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NE Actuarial Club –Actuarial modernization update
March 2019
PwC | NE Actuarial Club – Actuarial modernization update
With you today
David Honour
Principal - PwC
US Actuarial Modernization
Leader
Lance Grisby
Mutual of Omaha
Chief Actuary
Jordan Edwards
Mutual of Omaha
VP Model Development
PwC | NE Actuarial Club – Actuarial modernization update
Agenda
Market Update1Reporting and Analytics2Actuarial systems3
Process efficiency4
Assumption management5
3
Mutual of Omaha’s Modernization Journey6
Market update
PwC | NE Actuarial Club – Actuarial modernization update
Best practices
5
Today’s world class finance and actuarial organizations have certain things in
common:
People
Process
Technology
• Forecast faster, more accurately, and more dynamically
• Have more control automation and fewer errors
• Have more of their people focused on business partnering
• Have a greater focus on talent management
• Leverage cloud technology, RPA and advanced analytics
• Cost up to 65% less
PwC | NE Actuarial Club – Actuarial modernization update 6
PwC | NE Actuarial Club – Actuarial modernization update
Drivers for modernization
Reporting efficiency
Modernization driver: P&CLife
Regulatory changes
Data management
Insight
Organizational structure
Other
Insight
Reporting efficiency
Regulatory changes
Data management
Other
91% 86%
79% 79%
73%
64%
33%
6%
57%
29%
7%
Organizational structure
50%
7
PwC | NE Actuarial Club – Actuarial modernization update
Majority of insurers do not have a well articulated modernization plan
Comprehensiveness of modernization roadmap P&CLife
Mobilization
plan defined
0%
Well
defined
interim
stats
0%
Broadly
defined
end state
Limited
interim
states
0%
10%
20%
30%
40%
50%
60%
45% 57% 12% 43% 15% 21%
Nonexistent
6% 0%
8
PwC | NE Actuarial Club – Actuarial modernization update
Focus area of modernization programs
In progress Future area of focus Previously implemented/NA
Data infrastructure
Governance & control enhancements
Actuarial modeling platforms
Process efficiency
Pricing and underwriting
Target operating model
Cloud computing
Reporting metrics and KPIs
Management reporting
Experience studies & assumption setting
Finance systems
Advanced analytics
AI & machine learning
0% 20% 40% 60% 80% 100%
% of Total responses
76 13 11
62 11 27
53 13 34
51 33 16
50 25 25
48 17 35
44 31 25
43 27 30
42 44 14
40 24 36
39 22 39
34 55 11
9 67 24
9
Modernization driver:
PwC | NE Actuarial Club – Actuarial modernization update
A modernization technology architecture
Reconciliations, controls, Workflow and process automation
Source data
Reinsurance treaties
Other (FX, ESG and experience)
Policy admin
Claims admin
Commissions management
Cash admin (inc AR, AP) and bank
Investment management
Fo
un
dati
on
al
Life
modelling
Stochastic
models
GRC
Systems
ALM
modelling
Risk
aggregation
Reporting, KPIs and analytics
Disclosure Management FP&A
Self-Service
Insurance accounting
(sub ledger)
Investment accounting
(sub ledger)Tax
General ledger
Extr
act
scripts
Sta
gin
g a
rea
Actuarial and risk
applications
Finance
systems
ET
L/E
SB
Accounting
rules
engine
Non-life
modelling
XBRL/iXBRL
Data warehousing and aggregation
Historical data
Assumptions and run
parameters
Actuarial calcs
and aggregation
Finance calcs
and aggregation
Cash flow
model output
Risk calcs
and aggregation
In force data
Other internal data
ET
L
Consolidation User driven analyticsStatic reports
Mo
dern
ised
External and
Internal data
EL
T/C
onnecto
rs
Data lake
Advanced analytics
Agile
AI learning
algorithms
Dynamic data visualisation
Real time, user
driven &
customised
Visualisations
and Summaries
Dashboards
9 9
Strategic insights
Predictive
Unhide deeper
insights
8
Connectors
Digital mobility10IT Operating
Model14
Information
model11
Robotics
and machine
learning
12Cloud
Computing13
IT
Sourcing15
4
5
6
7
3
1 2
Strategic lenses for consideration
10
PwC | NE Actuarial Club – Actuarial modernization update
The roles of actuaries in the future
Today
2030
Actuaries
Data scientists
Risk & Capital
Management
Life Underwriting/
Pricing
ReservingIn-force Analytics
11
Reporting and analytics
PwC | NE Actuarial Club – Actuarial modernization update
Taking new data sources with the customer at
the center…
Integrating data analysis across finance and actuarial
… to find new ways of looking at
the business
• Identify new markets, channels,
and partnerships
• Deliver customer and segment lifetime
value analysis
• Integrated stress testing
…and to answer questions about the
customer like
• When does a need for college savings
compete with annuities?
