Young Actuaries envision industry future

The 2019 Young Actuaries Conference held this month unpacked climate change, the Financial Services Royal Commission,  and the future of work, providing key insights to the future leaders of the profession.

Ten speakers, practicing in various industries, with a diverse range of experience, were engaged to present at the 2019 Young Actuaries Conference, bringing different perspectives to 160 people: 117 in Sydney, 19 in Melbourne, 12 in Brisbane and 12 online via Webinar.   

The conference included three Plenaries, covering topical areas from a young actuary’s perspective:

  1. The Future of Work
  2. Impact of Climate Change
  3. The Hayne Royal Commission.

 

(L-R) Actuaries Institute President Nicolette Rubinsztein with Plenary 1 Speakers, Rita Yates, Vivian Yeung, Adam Reid and Chair Jenny Lyon

Plenary 1 – The Future of Work

The future of Work Plenary looked at how actuarial skillsets could be utilised in some of the non-traditional roles, inspiring the young actuaries to reimagine their future work life.

Rita Yates, CEO of Insurtech Australia opened the plenary with an overview of Insurtech. Rita shared some staggering statistics about investment in the insurtech industry around the world, which is expected to further grow into the future.

Most of the Insurtech startups are ‘enablers’ to the insurance industry, we learned, providing support on product design, marketing and distribution, pricing, back office and remediation.

This creates various opportunities for actuaries who would like to be involved in:

  1. Analysing big, new data sets;
  2. Helping to create dynamic customers experience;
  3. Focusing on prevention; and
  4. Integrating the insurers into the modern world with evolving technologies
Rita Yates discusses Insurtech 101 as part of “The Future of Work” Plenary

With the strong connection between data science and actuaries, we as young actuaries should shift our mindset and embrace the opportunities of getting involved in a great diversity of roles and responsibilities!

Adam Reid, Head of Vitality Product and Pricing at AIA Australia, then spoke about how the Vitality program incentivises the right customer behaviour through behavioural economics, and how Discovery’s experience has changed with the overlay of behaviour into insurance product design.

Lastly, Vivian Yeung, a Senior Actuary at icare gave a brief overview of icare’s business model, followed by a discussion into role of actuaries at icare. During her presentation, Vivian emphasised the importance of communication – particularly given that icare is a social insurer, it is crucial for actuaries to be able to communicate complex concept to stakeholders with no insurance background.

Vivian also showcased the innovative Claims Triage Model utilised by icare, which categorises claims depending on the level of complexity, improving efficiency of the claims assessment process.

(L-R) Plenary 2 Speakers Sharanjit Paddam, Jillian Reid, Emma Vitz and Pulkit Jain

Plenary 2 – Impact of Climate Change

The insurers are at the front line battling against climate change as they provide protection to policyholders impacted by extreme weather events.

The Head of ESG Risk at QBE, Sharanjit Paddam first explained to the audience that climate change is not only associated with physical risks (damages to policyholders’ properties), there are also transitional risks for investors as the economy starts to transit into a low carbon future.

There are a number of implications from climate change. For example, insurers will have to start considering the potential impact of stranded assets under the transition, which may in turn result in an increase in insurance premium. This is not necessarily the right customer outcome and the company would be running at a risk of losing the market.

As actuaries, we have to think through the implications of climate change and allow for those implications during the strategy and business planning process.

Jillian Reid, a principal in Mercer’s Responsible Investment team, took the audience through some high-level scenario analysis on climate change and how that impacts the investment return on the different asset classes, which highlights the importance of integrating climate scenario modelling into investment decision making.

Actions for actuaries/financial services industry include:

  1. Integrate belief, process and policy;
  2. Engage all the relevant stakeholders during the process; and
  3. Start moving assets!

 

The last presentation in Plenary 2 was delivered by Emma Vitz and Pulkit Jain, both from Finity Consulting, focusing on the Australian Actuaries Climate Index. They walked the audience through the purpose of the Index, the approach and results, and it’s uses.

The Climate Index focuses on extreme weather and sea levels, as the extreme weather condition is more relevant to insurers given their responsibility to provide financial protection against physical damages. The result suggests that the overall Index is trending up, with the recent weather events reflected in the index.

Potential uses of the Climate Index include:

  1. Catastrophe modelling;
  2. Education;
  3. Insurance Pricing; and
  4. Disclosure of climate risk

 

(L-R) Sharanjit Paddam, Jillian Reid, Pulkit Jain & Emma Vitz during the Q&A session.

