Actuaries Club of Southwest Presentation Rise of the ... · natural language generation and processing, and robotic process automation Exponential Technologies Flexible and adaptable

Copyright © 2019 Deloitte Development LLC. All rights reserved.1

June 7, 2019

RISE OF THE EXPONENTIAL ACTUARYTM

Introduction into Robotics, Automation, and Augmentation


Today’s Agenda

EXPONENTIALPROFESSIONAL OVERVIEW

11:05-11:15am

The Need for Change

The “Art of the Possible”

Building the Exponential Professional

Future skillsets needed to be successful

Q&A, CLOSING

11:30-11:40am

Q&A

TECHNOLOGY, TOOLS, ANDGETTING STARTED

11:15-11:30am

Exponential Technologies, including RPA, Natural Language Generation,Natural Language Processing

Establishing an Exponential Professional team and mindset

Key Takeaways

10:50-10:55am

Welcome & Introductions

Objectives for Today

INTRODUCTIONS ANDOBJECTIVES

10:55-11:05am

Unprecedented change and opportunity

Why and how the workforce is changing

FUTURE OF WORK


Introductions and Objectives


Introductions and Objectives

The proposed objectives for this meeting are to:• Provide an overview on the Future of Work and 4th Industrial Revolution• Provide perspectives on the Exponential ProfessionalTM and Exponential ActuaryTM

• Introduce emerging technology tools and Actuarial use cases• Discuss how to get started with transforming your organization

Exponential ProfessionalTM Solutions

Crowd Sourcing & Competitions

Cognitive Computing, Machine Learning & Analytics

Robotic Process Automation

Natural Language Processing & Generation

Actuarial Modernization


Future of Work


Unprecedented change and opportunity

7Disruptors

Technology is everywhere

6.0 billion+smartphones in the world by 20201

AI, Cognitive Computing, Robotics

$500,000 in 2008$22,000 today5

Tsunami of data

9x more in last 2 years2

Major enabler of machine learning

Jobs vulnerable to automation

35% UK 47% US

77% China6

Diversity and generational change

Millennials 50%3

25% global pop in Africa by 2050 5

Longevity Dividend– 50 year careers4

Explosion in contingent work

US Contingent workers 40% by 20207

Change in nature of a career

2.5 – 5 years: Half-life of skills4.5 years: Average tenure in a job8

1 https://www.cnbc.com/2017/01/17/6-billion-smartphones-will-be-in-circulation-in-2020-ihs-report.html2 https://www-01.ibm.com/software/data/bigdata/what-is-big-data.html3 Annual Global Millennial Study, https://www2.Deloitte.com/uk/en/pages/about-Deloitte-uk/articles/millennial-survey.html 4 https://www.newscientist.com/article/mg23130810-800-the-100year-life-how-should-we-fund-our-lengthening-lives/5 https://www2.deloitte.com/content/dam/Deloitte/il/Documents/human-capital/Thriving_in_times_of_digita_disruption.pdf


The Two-Part Value Equation

Productivity

Perform current duties faster, cheaper, and with less errors

Focus judgement and analysis on high risk issues

Enable workforce to focus on more strategic initiatives

Performance

Drive management action by moving from “Why” to explaining “So What”

Drive shareholder value through forward looking analysis to identify and manage risk

Expand role of the professional to drive business value

Exam

ple:

A

ctu

ary Automation of pricing models

and analysis reduces time required and increases reporting frequency

More frequent reporting and capacity to analyze and recommend opportunity leads to real time insights

Identify expense drivers to redesign products to minimize costs

Capacity for Insight

Address “what if” questions live through interactive dashboards

Strategize solutions to drive better outcomes

Innovate strategies to empower new business models


The Exponential ProfessionalTM


The need for change

CHIEF CHRISTINE

• Desires to serve business in a more proactive strategic capacity –insights vs production

• Wants to implement new technologies but believes they are too nascent and unproven

• Wants to position herself as a catalyst for change and an industry pioneer

• Struggles to know where to start, but wants to lead and share knowledge with team and senior management

• Need to consolidate or improve data capability, actuarial systems, and processes

• Respond to concerns around Quality – e.g., observed errors, lack of consistency

• Cost Reduction and related strategies to improve efficiency

• Keeping pace with evolving Regulatory Change such as implementing PBR and Targeted Improvements

HOW CAN I ENABLE MY TEAM TO BETTER RESPOND TO OUR STRATEGIC OBJECTIVES? HOW CAN WE PROVIDE MORE STRATEGIC INSIGHTS?

