Actuarial profession on the move

Interview with Dr Wilhelm Schneemeier, President of the Actuarial Association of Europe (AAE) and Member of the Board of the German Association of Actuaries (DAV:

1. Actuaries have always worked with data. What is the difference between the classic actuary and the modern-day data scientist?

It’s true that our profession has always worked with data and has a great deal of expertise when it comes to managing and processing it. Nevertheless, over time the amount of data has changed – previously there was simply less information available and this was highly aggregated in order to be able to work with it, for example, in the case of mortality for income protection insurance or motor claims. This had technical reasons because data is not only just numbers. For example, health information was often saved as text. Unlike in the past, nowadays we can process this data and consider it much more in our calculations. The sheer volume of information is enormous. There are 1.5 terabytes of data on every individual. Selecting and processing this data – everyone knows about Big Data and Artificial Intelligence – are technical developments that we’ve seen in recent years; actuaries have learned from data scientists and vice versa. As a result, the work of actuaries has become much broader. Data and algorithms are being used in areas that go far beyond classic actuarial activities – for example, in pricing, reserving and in risk management.

2. Why have the last five years, in particular, been so significant in this respect?

We‘re talking about a continuous development that has been ongoing for more than five years. However, that is the timeframe that we at the DAV at national level and at the AAE and EIOPA at European level have needed in order to formally implement these topics. At the DAV we have reorganised the structure of our bodies and committees and we have included Actuarial Data Science in our education and training. At a European level, key stakeholder groups have been set up, for example, on the ethics of data use. The EU, too, is pushing the issue of Artificial Intelligence. Thus, these subjects are also key issues to be addressed during my term of office as AAE President.

But to come back to the heart of the question, for me personally recent developments concerning behavioural pricing, involving incredible masses of data, have been particularly striking. Nor can we ignore issues like climate change and the pandemic, where we actuaries have to develop our know-how even further – also using data science techniques.

3. Now a question to you in your role as President of the AAE. The EU drives many topics forward in the field of data science. What role does the AAE play in this context?

At the Commission and at EIOPA, subjects and consultations on algorithms and trustworthy Artificial Intelligence have almost become part of our daily work. However, we have to take care that we don’t let them become mere buzzwords but that we maintain the connection to professional practice and to the actual work of actuaries. One major concern of the AAE is thus, for example, ethical responsibility for data: How can one differentiate? And when does this risk becoming discrimination? It is definitely not our aim that particular groups can no longer obtain motor cover, but if we can no longer differentiate between genders when setting annuity rates this is quite simply wrong from a purely risk exposure perspective. And what does trustworthy Artificial Intelligence even mean? Ultimately it’s always about algorithms, their parameterisation and the transparency and plausibility of their results. Regardless of the education and training of the actuaries belonging to our profession, the commitment to professional and ethical standards is an absolute must.

4. How should actuarial associations react to this development?

From the AAE perspective it is clear that new categories of membership are increasingly being formed. The French association is a prime example of this. Next to the actuarial qualification a Data Science string has been established with great success. In Germany, we have specialised further by offering education and training to become a Certified Actuarial Data Scientist. As actuaries, we should also increasingly showcase our profession at universities. However, to stay up to date, we have to keep an eye on topics beyond data science too.

5. Is there anything that future actuaries ought to bear in mind during their education and training?

Before the year 2000, Asset Management was the most pressing topic for actuaries – the concept of the “Actuary 3.0” was coined. Risk Management then brought us the “Actuary 4.0“. Nowadays, thanks to data science, we are now at “Actuary 5.0“. Even if – as I’ve already mentioned – implementing data science methods is the latest hot topic, the further development and further specialisation within our profession isn’t going to stop there. The European actuarial associations will also expand their scope.

It is very important to confront current developments openly; but as actuaries we have to concentrate on what we have in common at the core of our profession. And that will always be a solid mathematical foundation and the use of stochastic methods and statistics in an economic context.