As part of the preparation for the GI TORP Working Party presentation to the 2017 GIRO conference in October, the working party carried out a survey covering the level of automation used in general insurance reserving processes. This survey focused on the timescales and pressures of the reserving cycle and the current state of play relating to the prevalence of manual processes and the penetration of proprietary software. It looked at automation techniques as a mechanism for relieving the pressures on the reserving process resulting from solvency 2, the reserving cycle, IFRS and the pressure for faster close processes.

Download the results of the survey

Summary of Results

  • The total number of survey participants was 39, among which:
    • 50% are personal lines insurers
    • 40% are Lloyd’s/London Market insurers
    • 10% are reinsurers or health insurers
       
  • About 2/3 of the participants are doing business mainly in the UK (some of which also in other European countries), and about 1/4 have US operations
     
  • There was a good balance of small, medium and large firms in terms of Gross SII TP volumes
    • 25% less than £100m
    • 20% between £100m and £500m
    • 20% between £500m and £1bn
    • 35% more than £1bn
       
  • Regarding their reserving process, the participants currently use:
    • An-off-the-shelf product from a software supplier -> about 50%
    • Excel spreadsheets (exclusively) -> about 25%
    • An internally-built/coded platform (potentially combined with spreadsheets and other software) -> about 25%

It is worth noting that, within the group of firms that only use Excel spreadsheets for their reserving, half of them are actually very large firms from a gross solvency 2 technical provision perspective (SII TPs > £1bn) while the others are composed of small and medium firms.

  • Automation: Regarding the level of automation of their current reserving process, the responses have been:
    • 50% as being '50 manual and 50% automated'
    • 30% as being mostly manual or not automated at all
    • 20% as being mostly automated with little manual work needed

It is worth noting that approximately 1/3 of the participants using an off-the-shelf reserving platform have described their process as being 'mostly manual' while the remaining 2/3 have responded '50% manual and 50% automated.' However, within those exclusively using spreadsheets, only 1/4 have considered their process to be 'mostly manual', which might show that using a dedicated software package doesn't seem to solve most of the challenges related to automation even compared to spreadsheets. This appears to be consistent with the point that 90% of all the participants have responded 'Yes' or 'Maybe' to the question, ' Given time, would you like to invest in further automation of your reserving process?', disregarding what tools or platforms they are using.

  • Based on the other results (incl. open-ended responses) also received, the main outcomes to highlight relate to the following items:
     
    • Data Quality – This appears to be the main issue for most participants. Data quality is often not very good, it often needs to be processed at a significant level (for 3/4 of the participants) when coming from Management Information/Information Technology or from other teams, and it is not always consistent between quarters (e.g. quarter on quarter data formatting changes are common place). Data Quality arguably represents the main area of improvement as evidenced by the responses, with  of the participants considering 'data processing as an essential area of improvement regarding automation'
       
    • Level of Automation – There remains a significant volume of manual work needed by reserving actuaries (e.g. regarding data processing, ultimate claims selections, model blending, movement analyses from a quarter to another). Most participants would like to see an increased level of automation to allow for more time to do analyses and in-depth reserve review (but also reduce manual mistakes due to “tedious” tasks that must be achieved). Nevertheless, a few participants have said that there shouldn’t be too much automation – some is needed to provide first cuts/validation, but it always will be overlaid by manual adjustments and elements of expert judgement
       
    • Reporting – Reporting processes are mostly manual at the moment for almost 50% of the participants.  This seems to be the other major challenge regarding automation alongside data quality. In particular: QRTs, translation from GAAP/IFRS reserves to SII TPs and PowerPoint presentations (to various committees) are the most manual tasks to do for reserving actuaries in terms of reporting. One of the participants mentioned the potential of data visualisation software like Tableau for reporting purposes.
       