DEMANDS DESIRES

PAIN POINTS & CAPABILITY GAPS

SPANNING:PEOPLE, PROCESS, TECHNOLOGY,

AND GOVERNANCE


The need for change – emerging regulationsVolume of regulatory changes will create more work VM-20

EffectiveIFRS Effective

LDTIEffective

Emerging Change Magnitude of Impact Timeline

IFRS 17

Principles Based Reserving (PBR) for Life (VM-20)

US Tax Reform

IAIS ComFrame (Including International Capital Standard 2.0)

Solvency II

FASB Long Duration Targeted Improvements (LDTI)

1/1/211/1/20

Solvency II Applicable

VM-20 Introduced

ComFrame Introduced

IFRS 17 Introduced

Tax Reform Effective

LDTI ASU

IssuanceSolvency

II Reviews

1/1/2016 1/1/17 3/1/175/18/17

12/31/178/15/18

12/31/18

Introduction Effective Date

August 15, 2018 January 1, 2022

Introduction

New Methodology Effective

Applicable

ASU Issuance

ComFrame Introduction

Effective Date

Effects Complete

ComFrame Adoption

EIOPA Reviews

Effective: All Entities

December 31, 2027

January 1, 2020

November 30, 2019

December 31, 2018

January 1, 2021

January 1, 2017

December 31, 2017

March 1, 2017

January 1, 2016

May 18, 2017

Transition Date

January 1, 2019

Comparative Period

January 1, 2020

July 27, 2019

IAIS Global Seminar

May 1, 2016

Public Disclosure

LDTITransition

ComFrame Adoption

11/30/19

IFRS Comparative

1/1/221/1/19

*Timelines are not drawn to scale

NAIC QIS II

Statement of Position (SOP) 03-1

Financial Accounting Standards (FAS) 157

ASU 2010-26

December 31, 2009

July 7, 2003

September 1, 2008

December 15, 2003

November 15, 2007

December 15, 2011

September 1, 2006

October 10, 2010Effective

Approved Effective

Finalized

EffectiveIssued

EffectiveFASB Approved

VACARVM Effective

FAS 157 EffectiveASU2010-26

EffectiveSOP 03-1 Effective

11/15/2007

12/15/201112/15/2003 12/31/2009

Commissioners’ Annuity Reserving Valuation Method for VAs (VACARVM)

QIS II Begins

February 22, 2017

Recommendations Presented

December 1, 2017

QIS II Begins

2/22/17

12/1/17

QIS II Results


The opportunity for Actuarial function to provide deep business insight is negated by overwhelming Operational and Stewardship Activities they perform today.

Actuarial function of today

200+ spreadsheets linked together to calculate, capture, and allocate investment income

1500 hours spent annually drafting 500 actuarial reports after analysis has been completed

90 people involved in a 6 month process of updating regulatory AAT memos

10,000 unique tools and spreadsheets required for monthly actuarial reporting processes

1,000 model output files manually copied and aggregated to refresh Actuarial results

Life Insurance company doesn't know how many 90+ year olds they insure

300 plus Actuarial models all need to be maintained, updated, and launched manually and reconciled

Company produces 150 product filings every year

Decentralized business model has inconsistencies and redundancy in roles, tools, and approach

Users wake up at 2:00 a.m. to confirm models have successfully completed and to kick-off next job

Representative Actuarial Pain Points


The nature of the Actuarial Professions is being disrupted by technological and talent/operating innovation. This will shift human work towards higher cognitive and value-added activities.

Future state of Actuarial functions

TimeAllocation

Higher

LowerNow10%

Future

45% 45%

Automation Spreading Across Spectrum of Actuarial Activities

Ideation / Hypothesizing

Application and Decision Making

Computation and Distillation

Level of Cognitive Engagement


Companies agree that actuarial processes will look very different as they leverage emerging technologies.

A look at the not-too-distant future…

Day

1

5:00 AM

6:00 AM

7:00 AM

8:00 AM

8:10 AM

8:15 AM

An automated robot completes running of actuarial models, reserves/DAC, and claim liabilities. Output is sent to its analytics engine

The data from the modeling engine or tools is staged on a Tableau or BI server and dashboards are refreshed

The natural language generator adds in narratives to the dashboard

The Chief Actuary has access to the updated reports and narratives as soon as he/she arrives in the office

The Chief Actuary interacts with the chatbot in natural language to drill down into splits by channel/product

The Chief Actuary further drills down into variance analyses for products/services with dropping margins

Imagine a world where… Professionals can now spend their days driving business analysis and providing the intuition to …

• Identify management actions

• Uncover drivers of risk

• Develop pricing strategies

• Forecast financial results

• Increase capacity for growth

9:00 AM


Building The Exponential Professional™The actuary professional of the future will use a combination of core skill sets, including domain knowledge, and a diverse array of technologies to add increased value.

