Small Insurance Companies Need Outside Actuarial Consultants Too

Originally published for Trailblazer Technology (November8,  2022). Reproduced with permission of Trailblazer Technology.

With even the smallest insurance companies being afforded the opportunity to utilize top of the line technology such as Trailblazer’s comprehensive product suite, there is a greater need for actuarial consultants that can tackle more difficult and specialized analysis. Specifically, those individuals that embrace new technology, big data, and advanced modelling to discover growth opportunities.

It’s equally important to hire independent actuarial consultants that may be more objective than an in-house team. These outside consultants can help a company avoid any conflict of interest, actual or perceived. Full transparency is not only good business practice but can help to build a small company’s credibility and reputation for excellence in their industry.

The right independent actuary can become a value-added service provider for an insurance company. The key is finding the actuarial consulting firm that will meet the company’s unique needs.

What are Insurance Actuary Consultants?

Actuaries traditionally use mathematics, financial theory, and statistics to analyze the costs associated with risks and uncertainty. In the case of an insurance company, this means they advise and provide analytical assessment of product development, improvement of underwriting practices and procedures, rate and pricing assessment, and more. An actuarial consultant can ultimately drive down claims costs and enhance product profitability.

According to the U.S, Bureau of Labor Statistics, demand for actuaries will grow by 18% from 2019 to 2029. The reason — AI and machine learning, which use fundamental and applied mathematics, are infiltrating almost every aspect of daily life and require a high level of expertise to not only translate but operationalize. This is especially true for insurance companies and the growing InsurTech field.

A Big Impact on Small Insurance Carriers

Actuarial consultants can make a significant and positive impact on the business success of small insurance companies. They bring an understanding of larger company practices, methods, technologies, and approaches to innovation, and offer guidance on implementing innovative solutions (like the Trailblazer suite) within a small company environment. The benefits of independent actuarial services include:

• Financial Reporting
• Insurance Decisions
• Business Decisions
• Risk Management
• Trusted Advisement

Going it alone, a small insurance company might miss out on numerous opportunities such as the sophistication to pricing and reserving that an actuarial consultant brings to the table.

How Can an Actuarial Consulting Firm Help?

An actuarial consulting firm can optimize small insurance company operations and help enhance their success with actuarial solutions. They can do this by:

• Evaluating current company rates and rating structures using existing company loss experience and/or competitor comparison or industry benchmark.
• Evaluating current company reserve settings and compare company loss experience to those in the industry.
• Becoming more profitable by setting the correct rates and rating factors for the company’s program.
• Customizing workflows and teams to address specific small company needs; from addressing all actuarial functions and needs to providing peer review and quality control reviews to small internal actuarial teams.
• Expanding small teams’ product knowledge or jurisdiction through expansive resumes and reach.
• Providing an excellent blend of efficiency of size, while providing individual attention to all clients regardless of size.

Finding the Right Partner

Partnership with a reputable actuarial firm can improve an insurance carrier’s reputation with reinsurers and other business partners. Therefore, it’s imperative to find the right actuarial consulting firm — one that will tailor its solutions and introduce flexible services.

A trusted actuarial advisor will:

• Understand the client’s needs.
• Be consistent and dependable.
• Provide a fresh perspective and historical experience.
• Help the client to separate logic and emotion.
• Challenge the status quo and find areas of opportunity and growth.
• Provide honest assessments with a friendly demeanor.
• Have the client’s best interest at heart.

The actuarial talent a company embraces can impact performance and the bottom line. It’s incumbent on small insurance companies to do their due diligence and find the right partner for them.