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The wonders of Artificial Intelligence

Written by .
Published 1st November 2018.
Artificial intelligence seems to be the way forward in our technology-driven world, but will this put the actuarial profession at risk?

Artificial intelligence (AI), once a daft notion in sci-fi films, is now here—and it’s here to stay. Technology has been increasing rapidly since the 1960’s. Who would have thought we would live in a time were cars could drive themselves, travel to the other side of the world is possible in a small number of hours, and conversations can be held with people in London, New York, Tokyo, and Singapore, all at the same time? Technology is currently an actuary’s friend, but is there a risk (excuse the pun) that artificial intelligence could become an actuary’s enemy?

Actuaries use their skills in mathematical and statistical sciences to evaluate risk and the likelihood of random events occurring. This includes involvement in areas such as life insurance, pensions and natural disaster insurance i.e. property damage from hurricanes. Actuaries currently use AI to enhance how they analyse and store big data, collect real time data and to model complex situations. AI algorithms are being used more and more often - for example, a recently developed AI software programme was able to beat to some of the world’s most renowned poker players in a game of no limit Texas Hold’em. In addition, recently an insurance company in New York called Lemonade claimed they used AI to fully process an insurance claim. These types of advancements add validity to PwC’s claim that AI could make around 25% of people in the finance and insurance sectors become unemployed in the next 20 years. There are currently only around 70,000 fully qualified actuaries worldwide, so is the actuarial profession about to become extinct?

The simple answer is no, not yet. AI algorithms are constantly improving but actuaries shouldn’t be afraid. In fact, they should welcome these advancements in AI because artificial intelligence could support the work that they do now, enabling them to better calculate risk from more accurate data and models. Besides, there are certain regulations that would help keep actuaries employed. If insurance pricing was left entirely to AI, there would be the opportunity for abuse, for instance charging customers a higher price for insurance because the AI has calculated that they have a higher risk of claiming. An example of this is found in European regulation which prevents insurance companies taking gender into account when deciding on a person’s premium, after a 2011 ruling from the European Court of Justice. Therefore, the AI would need to be programmed to not increase premiums based on people’s gender. In addition to this, other regulation requires actuaries to perform certain tasks like signing off on reserves, life insurance and pension funds.

In summary, actuaries should be willing to adapt and accept new AI algorithms because after all actuaries will still be required and fundamental to businesses. Artificial intelligence would enable actuaries to calculate and predict outcomes with more certainty and better reliability. In addition to this, AI is able to adapt quickly to the fast-changing world of today, which will aid the actuarial profession in adapting just as quickly.