Inputs Outcomes

Actuarial and/or Data Science Expertise

Highly trained professionals with industry expertise and extensive training

Integrated use of RC&A technologies, including machine learning and predictive analytics, natural language generation and processing, and robotic process automation

Exponential Technologies

Flexible and adaptable workforce, with a focus on open talent networks, organizational redesign, and reimagining learning and development

Organization & Workforce Change

Improved Productivity, Accuracy, and Reliability

Leveraging automation technologies reduces the risk of error and eliminates costly re-work, allowing more time for analysis

Actuaries will be the heart of finance organizations and generate more strategic analysis to drive key company decisions

Increased Value-Add Contributions

As actuaries move away from repetitive process-oriented work and develop new skills, morale and job fulfillment rise

Stronger Morale & Employee Retention


Future skillsets needed to be successful

Cross Collaboration

Data Science

Communication

Marketing / Branding

Leadership


Technology, tools, and use cases


Many companies attempt to start by developing an “opportunity log” of existing processes that can be automated, but this gives an incomplete picture of the value that Exponential technologies, process redesign, and workforce changes can bring.

Identifying, evaluating, and executing on the opportunity

Evaluating Your Company’s Exponential

Potential

• Pixelating the opportunity set is important, which requires breaking the spectrum of work and entire end-to-end process into bite sized chunks

• Don’t just focus on your company’s current workload - identify processes that are not being performed today, due to resource limitations, skill deficiencies, or technology constraints

• Consider implications for professional operating and talent models, such as the change in how we source talent and design organizations – encompassing an array of resources, both internally and externally

• Professionals need to continue to meet professional and accountability standards and how these are met will evolve as processes change

• Learning and development programs will need to change as these technologies and approaches are embedded throughout your organization

KEY CONSIDERATIONS


Exponential ProfessionalTM solutionsOur approach coupled with a suite of solutions addresses all aspects of the actuarial profession and is unlike anything being offered in the market.

Ideation / Hypothesizing

Application and Decision MakingComputation and Distillation

Prepare Data Analyze Validate & Report

Data Wrangling• Experience studies• Valuation data preparation

Enterprise Content Management (ECM)• Linked multi-document creation

(e.g., actuarial memorandum)• Workflow managementRobotics Process Automation (RPA)

• Experience studies• Valuation kick-off and

calculation

• Experience study data gather

• Repetitive, manual analyses

Natural Language Processing (NLP)• Capture unstructured and metadata• Digitize and standardize contract terms• Data X-Ray

Natural Language Generation (NLG)

• Rate filing document writing• Quote document writing• Experience study or financial reporting analysis outcome summaries

Experience Investigation• Source of earnings analysis• Sales force analysis• Claims management analysis

DATA X-RAY


Opening email and attachments

Logging into web/ enterprise applications

Moving files and folders

Copying and pasting

Filling in formsReading and writing to databases

Scraping data from the web

Making calculations

Connecting to system APIs

Extracting structured data from documentsCollecting social media statistics

Following “if/then” decisions/rules

RPA is… RPA is not…

Computer-coded software

Programs that replace humans performing repetitive rules-based tasks

Cross-functional and cross-application macros

Walking, talking auto-bots

Physically existing machines processing paper

Artificial intelligence or voice recognition and reply software

RPA is delivered through software that can be configured to undertake rules-based (deterministic) tasks; it is not actual robots in a production line.

What is robotic process automation (RPA)?

What it can do


RPA demo


Natural Language Processing reads and Natural Language Generation writes.Natural language processing vs. Natural language generation

Natural Language Processing Natural Language Generation

• Ingests unstructured data (emails, tweets)

• Output designed for machine consumption

• Cognitive capacity lies in ability to disambiguate variations in speech

• Driven by machine learning

• Ingests structured data (spreadsheets)

• Output designed for human consumption

• Cognitive capacity lies in ability to imitate natural variability in human speech

• Driven by rulesets

Linguistic corpusOntology

Structured DataStructured Key Info

Varied Natural Language

Structured Data

Machine Learning Engine

Unstructured Text

Deloitte. Document Review Platform


Natural Language Processing demo


Natural Language Generation demo


Actuarial Benchmarking Study

Actuarial spend significant time with IT teams transforming data to a form which can be used for modeling, valuation, and analysis purposes. There is ample opportunity to leverage technology to automate the data processes.

