and capital markets, we use our scale, apply our deep expertise and data-driven insights, innovate with purpose to solve for our clients’ future, and deliver experiences that are more simple, seamless and secure to advance the way the world pays, banks and invests. Headquartered in Jacksonville, Florida, FIS employs about 55,000 people worldwide dedicated to helping our clients solve for the future. FIS is a Fortune 500® company and is a member of Standard & Poor’s 500® Index. For more information about FIS, visit www.fisglobal.com©2020 FISFIS and the FIS logo are trademarks or registered trademarks of FIS or its subsidiaries in the U.S. and/or other countries. Other parties’ marks are the property of their respective owners. 860752

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