    • IFRS 17 – This will be a major event which will increase the impetus for more automation within reserving processes for 75% of the participants. In particular, participants appear to want to try to use as much work as possible from SII for upcoming IFRS 17 implementation, and have a consistency between SII and IFRS 17 (e.g. regarding cash-flows)
       
    • Machine Learning – About 50% of the participants have responded 'Yes' or 'Maybe' when asked if they had already given any considerations to machine learning techniques applied to reserving (that includes both personal lines and Lloyd's/London Market insurers). It is seen as a great opportunity for them. However, a large majority have said that they are still in the very early/conceptual stages onl, and that they they are still a bit scpetical about it. This is mainly because f the level of complexity involved and the the technical skills that would be required to implement and maintain such models
       
    • Consequences of Automation – Most participants have said that automation would help do the 'tedious' work faster, reduce time/manual mistakes and allow for more time for deep analyses. A few of them, however, mentioned that currently most of the work performed by reserving actuaries actually relates to data/processing/manual tasks within their organisation, and on that perspective, automation could potentially reduce the need for reserving actuaries in the long term (hence the question of a possible reduction of Reserving sizes over time

Related documents

Contact Details

If you want more information about this research working party please contact the Communities Team.

professional.communities@actuaries.org.uk

Filter or search events

Start date
E.g., 16/07/2020
End date
E.g., 16/07/2020

Events calendar

  • Current Issues in Life Assurance (CILA) Webinar series

    Webinar Series
    15 July 2020 - 3 August 2020

    Spaces available

    CILA is one of the pre-eminent events in the annual 'Life' calendar. Due to COVID-19 we are running the programme as a series of webinars covering topics aimed at practicing life actuaries from life offices, consulting firms and other employers of actuaries and those who work in or advise on, the life assurance market in the UK and Europe.

  • Spaces available

    Current Issues in Life Assurance – Mortality in 2020 is now dominated by one thing, although – in our future-focused world – the pandemic is just one of many mortality considerations.  In this session, three well-regarded mortality/longevity specialists provide an overview of implications and impacts of COVID-19, recent and imminent CMI developments and more 'future focused' work in the MRSC

  • Spaces available

    Because of Covid-19, forecasters predict a severe recession in 2020, followed by a V or U-shaped recovery. This impacts both individuals and companies. However, compared to previous recessions, the impact on banks of higher credit losses should be mitigated to some extent by government actions. 

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series

    This session will provide an overview of the Population Health Management Working Party's research including defining impactability and impactability modelling, discussing some examples of specific modelling approaches, considering the practical challenges across the NHS as well as wider public perception and ethical issues.

  • Spaces available

    Many actuaries consider career opportunities in the Finance and Investment practice area after having started off in more traditional actuarial roles such as valuations, capital management or pricing. This session is aimed at helping actuaries to better understand roles in Finance and Investment and how they can fine tune their skills to pursue such careers.

  • Mortality and Longevity Webinar Series 2020

    Webinar Series
    22 July 2020 - 10 August 2020

    Spaces available

    Due to COVID-19, we are running this programme via a series of webinars commencing 22nd July.

    This webinar series will provide topical and practical updates and discussion on the latest thinking and innovations in mortality and longevity, and is designed to be very accessible to a broad range of experience.

     

  • Spaces available

    Insurers are making increasing use of medical research to help with assumption, models and underwriting. Experienced mortality/ longevity specialists discuss the issues in the interpretation of  medical research papers, using a range of case studies. The case studies will include COVID-19 points of current importance. Many of the concepts discussed (data bias, inference of causation) are also applicable to equivalent questions in 'big data' and advanced analytics.

  • Spaces available

    Members of the Mortality Working Group of the IAA have analysed changes in mortality for about 30 causes of death  and will discuss how causes of death are classified, and the problems of long-term data, appropriate metrics, including "years of life lost" (YLL), causes of death - a "measure of cohortness", the changes in dominant causes of death at older ages, and how can these types of studies enhance mortality forecasting.

  • Spaces available

    Predictive risk assessment and risk stratification models based on postcode-level consumer classification are widely used for life insurance underwriting. However, these are socio-economic models not directly related to health information. Similar to precision medicine, precision life insurance should aim to tailor policy pricing/reserving to the individual health characteristics of each client.

  • Spaces available

    This discussion, the fourth in the Extreme Mortality Events webinar series, will look at what poor model selection and calibration could look like – using inappropriate historical data; using incorrect 2020 mortality data; and inappropriate stochastic model recalibration (or lack thereof). Presented by Chair of the Life Board of the Institute and Faculty of Actuaries, Colin Dutkiewicz. 

