I’ve always been concerned that casualty actuaries paint themselves into a box, in no small part because they have a decade-long education process that, among other things, requires one to memorize large swaths of P&C arcania, like the Annual Statement.
The advantage: It makes casualty actuaries well-prepared for any traditional challenge they are likely to see. Need to price homeowners’ insurance? Well you learned the basics in Exam 5. Gotta estimate the premium asset on a retro-rated policy? Good news – you learned it in Exam 7.
The disadvantage: When insurers seek quantitative solutions outside of pricing and reserving, they are tempted to leave actuaries behind. Witness (sub req, I think):
Seeking to transform sheaves of claims data into risk-management gold, American International Group Inc. has hired a chief science officer for its largest insurance unit.
AIG on Monday plans to name Murli Buluswar to the newly created position at Chartis, its global property- and casualty-insurance business. The 40-year-old will oversee a research team that will draw in part on the immense collection of information the company has amassed around the world in the course of doing business.
The goal of the effort is to improve loss forecasts, reduce costs and devise more accurate pricing for insurance policies—even for big clients in the commercial-insurance field, where such analysis is relatively rare.
Now some of this looks like a new hat atop an old suit. U.S. personal insurers have been mining data heavily for the past decade. European insurers, even longer. And smaller commercial insurers – they’re all smaller than Chartis – have been refining their predictive modeling for a few years.
But that’s what pricing actuaries do. This role is broader, according to Mr. Buluswar:
The use of data analysis in the insurance industry has tended to be focused on the actuarial side of the business, but the opportunity is much broader than that. It can be applied to how you manage marketing, distribution, customer experience, underwriting decisions — it has a place in every function, of the insurance enterprise. At various levels I think this is terrific opportunity for Chartis to set the gold standard for how analytics can create competitive advantage, as well as to help position the industry as a whole more favorably to consumers and within society more generally.
Note the way he has put actuaries into a narrow box and, basically, implied that anything that is NOT pricing or reserving is outside the actuarial realm.
Is it? I wonder how many actuaries will make his analytical team.
P.S: If you are curious, here’s the new CSO’s Linked-in page.