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Technological and scientific advancements are transforming, disrupting, and inventing industries like never before.

Within actuarial risk modelling, there’s great potential to benefit from innovations such as big data, cloud computing, machine learning and predictive analytics. Deeper insight, automated processes, scalable infrastructure. What’s more, modern fraud attacks are evolving. Often faster than professionals’ ability to respond. These emerging advancements can be the answer. Algorithms that analyze trends, identify patterns and make predictions based on data – within seconds.

Microsoft has been working on an awareness campaign related to our solutions in the Risk Modeling space. As part of that effort, we partnered with Chief Nation to survey a number of Risk Professionals. This blog represents a short summary of the report with key findings.

The report sought to uncover the opportunities and challenges for organizations concerned with actuarial risk modelling, to gain insight into the perspectives and strategies of forward-thinking professionals and, to determine the key factors affecting the take-up and success of next-generation actuarial risk modelling applications.

Some of the key takeaways from the report included:

  • The majority of respondents (62%) are only “Somewhat satisfied” with their actuarial risk modelling applications
  • Budget and complexity are major challenges for improving risk practices
  • There’s high demand for applications offering simplified processes and better reliability
  • More than one-third of respondents’ organizations plan to deploy cloud computing

In addition to the key takeaways outlined above some of the feedback that provided some significant insight are outlined below:

  • 89% of the respondents felt that Risk/Actuarial Modeling was “very important” to their overall business strategy
  • The applications being used most by the respondents (planning to be used) are Willis Towers Watson (71%) RMS (56%) Milliman (43%) FIS (formerly SunGard) (37%) followed by GGY (21%) and Oliver Wyman (11%)
  • Top priorities for Risk Managers included quality of risk insight (75%), managing change in regulations (70%) and changing nature in risk (59%). Actuary productivity (52%) and difficulty in doing financial reporting and close (36%) rounded off the top 5.
  • Almost half of the respondents considered themselves ahead of their competitors as it relates to risk practices but still felt there was further work to be done.
  • Regulatory pressures are forcing carriers to run larger models, build more models and expand infrastructure (45%) with expanding infrastructure being the driver for continued scalability.
  • Benefits associated with new/improved risk modeling solutions included process simplification (87%), improved reliability (68%) and cost efficiency (52%). Security (29%) and scale (19%) rounded off the top 5.

While cloud adoption overall in Financial Services is slower than other industries due to the nature of the business and the need to protect PII (Personal Identifiable Information) but building rapidly, we found that 43% of carriers are cloud enabled or in planning. These could be considered the early adopters with the balance of the business users looking into cloud solutions or following IT’s lead.

These are exciting times for actuarial risk modelling. It’s a practice firmly in the heart of business strategy. Respondents express optimism and confidence in their organizations. There’s strong desire to explore new applications.

However, there are challenges for application providers. Alongside cost-effectiveness, respondents want reduced complexity and improved reliability. Of course, these are common requests among many industries. But within actuarial risk modelling, it’s particularly important.

Globalization means that ensuring international compliance is business-critical. Emerging technologies offer advantages, for example automation, that can transform efficiencies. And new data-gathering methods are putting unprecedented volumes of data at practitioners’ fingertips.

How can actuarial risk modelers capitalize? Next-generation solutions require next-generation infrastructure. So it’s highly significant that 36% of respondents refer to a planned cloud migration. Because the nature of cloud computing – secure, scalable, and cost-effective – can meet these needs.

Is the future of actuarial risk modelling heading for the cloud? Based on this report’s findings, it certainly looks that way…


Find out more by downloading Microsoft’s Perspectives on Insurance Risk Modelling