It is often said that “life insurance is a product that is sold rather than bought.”

It is only during some of the most challenging times in an individual’s life that they truly understand the benefit that life insurance can provide in easing the financial burden of death or disablement.  

While a long-standing and stable institution in the Australian financial services sector, the life insurance industry is constantly evolving through changes in legislation, regulation, financial reporting, and mergers and acquisitions activity. Nonetheless, what is certain is that there will always be a customer need for life insurance products.

While there continues to be demand for life insurance in Australia, life actuaries will play an integral role in designing sustainable products that meet customer needs and in the successful running of the business. 

The traditional versus non-traditional actuary 

As at 30 April 2023, 60% of our 2,783 Fellows were working in the traditional practice areas of life insurance (30%, n = 834) and general insurance (30%, n = 839).

When we consider the composition of our 1,573 students currently studying towards either the Actuary designation or Fellowship, this emphasis on traditional areas may be diluted over time. Moving forward, we may see a shift towards more Australian actuaries applying their toolkits in non-traditional growth areas, such as data science. Presently, 14% (n = 227) of this student population are working in the practice area of data science, while 21% (n = 329) and 27% (n = 431) are working in life and general insurance, respectively.

According to IDC analysts, businesses spent a whopping $215 billion in 2021 on big data and business analytics solutions, which was a 10% increase over 2020. ^[2]

To meet the growing demand for data technologies and data skills, the Actuaries Institute introduced a Data Science Applications Fellowship subject in 2021.

The growth in demand by our students for training in data science can also benefit more traditional areas – adding to the longevity of the life actuary!

Why be a life actuary?

It is helpful to remember the social service that life insurance provides to communities. Life insurance provides a financial backstop if “the worst case scenario” happens. The events upon which life insurance claims are payable are low probability but high severity. Consequently, it is easy for people to believe “it won’t happen to me.” Apparently, this is why life products are sold rather than bought and therefore, treating customers fairly is so important.

Life actuaries are trained to have a unique combination of skills including:

• understanding data and its limitations with respect to accuracy and completeness;
• technical mathematical and modelling skills;
• ability to understand and assess risk;
• ability to communicate the implications of uncertainty and advise decision-makers on their options; and
• the ethical and professional obligations that accompany being bound by a Code of Conduct when providing actuarial advice.

We cannot provide actuarial advice in the life insurance space without understanding the operating environment. However, knowledge of the legislative, prudential and professional frameworks governing the Australian life sector is not the whole story.

Over time products have evolved in line with changes in customer expectations. An understanding of the commercial environment is also important for product innovation to move forwards.

Why study life insurance applications?

The Life Insurance Applications subject is unique as it is a one-stop shop that covers current issues in the life industry, including designing sustainable products, as well as interpretation and application of current legislation, prudential and professional standards.

It also covers reporting under the new accounting standard, AASB-17 (the Australian equivalent of IFRS-17), which came into effect on 1 January 2023 and will be followed by a change in prudential standards from 1 July 2023.

While much of life insurance is about dealing with uncertain future events, what is certain is that companies need to prepare financial statements. There will always be demand for a skill set in statutory, regulatory and capital reporting. Moreover, given recent changes globally due to IFRS-17, knowledge in this space means graduates from the Life Insurance Applications subject have a very marketable set of skills. We expect these skills will be in high demand both in Australia and overseas for the foreseeable future. 

A microcredential in life insurance

From July 2023, the Actuaries Institute will be offering a microcredential in Life Insurance Applications.

This microcredential provides a bridge for Fellows qualifying through the Data Science Applications stream who want to build a career in the life insurance sector. Moving forward the Life Insurance Applications subject will incorporate examples of the implementation challenges life actuaries face when using these techniques.

This microcredential will also appeal to actuaries working in life insurance who are seeking to upskill or prepare for promotion. It provides an opportunity to step back from your day-to-day job in order to think about how the jigsaw pieces of product management, valuations, risk management and business planning fit together. 

Similarly, it will be invaluable for Fellows seeking to build their expertise in the Australian life industry, perhaps having changed industries, returned after working overseas or returned from a career break. 

The future is data rich. The future is also uncertain.

A professional education in life insurance will help life actuaries to understand their operating environment. This knowledge will help them to be confident when applying the control cycle so they can use data for good within the life insurance sector. 

For more information, please contact Georgina Hemmings or visit our microcredential page. 

References

CPD: Actuaries Institute Members can claim two CPD points for every hour of reading articles on Actuaries Digital.