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It’s not always easy to take a step back from your business and assess your operations without bias. Often it takes an independent eye to point out company strengths and flaws.
The US has a competitive actuarial consultancy industry designed to meet that need. There are a number of large actuarial and consultancy firms servicing the property and casualty (P&C) insurance space, and that capacity is growing year-on-year.
“Actuarial work is a great investment for insurance organizations. Consultants can give a detailed insight into a company’s operations in a way that’s very difficult for a company to do themselves,” said Greg Fanoe, consulting actuary, Merlinos & Associates.
“Brokerages, agencies and carriers understandably have their own ways of looking at business in terms of protecting their own interests, which may be totally different to the client’s perspective on things. A lot of brokers choose not to hire actuarial consultants or they have their own actuaries on staff – but it can be good to get independent, third-party feedback as well.”
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When you have a legitimate independent, third-party entity looking at operations and giving their opinion, that might carry more weight with the insurance company and the regulator than the company’s internal perspective and analysis, he added.
Actuarial work is only going to get more difficult and specialized for insurance companies with the incorporation of new technology, big data and advanced modelling. Access to new data has bolstered the possibility of what actuaries can do.
“In the past, only the largest insurance companies could expect to get any good credible actuarial analysis on their data,” Fanoe told Insurance Business. “The development of new techniques, the increased processing power of computers and the increased access to third-party sources of data have really helped drive a lot more interest in different types of advanced modelling. Companies that need assistance with these new techniques really require the specialized expertise of an actuary.”
Technological advancement and the emergence of new modelling and numerical analysis firms outside of traditional actuarial entities could be a potential threat to actuaries. But statistical devices cannot make up for the insurance expertise held by actuaries, said Fanoe.
“Actuaries have unique expertise in the insurance industry that allow them to incorporate those advanced data models into an insurance company’s business or an insurance rate structure,” he added. “On top of that, we have found success partnering with some of the new modelling and numerical analysis firms to help them with the insurance component of modelling rather than just straight statistics. It’s to everybody’s benefit to get an independent review from time to time.”
