By Tom Murray, Head of Product Strategy, Exaxe
Generally, the end result of this kind of approach is a system that will do what it is supposed to do, and the required life assurance product, regulatory change or new customer service offering will have been released at a lower cost than it would otherwise have been if the project had involved large amounts of staff from the IT department or any of the business areas.
However the issue is not that quite simple, in-house developments by actuaries are usually designed to solve a problem or create a specific product and therefore tend to be tactical solutions rather than strategic solutions. Re-use is never even thought of or if it is, there is no clear idea of how this re-usability is to be achieved. The actuaries will be far more focused on their needs from the system rather than the overall business or market demand, which is where the rest of the business is focused. Similarly, as it is not their specialisation, they may well be unaware of the advantages of newer technologies or design patterns that can be used. They may even be unaware of the technical environment in which the company and its competitors are operating.
Actuaries also tend to code for themselves rather than for those who will come after them and therefore the resulting systems can be difficult to maintain when product needs or regulatory changes demand it. As such, the ability to mine this work to benefit future initiatives is almost non-existent.
This effect is exacerbated when there is time pressure as product innovation, or more commonly increasing regulation, means that multiple changes are being made simultaneously but independently across the system. As a result, the overall corporate IT infrastructure ends up with changes spatchcocked onto it, without any overview of how these changes fit in with the company’s overall IT strategy. And these days IT strategy is not just about minimising cost. It is actually a key part of the company’s offering to the market. It is no longer just the product that matters but how it is sold and serviced.
Once upon a time, changes to calculations only needed actuaries to be involved. Essentially, it was a black box to the rest of the organisation. Now the need for the calculations is spread far wider across the organisation. So many services require on-demand calculations that bespoke solutions for specific needs are out of date.
Life and pension providers are competing in a new world where customers are no longer content to leave their financial products bubbling away quietly on a back burner for 20 years, trusting in other people to manage it for them. People are now more involved in organising their own financial needs and the companies that they will turn to will be those who provide new services in new ways in order to give these investors the accurate and timely information needed to inform their decision-making.
Calculations and projections are the rock on which these services are built and therefore it is vital that these services are designed to fit into the overall architecture of the platform supporting the company’s offering. The only way this can be achieved is by involving all key parts of the company in the project. The facts are never enough so it is not sufficient to come up with the right answer. How it is presented will require marketing and sales involvement so that they can position the company’s products at the forefront of the market.
The demand of customers and potential customers, in terms of how they wish to access the products and services, is evolving rapidly. Instantaneous access across mobile devices as well as call-centre support is what is expected and IT needs to ensure that their overall strategy will support this. Therefore, they need to be involved in every aspect of the project to avoid the company becoming hidebound to a particular approach taken by the actuarial department. This coupled with the increasing movement in the workforce, means that actuaries need to have an awareness that they may not remain either with that company or in that particular role for very long.
The result is that the old-style approach of actuaries creating black box solutions, whether that is on spreadsheets or via custom-built coded solutions is over. Actuarial calculations need to fit into the big picture and that means involvement with the other parts of the organisation, whose needs have an equally strong part to play in the overall offering to the customer. DIY solutions may have major appeal but they are outmoded in the inter-connected world we live in and have to serve.
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