• When is the loss of a job more likely to
cause a policyholder to lapse?
• How do prolonged low interest rates
impact withdrawals by retired
policyholders?
Social
media
Compe
titor
Bench
mark
Market
data
Em-
ployee
Cus-
tomer
Cus-
tomer
Histo-
rical
Oppor-
tunityTrans-
actions
Risk
Risk
Internal data
External data
13
PwC | NE Actuarial Club – Actuarial modernization update
Traditional approach
Visualisation of the future
Simulation approach
“Cockpit view”“Dashboard view”
Static, deterministic and statistical Real time, self service and behavioral
• Statistical algorithms predict aggregate
outcomes based on historical data
• Does not capture how individuals
make decisions
• Simulate relationships between
consumers, distributors, employers,....
• Shows impact of internal attitudes and
external factors on individual
decisions dynamically
14
Trends in actuarial systems
PwC | NE Actuarial Club – Actuarial modernization update
Emerging technologies (sample only)
16
Data manipulation Automation Analytics Visualization
• Tableau
• Microsoft
Power BI
• QlikView
• IBM (Cognos)
• Microstrategy
• SAS
• Python
• R
• SAS
• Skytree
• AWS analytics
• UiPath
• Automate
Anywhere
• Blue Prism
• Work fusion
• Alteryx
• Informatica
• Power BI
• Tableau
• Qliksense
• AWS Glue
• BigQuery
analytics
• Talend
PwC | NE Actuarial Club – Actuarial modernization update 17
PwC | NE Actuarial Club – Actuarial modernization update
Adoption of emerging technology
18
PwC | NE Actuarial Club – Actuarial modernization update
Current number of platforms
Rationalization of actuarial modelling platforms
Envisioned number of platforms
>69.3%
5-621.1%
1-225.8%
3-443.3%
1-255.0%
5-66.0%
3-439.0%
19
Process efficiency and advanced automation
PwC | NE Actuarial Club – Actuarial modernization update
RPA Capabilities allow automation of many types of activities completed by your users
RPA Capabilities
21
Rules-Based
Triggers
RPA benefits
Data
Entry
Rapid
Development
Continuous
Cycle
Audit Trail
and
Metrics
Reduced
Costs
Document
Image
Capture
Data
Scraping
Accelerated Application
Integrations
PwC | NE Actuarial Club – Actuarial modernization update
Actuarial process suitability assessment
Update parameters and run on multiple platforms
Define parametersModify existing modulesExplore new modules
DATA PREPARATION
CALCULATION
ANALYTIC & OUTPUT
OTHERS
DATA GATHERING
Gather and move data from standardized sources
Gather unstandardized or unstructured data for ad-hoc and exploratory purposes
Reconcile, integrate and translate data
Design new scripts Modify existing scripts
Generate/upload reports; send status notifications
Generate one off reports
Recurring, well-defined and high-volume time consuming processes
Judgements, decision making, rules and UI changes
More Suitable Less Suitable
22
Assumption management
PwC | NE Actuarial Club – Actuarial modernization update
Today’s experience study processes typically take
24
Today’s experience study typically
• Is carried out annually
• Kicks off at the beginning of the year, and can't be delivered to business till second half of the year
• Uses lagged data when delivered to management
• Is manual or rely on desktop automation
• Is lack of advanced analytics
ZZZ
5 Assumptions
3 Lines of business
3 Human resources
43,200hrsper year
Students, FSAs, Management
Gather data, data cleansing,
analysis, documentation
Life, Annuity, Others (LTC/DI)
Mortality, lapse, partial withdrawal,
premium persistency, others
6 Months full time
PwC | NE Actuarial Club – Actuarial modernization update
The future of experience study processes
25
Robots
automatically kick
off data cleansing
and reconciliation
Robots
complete
experience studies
and update
assumption
repository
Visualization is
automatically
refreshed with
updated assumption
repository data
AI updates
narratives
in executive
dashboard and
reports
Staff and
management
review results
and investigate if
needed
01:00 08:00 08:30 09:00 workday
480hrs per year
hrs quarterly
5 Assumptions
8
3 Lines of business
1 ResourcesManagement
Review results
Life, Annuity, Others (LTC/DI)
More frequent, less time consuming, more
focus towards
value-add and insightful activities.
