NE Actuarial Club Actuarial modernization updaten-a-c.org/wp-content/uploads/NAC-Actuarial-Modernization... · 2019-04-30 · PwC | NE Actuarial Club –Actuarial modernization update

NE Actuarial Club –Actuarial modernization update

March 2019

PwC | NE Actuarial Club – Actuarial modernization update

With you today

David Honour

Principal - PwC

US Actuarial Modernization

Leader

Lance Grisby

Mutual of Omaha

Chief Actuary

Jordan Edwards

Mutual of Omaha

VP Model Development


Agenda

Market Update1Reporting and Analytics2Actuarial systems3

Process efficiency4

Assumption management5

3

Mutual of Omaha’s Modernization Journey6

Market update


Best practices

5

Today’s world class finance and actuarial organizations have certain things in

common:

People

Process

Technology

• Forecast faster, more accurately, and more dynamically

• Have more control automation and fewer errors

• Have more of their people focused on business partnering

• Have a greater focus on talent management

• Leverage cloud technology, RPA and advanced analytics

• Cost up to 65% less

PwC | NE Actuarial Club – Actuarial modernization update 6


Drivers for modernization

Reporting efficiency

Modernization driver: P&CLife

Regulatory changes

Data management

Insight

Organizational structure

Other

Insight

Reporting efficiency

Regulatory changes

Data management

Other

91% 86%

79% 79%

73%

64%

33%

6%

57%

29%

7%

Organizational structure

50%

7


Majority of insurers do not have a well articulated modernization plan

Comprehensiveness of modernization roadmap P&CLife

Mobilization

plan defined

0%

Well

defined

interim

stats

0%

Broadly

defined

end state

Limited

interim

states

0%

10%

20%

30%

40%

50%

60%

45% 57% 12% 43% 15% 21%

Nonexistent

6% 0%

8


Focus area of modernization programs

In progress Future area of focus Previously implemented/NA

Data infrastructure

Governance & control enhancements

Actuarial modeling platforms

Process efficiency

Pricing and underwriting

Target operating model

Cloud computing

Reporting metrics and KPIs

Management reporting

Experience studies & assumption setting

Finance systems

Advanced analytics

AI & machine learning

0% 20% 40% 60% 80% 100%

% of Total responses

76 13 11

62 11 27

53 13 34

51 33 16

50 25 25

48 17 35

44 31 25

43 27 30

42 44 14

40 24 36

39 22 39

34 55 11

9 67 24

9

Modernization driver:


A modernization technology architecture

Reconciliations, controls, Workflow and process automation

Source data

Reinsurance treaties

Other (FX, ESG and experience)

Policy admin

Claims admin

Commissions management

Cash admin (inc AR, AP) and bank

Investment management

Fo

un

dati

on

al

Life

modelling

Stochastic

models

GRC

Systems

ALM

modelling

Risk

aggregation

Reporting, KPIs and analytics

Disclosure Management FP&A

Self-Service

Insurance accounting

(sub ledger)

Investment accounting

(sub ledger)Tax

General ledger

Extr

act

scripts

Sta

gin

g a

rea

Actuarial and risk

applications

Finance

systems

ET

L/E

SB

Accounting

rules

engine

Non-life

modelling

XBRL/iXBRL

Data warehousing and aggregation

Historical data

Assumptions and run

parameters

Actuarial calcs

and aggregation

Finance calcs

and aggregation

Cash flow

model output

Risk calcs

and aggregation

In force data

Other internal data

ET

L

Consolidation User driven analyticsStatic reports

Mo

dern

ised

External and

Internal data

EL

T/C

onnecto

rs

Data lake

Advanced analytics

Agile

AI learning

algorithms

Dynamic data visualisation

Real time, user

driven &

customised

Visualisations

and Summaries

Dashboards

9 9

Strategic insights

Predictive

Unhide deeper

insights

8

Connectors

Digital mobility10IT Operating

Model14

Information

model11

Robotics

and machine

learning

12Cloud

Computing13

IT

Sourcing15

4

5

6

7

3

1 2

Strategic lenses for consideration

10


The roles of actuaries in the future

Today

2030

Actuaries

Data scientists

Risk & Capital

Management

Life Underwriting/

Pricing

ReservingIn-force Analytics

11

Reporting and analytics


Taking new data sources with the customer at

the center…

Integrating data analysis across finance and actuarial

… to find new ways of looking at

the business

• Identify new markets, channels,

and partnerships

• Deliver customer and segment lifetime

value analysis

• Integrated stress testing

…and to answer questions about the

customer like

• When does a need for college savings

compete with annuities?

