Seamless data integration
Actuarial work relies on data, and LC/NC platforms come with prebuilt connectors that facilitate seamless integration with various data sources such as SQL and other database formats. Because actuaries can easily import, clean and analyze data without extensive programming knowledge, data processing time is reduced, which facilitates the use of up-to-date information. With most platforms, the built-in input tool can read today’s commonly used data sources. Based upon the type of input, the tool will automatically ask for the appropriate parameters to connect. Using the prebuilt functionalities in a LC/NC platform allows actuaries to spend less time troubleshooting data issues and more time performing analysis, which provides opportunities for actuaries and data professionals to collaborate more effectively.
Cost-efficient automation
Recurring processes, such as month-end reporting, require significant resources. These processes often involve an actuary or business analyst performing many inputs and data manipulations. LC/NC platforms facilitate the automation of repetitive tasks in actuarial work and streamlines complicated processes. Different inputs can be sourced and transformed in one workflow, which can be configured to work with dynamic inputs and run automatically. If certain records need to be changed, actuaries can add manual adjustment so the workflow can automatically adjust the output without user action. By creating custom workflows and automating data processing, actuaries can save valuable time and reduce the overall operational costs and increase business insights. The impact of LC/NC platforms extends to reporting and visualization; with robust reporting capabilities, users can generate insightful reports that distill complex data into actionable insights. Additionally, these platforms interface with visualization platforms, presenting an integrated solution for transforming data into visually engaging dashboards and reports. This creates an integration solution to automate the end-to-end process – from data aggregation and transformation to visualization and reporting.
Scalability and governance
With data sets becoming larger in response to accounting regulations and more granular models, scalability has become a concern. LC/NC platforms address scalability issues with solutions that allow actuaries to handle large sets of data without significant changes to existing workflows. Most solutions allow for workflows to be processed on cloud computing platforms by using grid computing. Cloud computing capabilities enable users to access resources as needed to handle substantial amounts of data. These platforms also provide an avenue for transitioning workflows from desktop versions to production environments. Beyond the scalability, server or cloud-based execution offers a strategic advantage for model governance by facilitating centralized control and management, which is essential for compliance with data governance, security and regulatory standards.
Modernizing actuarial specialty toolkits
Actuaries often rely on specialized software for complex modeling and analysis. While actuarial modeling software remains indispensable, the integration of LC/NC solutions can augment these existing processes significantly. For example, model development often includes unit testing through replicator workbooks in traditional tools such as Excel. They can become intricate and slow, particularly when replicating complex calculations like stochastic models. LC/NC analytical platforms can address these problems by enabling step-by-step replication of actuarial model logic and efficient scaling for large data sets. Having a user-friendly interface reduces the risk of errors caused by syntax or complex logic, allowing actuaries to focus on their core tasks.
Traditionally, actuaries have done this highly recursive exercise in SQL and spreadsheets, a process riddled with challenges that include handling large data sets efficiently, managing numerous copies of intricate workbooks for each iteration with the potential for human error. LC/NC analytical platforms offer a better approach, in our opinion; they use workflows to source inputs directly from assumption repository databases, perform data manipulations, automate recursive actual-to-expected (A/E) calculations, and generate optimized rate tables for a target A/E ratio. It couples all of this with data visualization tools to present comprehensive reports. This automation enhances accuracy and efficiency while accelerating the entire experience study process.
LC/NC platforms can be used to produce customized rollforward tables to support financial reporting. The process for customized rollforward analysis completed in spreadsheets can be cumbersome and requires transformations of large post-model data sets. In addition, a spiderweb of mappings and business rules can lead to low interpretability, limited flexibility for format changes and increased risk of user error. LC/NC platforms allow users to visually lay out transformation and mapping logic, providing a more user-friendly experience, with a variety of rollforward reports in a fraction of the time.
Lastly, LC/NC platforms go beyond traditional actuarial software by offering built-in advanced analytics packages. Actuaries can leverage these capabilities to create tools for advanced and predictive modeling and integrate with GenAI capabilities such as optical character recognition (OCR), customized large language models (LLMs) and natural language generation (NLG). This empowers actuaries to explore new horizons in their field and harness cutting-edge technology to drive insights and innovation. The preassembled components and templates in this technology allows actuaries to craft specialized toolkits within a matter of weeks – not months.
