// . //  Insights //  How To Manage Actuary Shortage

The Great Resignation, a term coined in 2021, to describe the record number of resignations of American workers, continues to be a hot topic in 2022. Not surprisingly, the hardest hit sectors are, in order of severity: accommodation and food services, retail trade, and arts, entertainment, and recreation.

These are the same sectors most affected by the pandemic curtailment of social and travel activities. A surprise to most people though is that coming up in fourth place in resignation rate is the professional and business services sector. A surprise because with the successful pivot to remote working, which the first three sectors could not leverage fully, one would expect fewer resignations in this sector.

Even before the Great Resignation, we have seen signs of talent shortage in the actuarial world. The demand for actuaries has been growing faster than the supply. According to the Bureau of Labor Statistics, the demand for actuaries is projected to increase 21% from 2021 to 2031 — much faster than the average occupation. The supply gap is worsened by the emergence of attractive jobs in similar fields such as data science. Even in the actuarial field, insurers are competing with tech companies for actuarial talent.

How insurers are coping with the strained resource situation

Since the problem is not likely to resolve itself over time, insurers need to look at long-term solutions. Automating actuarial functions is an obvious and necessary action to cut down on the resource requirements. Though the actuarial processes have improved in productivity and speed in leaps and bounds in the past 30 years, there are still many manual and labor-intensive processes which can be automated.

However, automation is a huge undertaking that should be planned out carefully. Before we get to automation, the journey to which will cause further resource strains, we take a look at how we can help insurers with the situation right now.

Outsourcing or staff augmentation

Outsourcing is not a new concept to businesses looking to cut the costs of hiring, free up internal resources or access specialized expertise. However, outsourcing is not suitable for every business process. Some disadvantages such as the loss of control and disruption to functions related to the outsourced process make it less than ideal for resolving actuarial department resource issues.

An alternative solution

How can we bring the best of outsourcing, while leaving behind the challenges? We have uncovered a solution that leverages the benefits of and diminishes the disadvantages of outsourcing. Through Actuarial Capacity Management (ACM), insurers, large and small are able to overcome resource woes caused by the challenges to recruit and retain staff, the additional capacity demands arising from a system migration, the lack of specific experience or skillsets, and seasonal and unexpected demand surges.

Similar to outsourcing, ACM services provide actuarial resources at various levels of experience and with various skillsets. The most significant difference is how the service is carried out. Unlike most outsourcing services, which are conducted outside the company’s usual work processes and in silo, ACM services can be integrated into the company’s business functions to ensure seamless continuation of their work processes and minimal disruption. Unlike usual staff augmentation services which require day-to-day staff oversight by the company, ACM services can include review by senior actuaries of work done by junior actuaries, providing companies with cost-effective quality work products.

Functions are suitable for ACM

Most recurring actuarial functions are appropriate candidates for ACM. For example, development of rate indications, preparation of rate filings, pricing, reserve analyses, model maintenance and updates, and audit or review of processes or models.

Why insurers are adopting Actuarial Capacity Management services

These services provide flexible and scalable resources, which companies can leverage during peak demand periods to avoid “staffing to the peak”. Measured over longer periods, ACM services prove to be more cost-effective because no fees are paid when resources are not utilized, whereas employed staff is paid every day throughout the employment whether there is work to be done. In fact, actuarial expenses can be lowered by 30-50% using our ACM services, apart from the time saved from recruiting, training and managing staff.

One of the top reasons actuaries leave their jobs is the desire for less routine work and more high-value insightful work. ACM services allow the reallocation of experienced actuaries from mundane activities to higher-value activities that create competitive advantages, thereby increasing job satisfaction for actuaries and lowering turnover rates. In cases where senior actuaries have left, ACM can fill in the competency gaps until replacement is found. Having access to subject matter experts, intellectual capital and market insights is an added benefit.

While ACM services integrate to the company’s business functions to carry out actuarial functions, feedback to help improve current processes is also provided.

Prevention is better than cure

The adage holds true in the labor situation. Another top reason that people leave a job is burnout. Getting resource relief sooner rather than later can help to prevent overworking and reduce burnout among current staff. It is more costly to recruit and train new staff than to engage help before staff leaves because of burnout.

The long-term solution

We mentioned that automation is the way forward for insurers. By automation, we do not mean developing macros or codes for specific functions only. The entire actuarial organization must be transformed and the road to the transformation is not a short one. Along the way, the resource capacity strain will intensify before it eases as resources are employed for the transformation. ACM is a fitting solution for the journey and beyond.