• When is the loss of a job more likely to

cause a policyholder to lapse?

• How do prolonged low interest rates

impact withdrawals by retired

policyholders?

Social

media

Compe

titor

Bench

mark

Market

data

Em-

ployee

Cus-

tomer

Cus-

tomer

Histo-

rical

Oppor-

tunityTrans-

actions

Risk

Risk

Internal data

External data

13


Traditional approach

Visualisation of the future

Simulation approach

“Cockpit view”“Dashboard view”

Static, deterministic and statistical Real time, self service and behavioral

• Statistical algorithms predict aggregate

outcomes based on historical data

• Does not capture how individuals

make decisions

• Simulate relationships between

consumers, distributors, employers,....

• Shows impact of internal attitudes and

external factors on individual

decisions dynamically

14

Trends in actuarial systems


Emerging technologies (sample only)

16

Data manipulation Automation Analytics Visualization

• Tableau

• Microsoft

Power BI

• QlikView

• IBM (Cognos)

• Microstrategy

• SAS

• Python

• R

• SAS

• Skytree

• AWS analytics

• UiPath

• Automate

Anywhere

• Blue Prism

• Work fusion

• Alteryx

• Informatica

• Power BI

• Tableau

• Qliksense

• AWS Glue

• BigQuery

analytics

• Talend

PwC | NE Actuarial Club – Actuarial modernization update 17


Adoption of emerging technology

18


Current number of platforms

Rationalization of actuarial modelling platforms

Envisioned number of platforms

>69.3%

5-621.1%

1-225.8%

3-443.3%

1-255.0%

5-66.0%

3-439.0%

19

Process efficiency and advanced automation


RPA Capabilities allow automation of many types of activities completed by your users

RPA Capabilities

21

Rules-Based

Triggers

RPA benefits

Data

Entry

Rapid

Development

Continuous

Cycle

Audit Trail

and

Metrics

Reduced

Costs

Document

Image

Capture

Data

Scraping

Accelerated Application

Integrations


Actuarial process suitability assessment

Update parameters and run on multiple platforms

Define parametersModify existing modulesExplore new modules

DATA PREPARATION

CALCULATION

ANALYTIC & OUTPUT

OTHERS

DATA GATHERING

Gather and move data from standardized sources

Gather unstandardized or unstructured data for ad-hoc and exploratory purposes

Reconcile, integrate and translate data

Design new scripts Modify existing scripts

Generate/upload reports; send status notifications

Generate one off reports

Recurring, well-defined and high-volume time consuming processes

Judgements, decision making, rules and UI changes

More Suitable Less Suitable

22

Assumption management


Today’s experience study processes typically take

24

Today’s experience study typically

• Is carried out annually

• Kicks off at the beginning of the year, and can't be delivered to business till second half of the year

• Uses lagged data when delivered to management

• Is manual or rely on desktop automation

• Is lack of advanced analytics

ZZZ

5 Assumptions

3 Lines of business

3 Human resources

43,200hrsper year

Students, FSAs, Management

Gather data, data cleansing,

analysis, documentation

Life, Annuity, Others (LTC/DI)

Mortality, lapse, partial withdrawal,

premium persistency, others

6 Months full time


The future of experience study processes

25

Robots

automatically kick

off data cleansing

and reconciliation

Robots

complete

experience studies

and update

assumption

repository

Visualization is

automatically

refreshed with

updated assumption

repository data

AI updates

narratives

in executive

dashboard and

reports

Staff and

management

review results

and investigate if

needed

01:00 08:00 08:30 09:00 workday

480hrs per year

hrs quarterly

5 Assumptions

8

3 Lines of business

1 ResourcesManagement

Review results

Life, Annuity, Others (LTC/DI)

More frequent, less time consuming, more

focus towards

value-add and insightful activities.

