The importance and prevalence of the use of artificial intelligence and machine learning (AI/ML) in actuarial work is examined in a report out today (26 October 2023).
It presents the findings from a research survey and a series of interviews conducted by the Government Actuary's Department (GAD) on behalf of the Financial Reporting Council (FRC).
Use in actuarial work
'The use of Artificial Intelligence and Machine Learning in UK actuarial work' explores the growing importance of AI/ML in actuarial work. It examines how these techniques are being used and where, and what risks are arising from this.
The report was written by GAD actuaries Sam Davies and Chris Paterson, and Senior Analyst Sam Kinshuck, supported by a wider team in GAD.
The research was carried out in the first 6 months of 2023 and first involved an online survey completed by over 100 respondents across different fields. This was followed by more in-depth interviews with 37 interviewees.
Survey results
The survey results indicated that the largest area of use of AI/ML techniques in UK actuarial work cover a wide range of applications within General Insurance pricing, including:
- determining claims risk for policyholders
- forecasting price-elasticity of demand for policyholder groups
- informing the 'front-end' process for customers and policyholders
As well as 'traditional' actuarial fields of Pensions, General Insurance, Life Insurance and Finance & Investment, the research also showed AI/ML being used by actuaries who:
- analyse the impact of public health interventions
- assist pharmaceutical companies with patient profiling
- develop long term economic projections
The research indicated that they apply more advanced techniques to more diverse use cases.
Growth in AI/ML use by actuaries
Survey results indicated the use of AI/ML techniques in actuarial work was limited but increasing rapidly.
Researchers found that during the 6 months duration of the survey, awareness of ChatGPT (a Large Language Model, or 'LLM', developed by OpenAI) grew significantly. Initial responses did not mention it, however from March to June 2023 it was raised by almost all interviewees as a discussion topic.
The survey responses indicated that some organisations were using LLMs in a variety of ways including:
- helping to aid efficiency of some processes
- to assist programming
- horizon-scanning
- summarising large volumes of text
- developing bespoke in-house LLMs to build financial models
Sam Davies, one of the report's authors said: "Our report highlights the established and growing importance of AI/ML in UK actuarial work.
"It presents various risks, but the profession is generally aware of these and well-positioned to implement appropriate mitigations."