Improved process transparency
LC/NC platforms offer a visual representation of a model’s components, making it easier for users to understand and interpret the logic behind calculations. With LC/NC platforms, the tools form a flowchart on a canvas that depicts how inputs are extracted and transformed into the final product. Instead of reviewing complicated programming language, reviewers can examine the model quickly by looking at the LC/NC workflow and setting up test cases.
LC/NC workflows allow compliance members and nontechnical stakeholders to accelerate understanding of the model. This transparency enhances model governance and aids in explaining results to nontechnical stakeholders.
Optimizing teamwork and communication
While actuaries are generally well trained in technical skills, it can be a challenge to share knowledge of highly complex models and code. LC/NC solutions streamline the communication process by providing an intuitive visual interface that is accessible to all – including nontechnical team members. By more directly involving nontechnical team members, LC/NC platforms improve collaboration with all business professionals and help them to better understand actuarial results and facilitate strategic decision-making.
SaaS empowerment
LC/NC solutions come with an assortment of pre-built tools to enable users to quickly construct workflows and models. The software-as-a-service (SaaS) model offers regular version upgrades and enhancements, and these tools can seamlessly incorporate the latest advancements in technology, such as statistical learning techniques. This allows users to effortlessly align their work processes with the cutting-edge tools and techniques, without the burden of extensive research and complex coding implementation.
The platforms have built-in libraries so that actuarial capabilities are up to date with the latest technologies. One recent example is the GenAI boom’s “coding assistants,” which help with the development and debugging of models. Comparatively, constructing and maintaining homegrown models often requires the involvement of subject-matter resources, who need to navigate the intricacies of integrating new technology or features, potentially slowing business innovation.
Agility realized – actuarial transformation case study
An EY team assisted a large life and annuity insurer with streamlining and automating a complex data preparation process used for the monthly valuation process. The result was the transformation of what once was a manual and time-consuming procedure that spanned several days to an automated workflow that takes only a few hours to run. Incorporating automatic error handling and user alerts for data quality control further enhances the efficiency and reliability of the process.
In another use case, we addressed a significant challenge where actuaries from six different product lines were required to independently format their cash flows into a standardized reporting format every quarter. This was a resource-intensive burden prone to multiple rounds of errors requiring rework. Leveraging a LC/NC platform allowed the extraction of data from various sources, data transformations, and standardization to be consolidated into a single automated process that one user running the workflow can perform automatically.
These examples showcase the power of modern data analytics and automation tools in revolutionizing traditional processes and optimizing resource utilization.
Limitations
Considering their pivotal advantages, it becomes evident that LC/NC platforms constitute potent assets within the actuarial toolkit, furnishing a multitude of capabilities. It is imperative, however, to underscore that they are not intended to serve as the sole universal solution for all circumstances. Practitioners should be conscious of the limitations. For instance, it may be more prudent for specialized IT teams that employ optimized processing languages to oversee and manage extensive data pipelines.
Conclusion
In a rapidly evolving landscape, many insurance companies are adopting LC/NC solutions into their processes, adding them into toolkits to address specific and unique business problems. LC/NC solutions empower actuaries by providing them with the means to fully unleash their analytical potential and navigate the increasingly data-centric landscape of modern actuarial science. While a major benefit of LC/NC platforms is that they help actuaries reduce the barrier of entry for analytics through ease of use and rapid development of solutions, it is crucial to recognize the importance of adhering to leading practices, stringent model governance and coding standards to unlock their full potential.
Looking ahead, we expect that advancements in artificial intelligence/machine learning (AI/ML), including GenAI, will further usher in an era of amplified empowerment for LC/NC platforms. These solutions are poised to revolutionize how actuaries approach their work by augmenting predictive capabilities, expediting tasks through automation, enabling seamless communication and facilitating adaptive learning. As this technology continues to advance, we believe its integration is likely to become the standard in actuarial practice, driving the industry forward into more innovative and data-driven excellence.
