December 4, 2007 by Canadian Underwriter
Process inefficiencies, increasing business complexity, regulatory demands and data volume are leaving little time for crucial actuarial analysis within insurance companies, driving a growing trend towards automation, according to the fourth Actuarial Transformation Roundtable organized by Ernst & Young LLP.
The roundtable focused on business intelligence (B.I.) strategies for actuaries coping with new challenges surrounding financial reporting, planning, forecasting and risk management. Participants included senior actuaries and IT executives from leading insurance organizations.
A survey conducted at the event revealed that three-quarters (75%) of actuarial participants spend 20% or less of their time on validation, reporting, analysis and explanation of results.
“Understanding and explaining results is fundamental for insurers, and it will be increasingly difficult to do so as companies get larger and the reporting requirements grow more complex,” Steve Goren, the leader of the Ernst & Young IAAS actuarial transformation practice, said in a press release. “The bar has been raised and actuaries are beginning to recognize the potential role business intelligence can play in their future success.”
There was broad agreement among roundtable participants that management teams are expecting more transparency and accuracy in a post Sarbanes-Oxley world, but the industry is not yet there.
At the same time, the group noted reliable results and an explanation of key judgments are no longer enough, as management is seeking insight and actionable recommendations to improve the business.
The roundtable participants “agreed that current processes and systems do not offer the necessary support to achieve these objectives,” the Ernst & Young release says. “Pointing to the sheer volume of data and accelerated close times, there was broad consensus that little time is left for analysis. As a result, the actuarial team is frequently left unable to answer crucial management questions in a timely manner.
“Many agreed this is creating a crisis in confidence that threatens to minimize the future role of actuaries.”
If the actuarial team cannot deliver on the needs of senior management, Ernst & Young says, “there will be a domino effect, as senior management will have difficulty answering to the board and external constituencies, potentially creating a credibility spiral for the organization.”