  • Spaces available

    This webinar has been re-scheduled from its original date of the 1st July. Although ESG has many buyers across the asset allocation community, from pension funds to sovereign wealth funds, it still hasn’t found its place within the core asset management strategy desks where the money is actually invested. The problem as well as the opportunity is Fixed Income. Plenty of strategies exist for incorporating ESG within Equities, from screening, integration to a combination. ESG has picked up relatively quickly within Equities with rating,indices created using ESG factors. This talk will discuss how we price a quantifiable ESG credit risk premium and make it alpha worthy in a strategy. 

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series

    With the rising prevalence of dementia, how can we manage this risk effectively and can insurance do more? Matt Singleton, Ageing Lead at Swiss Re, will cover these topics and demonstrate how insurance could help people address their concerns.

  • Spaces available

    Current Issues in Life Assurance – Join us for an exploration session on the use of data science in insurance companies today including how insurers are making sense of and using new data sources and technologies, exploration of practical applications of data science within actuarial work, benefits of data-driven decisions to solve business problems using the power of data and technology, and the role that actuaries can play to harness the benefits of data science.

     

  • Spaces available

    Current Issues in Life Assurance

    This talk will look at a range of such techniques (e.g. mass lapse risk transfer, contract boundaries, risk margin relief, non-standard longevity risk transfer) that have been applied or considered by UK and EU insurers, and the pros and cons of each.

     

  • Spaces available

    Current Issues in Life Assurance.

    The International Association of Insurance Supervisors announced on 14 November 2019 the adoption of v2.0 of the global Insurance Capital Standard (ICS) which will undergo confidential reporting for 5 years starting from 2020. This session will include specific experiences from Legal and General (L&G) as well as global industry perspectives from EY.

  • Spaces available

    Current Issues in Life Assurance

    This session will cover the PRA supervisory statement on financial impacts related to climate change, industry insights into PRA climate risk business plans, examples climate risk strategy setting out key workstreams and activity steps for successful execution, an overview of a climate risk strategy execution timeline and the future.     

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series. Using new and unique research and data from the UK, US, Sweden and China, this presentation investigates how consumers use the internet through their insurance journey and analyzes the role culture and generation plays in their online behaviour. We use this research to show the online landscape for insurance sales in the UK and suggest ways to shape new products and effectively engage with the consumer who is buying them.

  • Spaces available

    Chief Medical Officer (CMO) for Gen Re Life/Health Research and Development, Dr John O'Brien, will discuss the impacts of Gene Modification for life/health insurance. 

  • Spaces available

    As an industry, it has been important to be able to look to the future to identify the next quantifiable risk. In this session, I will explore some of the less tangible, but none-the-less concerning risks to future health, such as the health risks associated with exposure to pesticides, ingestion of plastic in the food chain, and the hazards of indoor air pollution through exposure to volatile organic compounds.

  • Spaces available

    The working party will help the industry to update and enhance how potential risk from diabetes and excess mortality is considered, including the need to understand the underwriting implications as treatments improve, and potentially to develop new products that are tailored to those with diabetes.

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series. Modelling the structure and trends of cancer morbidity risk is important for pricing and reserving in related health insurance fields such as critical illness insurance and care provision. We model the dynamics of cancer incidence over time in different regions in England, using 1981-2016 ONS data. The modelling allows estimation of cancer rates at various age, year, gender and region levels, following a Bayesian setting to account for statistical uncertainty. Our analysis indicates significant regional variation in cancer incidence rates. 

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series. In this talk we will outline the steps Aviva took in pulling together our first large-scale disclosures on the exposure of our business to climate change published in March 2019; in line with the recommendations of the Taskforce on Climate-related Financial Disclosures. After touching on why insurers have such an important role in climate change, we'll cover a brief “how-to” guide for those who have not yet embarked on thinking about these topics before giving a case study of how the learnings from a TCFD disclosure exercise can be applied to investment portfolios.

  • Spaces available

    Part of the Protection, Health and Care Conference 2020 webinar series. 

    The insurance industry currently underwrites customers with diabetes based on a range of factors, medical expertise and various medical studies. The work undertaken by the Diabetes Working Party would help the industry to approach this using current research findings to update and enhance how potential risk from diabetes is considered. This includes the need to understand the underwriting implications as treatments improve, and potentially to develop new products that are tailored to those with diabetes. This webinar will present our latest findings in the management of this important chronic condition which will include research in collaboration with the ARC.