Actuarial modernization is crucial for insurers to achieve both their short-term and long-term objectives. The insurance industry continues to navigate a complex environment with increasing data, complexity, uncertainty, multi-reporting bases, evolving capital regimes, and rapidly changing technology solutions. PwC's third Global Actuarial Modernization Survey, featuring responses from over 200 insurers worldwide, highlights the ongoing importance of modernization, particularly in the face of AI developments.
Modernization Landscape Changes in the Last 3 Years
- Drivers: The top four drivers for actuarial modernization remain consistent: efficiency and quality of processes, improved management insights, regulatory changes, and process efficiency. A pronounced emphasis on process efficiency is noted as companies shift focus from adoption to cost reduction. Upskilling or reducing key person risk is also a significant driver (39% of responses), reflecting concerns around talent retention.
- Spending: Actuarial modernization spending is set to exceed $5 billion over the next 5 years, with 87% of respondents currently undergoing an actuarial modernization journey.
- Themes: Key themes include data quality, talent acquisition and development, resource management, business intelligence tools, process efficiency, advanced analytics, modeling efficiency, assumptions management, cost efficiency, enhanced analysis, cultural change, reporting acceleration, data governance, reserving methodology, management buy-in, budget constraints, Gen-AI, cloud, process automation, and reporting automation.
Key Themes and Findings
- Efficiency: 94% of survey participants choose efficiency as the main driver for modernization, with automation progress remaining limited. Actuaries still spend more time on data preparation than analysis, driven by increasing data demands and a potentially missing data ecosystem.
- Data Management: While 70% of companies report obtaining accurate and timely data, less than half have consistent, normalized, and automated data. High-priority data elements lacking include single source of truth, standardized granular data, automated ETL processes, and effective data visualization and analysis tools.
- GenAI Implementation: The disruption and potential of GenAI are enormous. Around 32% of respondents have finished gathering use cases, and roughly 45% expect to finish setting up governance frameworks within 2 years. Benefits of GenAI have been observed in modeling, productivity, documentation, data extraction, and reporting.
- Outsourcing: 73% of survey participants realized enhanced capacity as a result of outsourcing, with the top four outsourced tasks being related to actuarial models and data preparation. Benefits include skill diversification and knowledge sharing, while challenges include communication barriers and time zone differences.
- Modeling Ecosystem and Cost Navigation: Life insurers continue to look to consolidate their actuarial modeling platforms, with the majority aiming to reduce the number of platforms to just one or two. Cloud costs are growing faster than hardware or software licensing costs, with cloud usage costs at or exceeding licensing costs for large and medium companies.
- Increased Actuarial Involvement: Actuaries are becoming increasingly involved in enterprise-wide modernization efforts, particularly in areas such as Data Science & Analytics, Cloud & Data Strategy, and Gen AI. However, less than 50% of participants indicated that their actuaries are proficiently skilled in these areas, highlighting the need for further development of capabilities.
- Actuary’s Future: Over 60% of respondents want their actuaries to develop project management, advanced data analytics, predictive analytics, data science, business intelligence, and soft skills such as communication, leadership, and relationship management.
Modernization Success Factors
- Proactively manage change.
- Establish strong executive sponsorship.
- Operate cross-functionally.
- Measure outcomes.
- Enable adoption of new tools and ways of working.
- Show progress continuously.
- Start small with focused initiatives.
- Over-communicate transformation objectives.
- Develop clear governance.
- Create a sense of urgency.
- Plan for interim states.
- Develop clear governance to drive accountability.
PwC is ready to help insurers turn ideas into impact and drive modernization efforts forward.
