8 Ways to Get More Value from Actuarial Consultants

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In the shadowy dance of risk and return, actuarial consultants emerge as the unsung heroes, wielding the power to sculpt chaos into clarity and certainty. Their expertise is not only invaluable in traditional insurance sectors but also increasingly sought after in other industries for risk assessment, financial planning, and strategic decision-making. However, the efficiency of actuarial services hinges significantly on how organizations engage and utilize these professionals.

The Expanding Role of Actuarial Consultants Beyond Compliance

Using actuarial consultants efficiently is crucial for organizations looking to optimize their financial strategies and navigate complex regulatory landscapes. In this article, we will explore the key aspects of using actuarial consultants and strategies for optimizing their contributions to achieve business goals. In today's complex business landscape, companies across various industries rely on actuarial consultants to navigate financial uncertainties, manage risks, and make informed decisions. Actuarial expertise is indispensable for insurance firms, financial institutions, healthcare providers, and even non-traditional sectors facing evolving regulatory requirements and volatile market conditions.

Unlocking the Full Potential of Actuarial Expertise

However, the true value of actuarial consulting lies not only in access to technical expertise but also in how effectively companies leverage these resources to achieve their strategic objectives. The key for companies to realize is that actuaries are not just highly paid compliance role players, but are multi-dimensional in their expertise which can help businesses to achieve their non-regulatory financial objectives as well.

Shifting the Mindset: Moving Beyond Regulatory Projects 

It is also important for actuarial consultants to not just try to sell regulatory burden works like IFRS17, LDTI, reserving, pricing, Risk Based Capital etc. but also other areas that are non-regulatory, but crucial for business importance. That can mean putting in more work and time into projects with lower than immediate returns than regulatory work, but it can help the management to see the value of actuaries via holistic track record in the long run.

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Strategies for Optimizing Actuarial Consulting Engagements

Below are some strategies companies can adopt to optimize the usage of actuarial consultants for driving performance and mitigating risks:

1. Define Clear Objectives and Expectations

   Before engaging actuarial consultants, companies should establish clear objectives and expectations for the engagement. Whether it's pricing insurance products, assessing liabilities, or optimizing investment strategies, articulate specific goals for scope of work and timelines to ensure alignment with the consulting team. Clearly defining the scope of work and desired outcomes minimizes misunderstandings and maximizes the effectiveness of the consulting engagement.

2. Collaborate Closely with Consultants

   Effective collaboration between internal teams and actuarial consultants is essential for success. Companies should foster an environment of open communication, where consultants have access to relevant data, insights, and stakeholders. Encourage active participation from both parties in meetings, workshops, and strategy sessions to leverage collective expertise and perspectives. By working hand-in-hand, companies can harness the full potential of actuarial consulting to address complex challenges and seize opportunities. Being flexible is key so that both parties compromise and meet each other halfway. Companies might sometime give projects to consultants but then forget about it (especially if its non-regulatory work without any fixed regulatory deadline). Similarly, increasing the scope of work substantially when project is underway or delaying or defaulting on payments can be an another area of concern.

3. Balancing High-Level Vision and Ground-Level Execution

   Recognize that high level picture and being on the ground level are two different things. Work always looks less demanding and time consuming from a high level but as we go in the trenches, there are almost always plenty of unexpected hurdles and additional work required to get the job done. Hence, buffers should be built in from both sides. In their zeal for marketing, actuarial consultants should avoid over-promising and under-delivering. Similarly, clients should not interpret humility as a sign of weakness. Being able to discuss challenges freely without fearing repercussions should be there and client should provide a safe environment for such discussions rather than only putting relentless pressure to perform or face disaster. This sort of mutual trust means the difference between one-off projects and continuous projects over the long term.

4. Leverage Technology and Analytics

   In today's data-driven world, companies can leverage advanced technology and analytics tools to enhance the capabilities of actuarial consultants. Investing in predictive modeling, machine learning algorithms, and actuarial software enables consultants to analyze vast datasets, perform scenario simulations, and provide actionable insights with greater accuracy and efficiency. By embracing technological innovations, companies can unlock new possibilities for risk management, product innovation, and strategic decision-making in collaboration with their consulting partners.

