As the insurance sector approaches 2024 and 2025, the actuarial profession is set to undergo significant transformations driven by advancements in technology and regulatory changes.
The actuarial profession is poised for significant transformations as it approaches 2024 and 2025, with several emerging trends expected to redefine business practices within the insurance sector. According to a recent analysis detailed in The Actuary Magazine, key updates include advancements in underwriting processes, evolving regulatory frameworks, the integration of InsurTech and automation, and innovations aimed at enhancing retirement solutions.
One of the most prominent trends is the rise of accelerated underwriting, a method designed to expedite the insurance application process, particularly for life insurance policies. This approach generally waives certain traditional underwriting requirements for applicants deemed favourable risks. By employing data-driven algorithms and third-party data sources, it negates the need for extensive medical examinations, reducing the time frame for approval from several weeks to mere hours. This has the potential to foster a more accessible insurance environment, catering to a demographic increasingly seeking efficient processes.
Despite the advantages of faster approvals, accelerated underwriting has raised concerns regarding fairness and transparency. Regulatory oversight in Canada mandates that insurers adhere to guidelines ensuring equitable practices. As insurance organizations adapt to this new model, scrutiny from provincial and territorial regulators aims to mitigate bias in decision-making processes.
As the sector adjusts to changes in underwriting, it is also navigating the implications of new regulatory frameworks. The transition to International Financial Reporting Standard (IFRS) 17 reporting has introduced additional challenges for insurers, prompting them to seek guidance from the Office of the Superintendent of Financial Institutions (OSFI). Among the critical developments are OSFI’s new guidelines requiring climate-related risk disclosures and enhanced protections against foreign interference, both of which will influence future underwriting practices in property and casualty insurance.
Moreover, the adoption of InsurTech and automation technologies is set to linger as a significant trend in the coming years. The integration of artificial intelligence (AI) within the insurance sector is anticipated to enhance productivity and lower operational costs substantially—estimates suggest by as much as 40%. In a survey conducted by KPMG, 71% of insurance organisations indicated plans to implement generative AI (GenAI) solutions within two years, expecting these technologies to boost profitability alongside operational efficiencies. A case in point is Sun Life’s introduction of the GenAI-based chatbot, a tool designed to assist employees in streamlining their daily tasks.
As these technologies unfold, they also bring challenges related to workforce dynamics. In particular, over half of unretired Canadians reportedly feel unprepared for retirement amidst rising inflation rates affecting overall financial readiness. Insurers are viewed as vital players in the pension industry, with opportunities to innovate financial instruments that aid individuals in saving effectively for retirement. Proposals include flexible pension plans that allow clients to manage their savings efficiently while accommodating personalised contributions to support long-term financial health.
Looking ahead, the actuarial profession is navigating a landscape rife with both challenges and opportunities. As articulated by Tiana Zhao, FSA, CERA, ACIA, a senior associate actuary at Sun Life and a contributing editor for The Actuary Canada, the evolving dynamics in the industry highlight the importance of leveraging data-driven insights to propel organizations forward. With various regulatory guidelines and technological advancements in play, the actuarial profession is well positioned to respond to the complexities of a rapidly changing business environment. The coming years are anticipated to shape a new era of actuarial practice that balances innovation with ethical considerations and regulatory compliance.
Source: Noah Wire Services
- https://www.businesswire.com/news/home/20241112347407/en/Gen-Re-Releases-2024-U.S.-Individual-Life-Accelerated-Underwriting-Survey-Results – Corroborates the trend of accelerated underwriting in life insurance, including the use of data-driven algorithms and the reduction in approval time.
- https://www.businesswire.com/news/home/20241112347407/en/Gen-Re-Releases-2024-U.S.-Individual-Life-Accelerated-Underwriting-Survey-Results – Provides details on the implementation and goals of accelerated underwriting workflows among insurance carriers.
- https://www.spsglobal.com/en/news/automation-insurance-industry – Supports the integration of InsurTech and automation in the insurance sector, highlighting benefits such as enhanced productivity and lower operational costs.
- https://www.spsglobal.com/en/news/automation-insurance-industry – Discusses the role of AI, Machine Learning, and RPA in automating complex tasks and improving customer experiences in the insurance industry.
- https://www.visionet.com/blog/smartening-up-actuarial-workflow-with-automation – Explains how intelligent automation is transforming the actuarial workflow, including data collection, validation, and financial modeling.
- https://www.visionet.com/blog/smartening-up-actuarial-workflow-with-automation – Details the benefits of automation in actuarial work, such as reducing complexities and improving accuracy in risk assessments and financial modeling.
- https://www.insurereinsure.com/2024/07/16/state-insurance-regulators-wrapping-up-preliminary-guidance-on-accelerated-underwriting/ – Addresses regulatory oversight and guidelines for accelerated underwriting, including actions by the New York Department of Financial Services and the NAIC.
- https://www.insurereinsure.com/2024/07/16/state-insurance-regulators-wrapping-up-preliminary-guidance-on-accelerated-underwriting/ – Highlights the importance of fairness and transparency in accelerated underwriting processes as mandated by regulatory bodies.
- https://www.spsglobal.com/en/news/automation-insurance-industry – Mentions the impact of automation on workforce dynamics and the need for insurers to adapt to new technologies while ensuring ethical and regulatory compliance.
- https://www.visionet.com/blog/smartening-up-actuarial-workflow-with-automation – Emphasizes the role of data-driven insights in propelling insurance organizations forward, aligning with the views of actuarial professionals on leveraging technology.
- https://www.businesswire.com/news/home/20241112347407/en/Gen-Re-Releases-2024-U.S.-Individual-Life-Accelerated-Underwriting-Survey-Results – Supports the notion that insurers are innovating financial instruments to aid individuals in saving for retirement, such as flexible pension plans.
