While many reserving actuaries do most of their work in spreadsheets, it’s long past time to acknowledge the many risks associated with them.
Regulatory and financial requirements typically drive the form and substance of loss reserve reporting. Largely fixed by these requirements, the information that flows from reserve analyses tends to be a study in extremes. At one end is the mass of data and granular detail needed for credible actuarial analysis. At the other are top-level estimates required for effective decision-making by leadership. In the middle is often a static deck of charts and spreadsheets for managers to work their way through. In each case, reporting is often a missed opportunity to share valuable information and fails to have the operational relevancy that can help insurers to better compete in today’s markets.
Loss reserve reporting has traditionally been focused on providing estimates of unpaid claims for financial reporting. The often exhausting effort to get to the quarterly finish line often leaves little time to consider more engaging ways to communicate the valuable information uncovered. But for many insurers, time is not the only hurdle.
The challenge often stems from a disconnect between the level at which reserving data is analyzed and ultimately reported. While insurance actuaries analyze loss activity at a more granular level, where they can see the detailed patterns and better estimate results, management reporting on the estimates occurs at a more summarized level. As estimates flow through the aggregation process, access to more granular information can be lost as the underlying detail is separated from total estimates. The question is how to easily access these lower-level estimates that have been rolled up for various reporting needs. Routinely stored in separate databases, the granular detail from actuaries’ work exists, so why not make more of it available for stakeholders to use?
Easy access to data and results
Collecting the lower-level loss reserving data, assumptions, and results into a central analysis database can give actuaries and managers the flexibility to drill into the specific information they need, when and where they need it, whether on an early morning plane trip or a home desktop during a pandemic.
In addition to being timely and accessible, users can be confident that the information they are working with is accurate, current, and consistent across segments and over time. Reporting moves from a labor-intensive assembling of data to a conduit that promotes investigation and creative thinking. Actuaries can probe lines of inquiry that had once raised questions but took too much time to explore, and managers can look beyond a column of totals and easily drill into issues that most concern them.
Visualize trends with smarter reporting
Much of the noise that comes with scanning a static column of numbers on a screen is eliminated when output is coupled with interactive reporting techniques, enabling managers to see trends and identify outlier results more quickly. They can get a clearer view of the potential drivers of change, and can direct their teams’ attention to where their insight and expertise can add the most value.
The use of interactive graphics and dashboards transforms reporting from a stack of static reports to a medium for telling an interactive loss reserving story, ensuring that the message is received by those without the time to dive deeply into the analyses. At the same time, they also help other stakeholders investigate and leverage the data-rich results of the loss reserving process, providing a potential business advantage in an ever-competitive environment.
Adding advanced reporting and visualization functionality to the loss reserving process can transform it from a static, compulsory routine to a productive tool that gives stakeholders throughout the organization the means to understand what drives claims costs and the support to make more informed decisions.
This article is part of a longer series on reimagining the loss reserving process. Read the rest of the series here.
This article was originally published on April 19, 2022.