5. Fostering a Culture of Continuous Learning

   In the fast-paced world of actuarial science, staying ahead means embracing the constant shifts in regulations, market dynamics, and new risk landscapes. It is imperative for companies to commit to the ongoing enhancement of their actuarial teams' capabilities. This commitment can extend to engaging actuarial consultants for specific projects, which not only brings fresh perspectives and innovative solutions—such as creating policies for insuring electric vehicles exclusively, developing insurance pools for unconventional risks, or evaluating the effects of climate change on claims and premiums—but also offers these consultants practical learning opportunities and real-world case studies to refine their expertise.

6. Measure Performance and ROI

   To assess the effectiveness of actuarial consulting engagements, companies should establish key performance indicators (KPIs) and metrics to track progress and measure return on investment (ROI). Evaluate factors such as accuracy of projections, timeliness of deliverables, cost-effectiveness, and impact on business outcomes. Regularly review performance metrics and solicit feedback from internal stakeholders and consulting partners to identify areas for improvement and optimize future engagements.

7. Cultivate Long-Term Relationships

   Building long-term relationships with trusted actuarial consulting partners can provide companies with a competitive advantage in managing risks and seizing opportunities. Instead of treating consulting engagements as one-off transactions, prioritize cultivating enduring partnerships based on mutual trust, transparency, and shared objectives. Invest time and resources in nurturing these relationships, and leverage the collective expertise and institutional knowledge gained over time to drive continuous improvement and innovation.

8. Training and knowledge transfer

   One of the long-term benefits of engaging actuarial consultants is the transfer of knowledge and skills to your internal team. This can be achieved through formal training sessions, workshops, or simply through the course of collaboration on projects. Ensuring that your team learns from the consultants can help build internal capabilities and reduce dependency on external consultants in the future.

Choosing the Right Actuarial Consultants for Your Needs

It is also important to know that all consultants are not the same. Each operate within their own segments and should be availed likewise. This selection should be based on several criteria, including the consultant’s experience in your industry, their technical expertise, reputation, and the range of services they offer. It's also essential to consider their communication skills and ability to work as part of your team, as collaboration is key to the success of any consultancy project. Established big brands have very high fees and only select the top participants in the market to work with. So going for Number 1 brand might not always be within the budgets of companies. The big brands often lack the personal touch and detailed attention that smaller consultants can offer, all while staying within budget constraints. What one consultant or client might overlook or discard, another might find invaluable. Therefore, understanding your target segment is crucial to ensure a good fit and to deliver value effectively.

Building a Consortium of Actuarial Consultants for Specialized Services

Another strategy that businesses follow is to have a consortium of consultants rather than just one consultant. So one consultant prices new products, the other implements new financial reporting standard and yet another for ongoing support etc. That way, the business is able to mix and match as well as diversify so as not to put all eggs in just one consultant. Businesses can also have separate consultants for regulatory work and non-regulatory. Regulatory work might have big brands with high fees but company still goes with them because the stakes are high. With non-regulatory work, the company can allow to take a chance with small consultants in order to get much more time and efforts from them at cost which is much lower than the big brands. The most active liaison in the company with the external consultant can be the company’s internal actuary; as a lot of work can be done by internal actuary and it can just be reviewed by the actuarial consultants. Review work is less time consuming and has lower fees as well. Belonging to the same field, communication between them can also be easier to conduct. It’s also more effective to interact with one point of contact rather than let’s say 13 head of departments to deliver the projects.

Internal Resources vs. External Consultants: Finding the Right Balance

The mix between deciding upon whether to invest in internal actuarial resources Vs. getting actuarial consultants is a big theme that is debated within every company. There is no one right answer as context differs each time. In one country, hiring full time resources might be more expensive like in Middle Eastern countries and so most of work gets outsourced to actuarial consultants. In other countries, the opposite is true like in South Asia. In the United States, it is a norm to hire actuarial consultants to implement new regulatory changes and accounting standards, as well as converting from legacy systems to new actuarial platforms. Every country has different depth of regulations so if regulations are weak and outdated, only few insurers will connect with actuarial consultants out of concern for best practices. Most insurers will avoid getting actuarial consulting to minimize their costs.

Conclusion: Unlocking the Full Potential of Actuarial Consultants

Optimizing actuarial consultants involves a strategic and collaborative approach, recognizing the multidimensional value they bring to an organization. By fostering clear communication, collaboration with internal teams, embracing technology, and incorporating scenario planning, businesses can harness the full potential of actuarial expertise to achieve long-term success in a dynamic and uncertain environment.