Mortality, lapse, partial withdrawal,

premium persistency, others


Summary

Getting timely and

accurate data is

the top priority,

and most

companies have

that today. The

current state is

effective, but

suboptimal.

Multiple catalysts

are driving

companies to

modernize.

Successful

execution

depends on

having

comprehensive

plans.

Significant

opportunity exists

to expand

automation,

increasing

“productive time”

and reducing

process

specialization.

The changing

paradigm will

impact people,

increasing the

need for

structured training

and development

programs,

including new

tools and

techniques.

01 02 03 04With necessary

investments in

data, technology,

automation,

training and

development, and

by articulating a

comprehensive

modernization

strategy, actuarial

teams can provide

greater insights

and value to their

business partners.

05

26

Mutual of Omaha’s Modernization Journey

What will be covered

PwC | Mutual of Omaha’s Modernization Journey 28

VisionCatalysts

Guiding principles

The journey ahead

Early successes

Lessons learned

Catalysts

Modernization efforts are critical to comply with new regulatory

requirements and support future business needs in a cost effective way

1. Modeling processes were not scalable

and had key person risk

2. Systems could not deliver deeper and

more timely insight to business partners

3. Regulatory requirements compound

complexity of modeling, audit and model

risk management

• 6 different actuarial valuation systems,

some homegrown

• Inefficient to run insightful forecasts

(GAAP & SAP; Inforce and New

Business)

• Added complexity of new reporting

regimes – PBR, GAAP LDTI

Capabilities gapsSystem shortfalls


Vision

A single unified model that streamlines modeling, ensure consistent data

usage and deliver a cost efficient operating model which creates capacity to

provide better insights

1. Single modeling platform

2. Integrated across all functional areas

3. Modernized actuarial data feeds aligned

with data strategy

4. Enhanced operating structure,

governance and control environment

PBR compliance

Streamlined actuarial modeling and

controls across all products

Capacity to perform insightful analysis

Enhanced model risk management

framework

Cost effective use of actuarial resources

– Right Resources doing the Right Tasks.

Capabilities deliveredScope


Guiding principles

Guiding principles provide fundamental vision and direction for project team


1. One Corporate Actuarial model per product line

A. across all actuarial functions

B. across inforce and new business

C. with one streamlined data extract

2. Models built in accordance with Model Development Life Cycle and Model Governance

Framework

3. Actuarial Data Processes modernized and aligned with the Finance Data Strategy

4. Models rebuilt, not converted where appropriate and cost effective

5. Effective change management process ensures that model owners receive quality

models in line with business requirements

The journey ahead

Three phase project…currently midway through Phase 1


• Each product workstream

encompasses all actuarial

functions

• Prioritization based on

regulatory requirements,

model complexity, and

legacy system retirement

plan

• Dual path for data

modernization and model

build for each product

We are here

Early successes

Early successes helped project and modernization efforts gain momentum


1. Early executive buy in and full funding approval, project seen as “Enterprise Blue Chip”

2. Early actuarial stakeholder buy in into system selection and dedicated project team

resources

3. New system environment opened to user population early on

4. Built and tested proof of concept models. This proves quality of requirement gathering

and build processes

5. Already retired first legacy actuarial system

6. New actuarial system is already in use for PBR impacts to pricing and upcoming new

product roll-outs

Lessons learned

Experience from past projects and ability to react quickly to new challenges

is critical to our success

1. Fully dedicated project resources are

a must

2. Clear timeline with clear deliverables

and agreement on definition of done

3. Establish roles at the outset and

ensure clear ownership for decisions

4. Gain commitments from teams outside

core project.

Lessons from this projectLessons from past projects


1. Lots of show and tells with owners to

get early feedback

2. Deliver smaller components sooner to

reduce complexity and provide clarity

as well as value

3. Don’t underestimate complexity of

legacy data processes

4. Effective collaboration is critical to

manage priorities and resolve

dependencies across teams


pwc.com/insurance

Thank you

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NE Actuarial Club Actuarial modernization updaten-a-c.org/wp-content/uploads/NAC-Actuarial-Modernization... · 2019-04-30 · PwC | NE Actuarial Club –Actuarial modernization update