Illustrative data integration process

Applicable Technologies

Process AutomationCognitive Automation / Machine LearningData WranglingNatural Language

Generation

Data Analyze and Report

Extract data from systems

Convert data into consistent file format

(e.g. from CSV)

Cleanse data for PII and sensitive information

Tackle any duplicate records to ensure each

record has a unique identifier

Generate fields required for valuation

Perform gain/loss analysis to study changes in liability

Reconcile data with respect to prior year's

data, perform consistency checks

Update the data as per stakeholder responses

Note any discrepancies and resolve using data clean-up files provided

by the client

Prepare data questions for client for any unresolved issues

Incorporate final assumptions in the valuations with final data to study impact from assumption

changes

Pro

cess

Ste

ps

Analyze results, draft reports and deliver to stakeholders. 57% of data analytics

capabilities were not effective / somewhat

effective

63% not satisfied with data quality

46% of systems are spreadsheets and

databases


Actuarial case studiesThe following Actuarial Processes have been enhanced through automation technologies.

Metric Amount

Prior Execution Time 2,400 minutes

Prior Execution Frequency Annually

RPA Execution Time 90 minutes

RPA Execution Frequency Quarterly

Reduced execution time allows for more frequent process execution, trend monitoring, and rate filings.

Eliminated almost all manual copy-paste work, which will reduce the risk of errors and improve controls.

Improved the organization and standardization of Excel files throughout.

Premium Rate Increase Process

Actuarial Content Management –Cash Flow Testing Memoranda

Health Underwriting Quote Testing Automation

Process Overview Benefits / Enhancements Key Metrics

The RPA Process automates the collection, manipulation, and use of data for calculating lapse rates, projected premium, and projected claims that are used to select the rate increase for each Block.

The ACM solution reduces the time required to produce regulatory documents through standardized tools and templates, streamlined content management, and efficient workflows.

Reduction of time spent on memo generation, allowing actuaries to spend more time performing analysis.

Improved governance, control, and audit trail of documentation

Increased consistency and accuracy of information across the organization.

Metric AmountCurrent FTEs (Hours Equivalent) 20 FTEs

Future FTEs (Hours Equivalent) 15 FTEs

Estimated Savings 25%

The Health Rate Testing Bot automates the entry of thousands of test cases into a company-specific underwriting user interface, stores rate quote results, and compares them to independent values.

Allows for continuous testing of the system, for product and rider combinations that were rarely tested.

Increases accuracy of underwriting quotes, leading to fewer quote errors, more accurate pricing, and increased customer satisfaction.

Metric Amount

Prior Execution Time N/APrior Execution Frequency N/ARPA Execution Time ContinuousRPA Execution Frequency 24/7/365


Getting Started


Join an immersive experience (e.g., Actuarial and FinanceTM Lab) to explore the

“art of the possible” and determine a future state vision, goals, and benefits

Immerse Yourself in Innovation

Use an agile, iterative piloting approach to move from strategy to prototyping as

quickly as possible – “fail fast” and achieve rapid results

Prove it Works (Quickly)

Evolve your Actuarial organization by collaborating with other business functions,

BPO providers, and digital vendors

Build Your Ecosystem

THINK BIG

Disconnect from the core business and set up a digital leadership team to assess

disruptive opportunities within the organization

Scaling the Edges

START SMALL ACT FAST

ESTABLISH AN EXPONENTIAL PROFESSIONALTM LEADERSHIP TEAMIdentify a visionary program leader and assemble a team to accelerate your digital goals. Determine a governance model and understand

policies that might need to be adapted to execute successful change management and ensure the solution is absorbed into the business fabric

Prioritize your desired tactics and pick just one or two to get started in order to

establish proof of concept

Pick One or Two Plays

Seek opportunities to share digital experiences with other functions –

knowledge share

Market Your Own Success

How do you get started


Key takeaways

Disruption will impact Actuarial professionals and other white-collar professionals, in addition to those blue collar professions that we typically associate with disruption (e.g. Uber/Taxis)

Professionals need to continue to meet professional and accountability standards and how these are met will evolve as processes change

Pixelating the opportunity set is important, which requires breaking the spectrum of work and entire end-to-end process into bite sized chunks

Examples of change/disruption are manifold and include technology enablers such as robotics and cognitive automation

There are significant implications for professional operating and talent models, such as the change in how we source talent and design organizations – encompassing an array of resources, both internally and externally

The outlook for the future is bright and will enable professionals with the right skillsets to add more value to organizations through more strategic activities


Q&A

About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a detailed description of DTTL and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Copyright © 2019 Deloitte Development LLC. All rights reserved.