Neil Cantle, principal and consulting actuary, explains the benefits and potential challenges in adopting the next level of technology, including machine learning and artificial intelligence.
Now that Solvency II is two years in has the industry become comfortable with it?
I think this depends a little on the firm, but most are still finding their feet. The reporting is still new and the models being used – whether as approved internal models or not – are still settling down. We have also seen the impact of the new regulations on product choices, as some insurers have found particular business lines too expensive to support.
IFRS 17 is the topic on everyone’s lips. How have you sought to assist with the challenges of the new accounting regulation?
There is actually a great deal of complexity behind IFRS 17 from an actuarial perspective, so we have spent time with insurers helping them to understand the potentially significant impact of the new regime on their systems and the way their profits could emerge. We have already made changes to our actuarial systems to ready for the new rules.
In terms of new releases, the most top-of-mind item right now is probably our IFRS 17 support. We have leveraged our existing platform to provide a solution for our Integrate clients, but also more broadly to customers using other systems for cash flow generation. We can accept the asset and liability cash flows from another system into our platform where we will do all of the data management, the IFRS 17 cohort level calculations, and the reporting. In addition, we have rebuilt our nested stochastic capabilities to provide a robust and efficient process without having to compromise precision on the inner paths and have continued to enhance our workflow and reporting tools.
What progress have you made in updating technology?
Milliman is a leader in technology innovation. We were very early adopters of cloud and continue to be early adopters of new cloud services that are opening opportunities to improve efficiency, customer engagement and employee satisfaction. Currently we are working on embedding machine learning tools into our solution. We believe the opportunities are tremendous, but we are starting our research looking at outlier detection to facilitate validation of input data and analysis of results. We also have a project underway to use machine learning to optimise the use of the computing cores to minimise costs.
The industry seems to be deluged by information – what can be done about this?
Firms are starting to explore the benefits of visualisation techniques and the use of machine learning and artificial intelligence. We are also seeing a move away from data models which require all data to be resident with the client. Instead, data is brought into a search ad-hoc. This is particularly powerful when using unstructured data, like social media. The important thing for firms is to ensure that they don’t completely abdicate the analysis to machines. Machines can help to process large amounts of data and visualise it for you, but this should be about bringing experts’ attention to hidden trends so they can consider it in context, rather than trying to completely automate away the expert.
Digital disruption is the buzzword in the market. What are the major business or technological challenges the industry should be aware of?
Automation is a major feature in the market right now. We will see a large number of processes which have hitherto been considered the domain of humans, become automated. This will cover advice, policy processing and back office tasks. Our Integrate platform already goes a long way towards that for actuarial reporting. Disruptors are also finding ways to use new technologies like artificial intelligence and blockchain to deliver more compelling solutions for consumer problems, efficiently and cost-effectively. Working out how to compete against these new firms will become an existential challenge.
Looking forward, we will continue to enhance and improve our technology to take advantage of emerging technologies to allow for more efficient and effective use of resources.