Mortality, lapse, partial withdrawal,
premium persistency, others
PwC | NE Actuarial Club – Actuarial modernization update
Summary
Getting timely and
accurate data is
the top priority,
and most
companies have
that today. The
current state is
effective, but
suboptimal.
Multiple catalysts
are driving
companies to
modernize.
Successful
execution
depends on
having
comprehensive
plans.
Significant
opportunity exists
to expand
automation,
increasing
“productive time”
and reducing
process
specialization.
The changing
paradigm will
impact people,
increasing the
need for
structured training
and development
programs,
including new
tools and
techniques.
01 02 03 04With necessary
investments in
data, technology,
automation,
training and
development, and
by articulating a
comprehensive
modernization
strategy, actuarial
teams can provide
greater insights
and value to their
business partners.
05
26
Mutual of Omaha’s Modernization Journey
What will be covered
PwC | Mutual of Omaha’s Modernization Journey 28
VisionCatalysts
Guiding principles
The journey ahead
Early successes
Lessons learned
Catalysts
Modernization efforts are critical to comply with new regulatory
requirements and support future business needs in a cost effective way
1. Modeling processes were not scalable
and had key person risk
2. Systems could not deliver deeper and
more timely insight to business partners
3. Regulatory requirements compound
complexity of modeling, audit and model
risk management
• 6 different actuarial valuation systems,
some homegrown
• Inefficient to run insightful forecasts
(GAAP & SAP; Inforce and New
Business)
• Added complexity of new reporting
regimes – PBR, GAAP LDTI
Capabilities gapsSystem shortfalls
PwC | Mutual of Omaha’s Modernization Journey 29
Vision
A single unified model that streamlines modeling, ensure consistent data
usage and deliver a cost efficient operating model which creates capacity to
provide better insights
1. Single modeling platform
2. Integrated across all functional areas
3. Modernized actuarial data feeds aligned
with data strategy
4. Enhanced operating structure,
governance and control environment
PBR compliance
Streamlined actuarial modeling and
controls across all products
Capacity to perform insightful analysis
Enhanced model risk management
framework
Cost effective use of actuarial resources
– Right Resources doing the Right Tasks.
Capabilities deliveredScope
PwC | Mutual of Omaha’s Modernization Journey 30
Guiding principles
Guiding principles provide fundamental vision and direction for project team
PwC | Mutual of Omaha’s Modernization Journey 31
1. One Corporate Actuarial model per product line
A. across all actuarial functions
B. across inforce and new business
C. with one streamlined data extract
2. Models built in accordance with Model Development Life Cycle and Model Governance
Framework
3. Actuarial Data Processes modernized and aligned with the Finance Data Strategy
4. Models rebuilt, not converted where appropriate and cost effective
5. Effective change management process ensures that model owners receive quality
models in line with business requirements
The journey ahead
Three phase project…currently midway through Phase 1
PwC | Mutual of Omaha’s Modernization Journey 32
• Each product workstream
encompasses all actuarial
functions
• Prioritization based on
regulatory requirements,
model complexity, and
legacy system retirement
plan
• Dual path for data
modernization and model
build for each product
We are here
Early successes
Early successes helped project and modernization efforts gain momentum
PwC | Mutual of Omaha’s Modernization Journey 33
1. Early executive buy in and full funding approval, project seen as “Enterprise Blue Chip”
2. Early actuarial stakeholder buy in into system selection and dedicated project team
resources
3. New system environment opened to user population early on
4. Built and tested proof of concept models. This proves quality of requirement gathering
and build processes
5. Already retired first legacy actuarial system
6. New actuarial system is already in use for PBR impacts to pricing and upcoming new
product roll-outs
Lessons learned
Experience from past projects and ability to react quickly to new challenges
is critical to our success
1. Fully dedicated project resources are
a must
2. Clear timeline with clear deliverables
and agreement on definition of done
3. Establish roles at the outset and
ensure clear ownership for decisions
4. Gain commitments from teams outside
core project.
Lessons from this projectLessons from past projects
PwC | Mutual of Omaha’s Modernization Journey 34
1. Lots of show and tells with owners to
get early feedback
2. Deliver smaller components sooner to
reduce complexity and provide clarity
as well as value
3. Don’t underestimate complexity of
legacy data processes
4. Effective collaboration is critical to
manage priorities and resolve
dependencies across teams
PwC | Mutual of Omaha’s Modernization Journey 35
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Thank you
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