The Q&A session was particularly interactive. The topics presented generated a lot of discussions around how insurers could involve the policyholders in making sustainable investments, and how insurers strike the balance between risk pricing for those who live in risky areas/work in risky occupations versus leaving a portion of policyholders not being able to afford their insurance premiums.

(L-R) Plenary 3 Speakers Geoff Atkins, Hoa Bui and Stuart Turner with Chair Jenny Lyon


Plenary 3 – The Hayne Royal Commission

The last plenary of the day looked at the Royal Commission in the broader context, and the implications for the insurance industry.

Geoff Atkins, Principal at Finity Consulting first spoke about some of the specific findings in the Royal Commission that are relevant to general insurance, such as misleading statements around Allianz’s travel insurance product; inappropriate sales of IAG’s add-on products, and claims handling not being taken as a part of “financial service”.

Geoff then went through the recommendations in relation to these findings, and highlighted that some of the recommendations are not only applicable general insurance, but also life insurance.

Other recommendations that would potentially impact actuaries’ roles are:

  1. Extension of BEAR (Banking Executive Accountability Regime) to all APRA regulated entities;
  2. Improving the effectiveness of consumer disclosure; and
  3. Changes in insurance produce design and distribution obligations.

 

Hoa Bui, Partner at KPMG explained to the audience that the main purpose of Royal Commission was to investigate the misconduct issue within the banking industry, which was then extended to the wider financial services industry. In addition, most of the cases were remediated by the time the final report was released. Culture and governance were the key issues identified in the process and most of the recommendations were for APRA to action.

There are some cross-practice impacts brought by Royal Commission, including:

  1. Increased focus on culture, governance and remediation;
  2. Intervention by regulators;
  3. Removal of conflict of interest; and
  4. Focus on simplified laws and consumer rights

 

The implications specific to the life insurance industry include:

  1. Shift in the duty of disclosure;
  2. Termination of grandfathered commission arrangement;
  3. Capping of life commission; and
  4. Treating claims handling as a part of providing financial service.

 

Take outs for life actuaries, following the above-mentioned implications, include:

  1. Ensure the product design are fit for purpose;
  2. Ensure the products are priced sustainably;
  3. Including social risk and reputation risk in the advice to the board and management, instead of advising purely from a financial perspective;
  4. Balancing the interest between policyholders and shareholders;
  5. Improving transparency on declined claims; and
  6. Increasing interaction with the regulators.

 

Lastly but most importantly, one thing that all of us actuaries need to bear in mind is – policyholder interest comes first!

Stuart Turner, the Financial Integration Lead at Zurich, chaired the last discussion. He engaged the crowd to share ideas around the causes of the Royal Commission, followed by a few case studies in the past around the failure of ethics.

A few key drivers to ethic failure were:

  1. Self and Incentive – placing self-interest first;
  2. Framing – making ‘commercial’ decisions as long as they are compliant;
  3. Leadership – where implicit value demonstrated is not consistent with stated value: ‘we have to do whatever it takes’; and
  4. Culture – the desire to fit in.

 

What can actuaries do to battle against ethical issues? Here are some thoughts shared by Stuart:

  1. Be aware of your conflicts and those of the others;
  2. Consider different ethical perspectives – are you comfortable for your decision to be revealed to the public?
  3. Consider different stakeholders;
  4. Watch your language – ‘whatever it takes’ could be interpreted differently;
  5. Discuss and consult with the others; and
  6. Speak up!

 


Final Thoughts

Overall, these plenaries provided some great insights to the conference participants with actionable takeaways, either giving them an idea to think through (like how they could steer their career pathway into a broader field), or enabling them to reflect how they could further develop their thinking and expand their current roles and responsibilities.

Prior to the networking session, a number of the Institute’s Practice Committee members joined the crowd and introduced themselves to the audience, which gave the audience a good idea of the relevant working groups within the industry and what they do.

Here is a description of how the webinar session went in Melbourne:

The turnout for Melbourne’s webinar session (wonderfully hosted by AIA) was delightful with a participation of more than 15 people across a diverse practice areas. This included students and a Professor from the University, retirement, wealth management, general insurance and life. The diversity of topics presented in the conference was greatly appreciated by participants. The first plenary in relation to the future of work provided valuable insights into industry trends whilst the session on climate change opened audience to a less known practice area of actuarial work. Last but not least, an interactive session on the Royal Commission allowed each participant to reflect upon the work ethics and behaviour which each actuary should uphold as part of their profession. It was exciting to see young actuaries being encouraged to join the various working groups with opportunities to give back to the profession!

As always, thanks to our speakers, our sponsors (SKL, Finity and Taylor Fry), the Actuaries Institute and the Young Actuaries Conference Organising Committee for making this event such a success!

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