Speaking in South Africa, Deloitte Vice Chairman Louis Jordan comments that European executives are shocked at the cost of implementing Solvency II on the life side. Why? Well, the actuaries get picked out:
[Jordan] . . . said the price of actuaries working on contract had “gone through the roof” in Europe, because more were essential for Solvency 2 implementation . There may be a shortage of actuaries in SA [South Africa] once insurers start working on the programme in earnest.
I think the real problem is that data capture was never as high a priority as it needs to be now. Product developers (underwriters) in my experience never spent a lot of time on data capture, as that can really slow down the rollout. And that made sense in the days before mega-gig computing. You didn’t need a lot of detail, because you’d never be able to do anything with it. Today, we can analyze in astonishing detail.
Take GLM: The math for it wasn’t a breakthrough; creating a desktop powerful enough to harness it was.
A 21st Century company, in my view, needs to work much harder on data capture because failure to do so will be a competitive disadvantage. This seems inevitable to me.
I compare it to Microsoft vs. Apple. Microsoft put out buggy products but put them out fast and cheap. Apple very patiently crafted a perfect product, and that product was relatively expensive.
From the ’80s to the early aughts, the Microsoft approach worked. That’s why Bill Gates has billions and billions. But over the past five years or so, the Apple approach has ascended as the need to integrate seamlessly became critical. (viz. Ipad vs. Vista) (None of this is a sell order on Microsoft, by the way.)
In the same way, it made sense in the old days to softpedal data needs in insurance product development. Getting to market fast is always a strategic advantage, and back then, the down side of weak data was small.
Today, data capture is a lot more important, and the backfilling of data capture is really painful. But it’s inevitable to thrive in today’s markets. Solvency II is just holding management’s feet to the fire.