Actuarial science is not an exact science…for now.
More often than not, our work product will be influenced by multiple, acceptable methodologies and/or a spectrum of reasonable assumptions that will produce a range of actuarially sound models and results. Technology, however, is conspiring to change this. While it’s not likely to change the results of our work to a single point solution in the near future at least, technology is tightening the range.
The availability of “Big Data” and predictive modeling techniques is allowing actuaries to apply more precision to our work. Information captured from Electronic Health Records, like Social Determinants of Health (SDOH), are helping healthcare actuaries better predict the prevalence and cost of large claims. It’s also assisting healthcare providers through more meaningful interactions with their patients to improve care. The availability of new information is not only enhancing our predictive abilities but also requiring us to monitor how these are being used that could affect the range of reasonable outcomes. As an example, incorporating SDOH into predictive modeling can help better identify populations that may be more susceptible to conditions that result from neglect of care or opioid abuse. This will likely alter “typical” health care utilization and cost and result in improved mortality rates.
Blockchain technology, through its defining features of decentralization, immutability, and transparency, has the promise to create efficiencies in the financial and healthcare industries (among others). Blockchain will improve the reliability and quality of the information used by actuaries as well as speed up transactional processing time. In the financial arena, blockchain can improve our understanding of the risk profile of financial instruments leading to better definition of rates of return. This technology will also have profound effects on healthcare claims processing, diminishing the lag time between when a claim is incurred and when it is eventually paid in addition to reducing payment error rates. Clearly actuaries need to monitor the progress of this 10 year-old technology as it morphs into more widespread use.
Additionally, technology that is used to measure our body’s vital signs in real-time has moved from a wired environment in a hospital setting to less intrusive means of interaction within our everyday lives. Wearable devices can measure cortisol in sweat to provide an objective gauge of emotional or physical stress and tell if a patient's adrenal or pituitary gland is working properly. Researchers have designed a toilet seat that can detect congestive heart failure. These are just two examples that represent the intersection of the physical and computing world that define artificial intelligence. This type of real-time information, whether used solely by the user or linked to healthcare providers, can help identify health conditions sooner, potentially reducing long-term cost of care and improving mortality.
The inexact nature of what we do everyday places a greater burden on our profession and on us as actuaries to make sure we are appropriately trained for what we do. Additionally, the environmental changes affecting the models and assumptions we use today require us to continually assess our work and make appropriate adaptations. We are obligated to the people and institutions that rely on our work product, including our clients, the government, and the general public to be educated and conduct ourselves in a manner that maintains their trust in all we do. These are the primary reason we need continued education, not simply to meet a standard imposed by our profession.
The technologies discussed here were topics of our recent Enrolled Actuaries and Annual Healthcare meetings that took place earlier this month in Washington, DC. They will also be covered in upcoming webinars produced by the CCA as well as at our Annual Meeting in October in San Antonio. Given the nature of our ever-changing environment, I encourage all of us to take advantage of the many educational opportunities available, whether through the CCA or elsewhere, to maintain our knowledge and skills to the level that raises the profession in the eyes of those that rely on us and advances the practice.
Edward M. Pudlowski, FCA