The actuarial function has been facing challenges in terms of resource availability and quality. A strategic approach to outsourcing could enable insurers to regain control of their actuarial processes while focusing on high-value insights.
A key to leveraging actuarial outsourcing is having onshore experts manage the process of setting assumptions, analysing results and communicating findings. This helps ensure consistency and accuracy.
Cost-effectiveness is one of the main reasons insurers turn to outsourcing to address their actuarial needs. The benefits of outsourcing include lower costs, greater flexibility, and a faster turnaround. Many life insurance companies have also found that outsourcing is a great way to free up resources for more strategic projects.
In addition to cost savings, outsourcing can also help reduce regulatory burdens. For example, if an insurer is considering implementing a new pricing model, they can outsource the work to a third-party vendor instead of investing in in-house resources. This will allow the insurer to focus on their core business and avoid costly investments in internal IT infrastructure.
Another benefit of outsourcing is that it allows actuaries to spend more time on high-value activities. Outsourcing partners can automate manual tasks and eliminate recurring, low-value activities that consume actuaries’ time. This can free them up for tasks that directly bolster growth and profit. This helps insurers achieve better returns on their investment, which is especially important in this environment of reduced investment returns and commoditization.
The actuarial profession is a highly technical occupation with a complex set of skills. It is not as easy to outsource actuarial work as other types of jobs. For example, the SOA and CAS credentialing process makes it difficult for foreign actuaries to gain employment in the United States. In addition, most employers refuse to sponsor foreign actuaries. Despite these challenges, some insurance companies have started to outsource actuarial work in the United States.
Actuarial outsourcing is a powerful tool for meeting resource constraints in a dynamic environment. However, it is crucial for life insurance firms to understand the risks associated with outsourcing and devise a strategy to manage them from the start. The key is to be prepared for potential problems and ensure that the actuarial function is fully integrated with other life insurance functions.
Outsourcing can be an excellent solution to resource constraints, but it is essential for life insurance companies to take a long-term view of the value of actuarial outsourcing. In addition to reducing costs, outsourcing can also help them improve their competitive edge by enabling them to deploy innovative actuarial solutions more quickly.
Risk management is an important component of the actuarial process. It involves identifying and quantifying the risks that a company faces in order to make sound decisions. The process also involves assessing the impact of a risk on a company’s profitability and capital structure.
This risk-based approach can help companies identify the most pressing issues and determine how to address them. It can also help them avoid costly mistakes and reduce the likelihood of a catastrophic loss. In addition, a comprehensive risk management program can improve transparency and accountability by eliminating the temptation to hide or misreport information. The recent scandal involving New York state officials underreporting coronavirus-related deaths at nursing homes is a prime example of this. In addition, a robust enterprise risk management strategy can provide better and more consistent decision-making by ensuring that risk is always taken into account.
It is essential for insurers to have a well-defined risk management framework, which includes an assessment of the severity of different threats and their impact on a firm’s financial performance. The framework should also define how to measure and monitor risks, as well as the frequency and intensity of those threats. It should also establish clear roles and responsibilities for the management of risk, and incorporate internal audits to ensure that key risks are being managed.
As the insurance industry continues to face significant business and regulatory challenges, many companies are looking for ways to increase their capacity and flexibility. This includes leveraging flexible staffing and other managed services to expand resource capacity, match work and skillsets, and optimize cost structures. These services can also accelerate the deployment of innovative actuarial solutions and enable the company to implement them more quickly.
In a global economy, managing actuarial risks is becoming increasingly complex. For example, the emergence of new technologies and changing customer behaviors are increasing the speed at which insurers must act. This has led to a growing need for actuaries to adopt new models, which require them to tap into data in a variety of ways. Additionally, the proliferation of new regulations, such as LDTI and IFRS 17, are putting additional pressure on the industry.
A major factor driving actuarial outsourcing is the desire for more flexible work. This enables companies to reallocate their experienced actuaries to high-value insightful work, increasing job satisfaction and lowering turnover rates. It also reduces the need to recruit and train new actuaries. In addition to flexibility, ACM services also provide a cost-effective way for insurance firms to handle routine tasks, such as reporting and data management.
Actuarial outsourcing can save money by reducing the need for in-house staffing, saving on infrastructure costs and software. This can free up resources for more valuable activities that will drive growth and improve profitability. For example, a life insurer can outsource its business-as-usual (BAU) actuarial processes to a third party, which can perform data transformations and aggregation, freeing up time for actuaries to focus on analytics that directly impact bottom line performance.
Moreover, outsourced services can help with the transition to new systems during a transformation. Many insurance companies struggle with legacy systems, which impede their ability to focus on the products that will boost their bottom line. This is especially true for actuaries, who are overworked with the demands of day-to-day operations and are required to implement functional transformations while performing business as usual.
Outsourced actuarial services can help by providing expertise in running and winding down these systems, which allows the actuary to focus on core products that will drive revenue growth. For example, an insurer can outsource the reserving process for closed blocks to allow its actuaries to focus on current products that will generate future revenue.
Outsourcing is becoming an essential part of the actuarial process. The emergence of KPO vendors has allowed insurance companies to leverage global talent at a fraction of the cost of a full-time actuary. Insurers can select the right KPO vendor for their needs based on their unique business goals. The right vendor will have the domain expertise, delivery models and governance practices to support an effective actuarial outsourcing relationship. In addition, they will be able to provide the appropriate level of security to ensure compliance with regulatory requirements.
With actuarial transformation increasingly high on the insurance industry’s priority list, many firms are turning to outsourcing to free up resources and tap into specialized expertise. This is a smart strategy, but it’s important to understand the risks associated with this approach. In particular, it’s important to make sure that any outsourced work doesn’t interfere with actuaries’ core business functions.
Moreover, it’s crucial that outsourcing partners have robust quality and risk management processes. Otherwise, errors can slip through the cracks and compromise critical results. These errors can also lead to higher costs and unnecessary delays. In addition, some outsourcing providers may not be up to speed on industry trends and new regulations, which can impact the actuarial process.
Actuaries need to have strong math skills and advanced calculations in order to produce data and determine the likelihood of future events. They also need to have a solid understanding of business trends and other financial concepts in order to provide relevant information to clients. They also need to be able to effectively communicate and collaborate with their colleagues, which is why it’s so important that they have access to a modern technology environment.
The global actuarial services market is expected to grow at a CAGR of 8.8%, reaching $9.8 billion by 2028. The report covers the key factors driving the growth of this market, including market size and segmentation (mainly based on product type and application) along with current demand, challenges, opportunities and the latest developments in the actuarial services market.
In addition, the report offers a comprehensive overview of the key players operating in the global actuarial services market. It analyzes their products, markets, customer base, and competitors. It also includes the key strategies of the leading companies in this market.
The actuarial services market is highly fragmented and competitive, with several large multinationals dominating the sector. However, emerging economies such as India are becoming a major destination for actuarial outsourcing. This trend is driven by the rapid economic development of these countries and increasing awareness of the benefits of actuarial services.