Tag Archives: Neil Cantle

Lapses in concentration

A range of factors interact to influence lapse behaviour as it relates to long-term insurance. Yet, this is not typically taken into account directly when setting assumptions. This report by Neil Cantle and Jennifer Smith sets out the methodology and results of Milliman’s research investigation into the use of advanced systems mining techniques to determine how lapse experience for long-term insurance business might change according to the prevailing dynamics within the business and due to uncontrollable external factors.

Emerging risk analytics: Application of advanced analytics to the understanding of emerging risk

This report by Milliman’s Neil Cantle uses advanced machine learning algorithms, such as deep neural networks, to analyse social media conversations about Brexit. The purpose of the study was to examine whether useful information could be extracted from social media in what is effectively real time on a key topic in a political economy.

To optimise financial decision-making, human-and-machine iterative process proves most successful

Milliman has announced that an innovative new study examining multi-criteria decision-making using an iterative process of advanced computing and human input has shown superior results in risk management when compared to machine algorithms or humans alone.

Using an illustrative example from the life insurance industry, the study looked at how optimisation techniques can be used to develop insights into drivers of economic capital within an internal model framework, and how to then use these insights for risk management decisions. The findings illustrate that advanced computing, visualisation, and complex systems-mining techniques that include expert input can deliver superior optimisation results when faced with multiple objectives and multiple constraints which machine algorithms alone find challenging to resolve.

While not obvious at the outset, combining human input with advanced computer modeling allows domain experts to analyse results and elicit insights into features that subsequent iterations of a model should contain, thereby refining the process.

Milliman’s study employed the DACORD platform from DRTS, Ltd. to support its system-mining efforts. “Future states are unknown, involve human affairs and are therefore complex,” says Jeff Allan, CEO of DRTS, Ltd. “Augmenting experts with the appropriate tools and processes can aid the reasoning and evaluation of a range of solutions.”

Adds Milliman’s Corey Grigg, “Looking toward the future, this sort of optimisation technique can extend to big data, simulations, and enhanced visualisation, ensuring that even as the complexity of our data and problems increases, experts can continue to add value.”

The results suggest a number of practical applications for Insurance ERM, including finding patterns in key risks driving capital losses and understanding diversification in order to enable quick judgements about the similarities and differences in the risk profiles of different portfolio elements.

Milliman’s Optimisation study was conducted in conjunction with Dr. Lucy Allan of University of Sheffield. To read the entire study, click here.

Big data challenging how insurers think about business

The insurance industry has a long history of using data to make decisions around risk. However, as more and more data on risk becomes available, insurers will encounter numerous business challenges. In the Milliman Impact article “Harnessing the transformative power of big data,” consultants Neil Cantle, James Dodge, and Derek Newton offer perspective on big data and its implications for insurers’ business models, data governance, and skills moving forward.

Innovation and technology creates a new market for players and new challenges for insurers

Innovation is changing the insurance industry landscape. To remain viable, traditional insurance companies must transform their business models to meet new data and consumer expectations. The Milliman Impact article “Disruption or innovation: A digital future for insurers” explores some technological advances that are opening up the market to new players and challenging insurers to augment their approaches.

EU’s new conduct risk agenda gains traction

Strengthening consumer protection has become a priority for insurance regulators in Europe. The Milliman Impact article “A level playing field: Conduct risk in Europe” examines the issues insurance companies and regulators must address to improve conduct risk under Solvency II.

Here’s an excerpt:

Globally, regulators are increasingly focused on consumer protection and mis-selling issues. “The UK and the US are ahead of the game when it comes to risk-based reporting and building regulation around the concept of consumer detriment, but many other markets, especially in Asia, are also looking to address these issues. They want to be seen as good places to do business and so are aligning their regulatory approaches with those of the more developed markets,” highlights Neil Cantle, principal at Milliman. …

…The need for senior management leadership will be key. The FSB identified the ‘tone from the top’ as a key indicator of the risk culture in major financial institutions in its initial report on conduct risk strategies in April 2014, and this has been embraced by the International Association of Insurance Supervisors and by EIOPA.

In particular, EIOPA has warned that the failure of many institutions and regulators to make the connection between conduct and prudential regulation has been a source of weakness in the past. It makes it clear in its Strategy towards a comprehensive risk-based and preventive framework for conduct of business supervision (published in January 2016) that “the interlinkages between conduct risk and the financial soundness of insurance undertakings and the stability of the financial system as a whole” will be a key focus as this agenda develops.

“In essence, it is about much more than the sales processes of individual insurance companies and intermediaries or even the potential reputational damage to the insurance industry. It is about ensuring financial stability and preventing any cross-contamination from poor conduct, whether that be product design, inappropriate sales incentives, poorly trained staff or inadequate monitoring,” outlines [Oliver Gillespie, principal at Milliman].