Data Science & Actuarial Science

Digitalisation and new technological developments are having a significant impact on society and the economy. The insurance industry is also being profoundly affected by these changes. As a result, the day-to-day work and responsibilities of actuaries are changing too.

The core responsibilities of actuaries are modelling, identifying and managing financial and insurance risks. Knowledge of mathematics, statistics, economics and law is essential for these tasks. New technological capabilities are also making skills in data science and machine learning increasingly important.

Analyses show that the big data sector continues to grow rapidly alongside the increasing volumes of data held by companies. Global revenues from big data have tripled over the past five years and are expected to triple again by 2021.

Actuaries and data scientists perform many related tasks and have similar educational backgrounds and skills. They use many of the same techniques to analyse data and make informed predictions about the future. These techniques include statistics, data visualisation and pattern recognition.

Machine learning and data science algorithms can be used in the following areas of actuarial science:

-Pricing (GLM/Random Forests/Neural Networks)

-Loss and risk forecasting

-Detection of fraudulent claims

-Automation and planning of actuarial reporting processes

-Time-lapse forecasting

-Proxy modelling in life insurance

-Visualisation of model results and data.

Applying data science techniques improves the predictive accuracy of models, automates reporting processes and speeds them up. Ongoing monitoring and validation of actuarial models become significantly simpler and more controlled. This in turn minimises risk and reduces costs, leading to lower insurance premiums, higher equity and competitive advantages.

These technological advances mean that actuaries need to undertake further training in this field to develop skills in new areas of technology and integrate them into their work in the financial and insurance sectors.