Machine Learning in Credit Scoring

Edmund Stokes

This presentation will be on credit scoring, and detail the shift in the industry away from using GLMs to Gradient boosted trees "GBT" (a machine learning algorithm) to make credit decisions (e.g. accepting and declining a mortgage application). The session will begin with the purpose of credit decision models and then move into the approaches that have traditionally been applied (i.e. GLM) then, cover off on the advantages and disadvantages of both modelling approaches and why the industry is starting to trial a GBT approach.

Housing Affordability in Australia - The Issues and Opportunities for Super Funds to Make a Difference

James Hickey, Andrew Doughman

Banking Capital

Nick Scott

What will Australia's transition to renewable energy mean for financial services?

Sharanjit Paddam, Michael Thomas

Driven by the Paris Agreement’s commitment to a less than 2 degree C temperature rise, as well as the rapidly decreasing cost of renewables, the Australian energy sector is rapidly transitioning from fossil fuels to renewable energy.  What are the implications for financial services, including lending and credit risk for banks and investment strategies and risks for banks, investment managers, life insurers and superannuation funds?  What will a zero-carbon economy look like, and what products and services should financial institutions be offering their customers?

Data Analytics and Super

Jeff Gebler, Meg Yang, Anthony Asher, Igor Balnozan

The robots are here: Delivering practical innovation with Artificial Intelligence in Insurance

Dan Taylor

In a world of emerging technologies that have massive potential but aren’t yet proven, how do corporates keep up with the fast-paced, high risk progress of start-ups? Where should they focus their efforts, and how do they deliver progress that ’moves the needle’?

This session will explore TAL’s experience in delivering Machine Learning applications to Life Insurance, including:

• TAL’s Incubator approach
• Finding the right use cases
• Overcoming the challenges of delivering Machine Learning
• Case study of the award-winning WunderWriter solution

Algorithmic Risk Management

Basem Morris, Kranthi Nekkalapu

With the recent developments in big data, analytics, robotics and artificial intelligence, a new category of risk is emerging, which will touch every aspects of our lives. Algorithmic risk will prove to be more dangerous than the traditional risk categories of operational risk, credit risk, market risk, etc. Organisations that develop a risk-aware mind-set will have the opportunity to use algorithms to lead in the marketplace.

Artificial Intelligence and Advanced Insurance Analytics: Delivering the Promise

Paul Caputo

The explosive growth in data science has generated considerable enthusiasm for data analysis across all industries. Exciting new tools developed in the technology industry are driving change and disruption. It is easier than ever to change the technical backbone of a company or department, but it remains difficult for insurers to understand whether they should be pursuing, monitoring, or simply ignoring some of the newest trends. In this discussion, we will recap the basic concepts in artificial intelligence and take a candid approach to filtering through these innovations. We will also discuss a framework for identifying opportunities within your own organisation.

Australian retail tpd - what have we learned?

Zoe Song, Matthew Paul, Jason How

Has retail TPD claims experience deteriorated? What could be the drivers? Are there any leakages such as anti-selection? How does Australian retail TPD product compare to other countries? In this presentation, we will share with you the recent retail TPD experience observed on a reinsurer's portfolio. We will also focus on sharing our learnings from investigating the drivers and walking you through case studies.    

Actuarial Advice Framework – a guide for actuaries

Anton Kapel

The Cross-Practice Actuarial Advice Framework Working Group of the Actuaries Institute has been formed in response to the forth-coming requirement under Prudential Standard CPS 320 Actuarial and Related Matters for each general insurer, life insurer and private health insurer to establish a framework for the provision of actuarial advice. The Working Group will be preparing guidance to support actuaries carrying out the following activities related to an insurer’s actuarial advice framework (AAF):

a)         drafting an insurer’s initial AAF or proposing updates to an existing AAF;
b)         providing advice to the Board at time of adoption of the initial AAF or an updated AAF, covering the suitability and adequacy of the proposed AAF; or
c)         providing advice to the Board via the Financial Condition Report (or other reports) on the effectiveness of the operation of the AAF over the prior period.

 At this session, members of the Working Group will present an overview of the information note that is currently under development, and use a strawman AAF (which will be available in advance of the session) to prompt discussion around good practice in developing and reviewing an AAF.

Advances in genetics and their impact on Life Insurance

Jessica Chen, Damjan Vukcevic

• What is the current predictive power of genetic tests for common diseases? This is an update from the research we presented at the Actuaries Summit 2017 and will highlight how much progress has occurred in just a single year.
• What genetic tests are currently available? How much do they cost, what information do they provide and how will future tests differ to the current ones?
• Globally, what is the state of regulation for the genetic testing industry and how does it compare to the regulations in place for the use of genetic information by life insurers?
• From an underwriting perspective, how is family history different to genetics? Are the two essentially interchangeable, or do they provide complementary information? This is of particular interest if a moratorium against the use of genetic information for life insurance comes into force.

IFRS17: The Catalyst for Actuarial System & Process Transformation

Trang Duncanson, Keith Chong, Nick Parkin

The purpose of the presentation is to highlight the key system and modelling implications arising from IFRS17, how the existing actuarial and finance system architecture may be impacted, and explore the need for transformation.

We identify some key pain points within existing actuarial modelling systems (using life insurers as a focus area), and where IFRS17 could further impact these systems and processes. In order for actuarial functions to not just survive but thrive, we explore how exponential technologies should and could be embedded into the implementation planning for IFRS17 systems to set actuaries up for the future of work.

IFRS 17: Update from the Working Group

Francis Beens, Hoa Bui, Grant Robinson, David Rush

Representatives from the Actuaries Institute AASB 17 Implementation Taskforce will provide a broad overview and the current status of the new insurance accounting standard and what it means for actuaries.

IFRS17: Use of the Variable Fee Approach with Participating Life Insurance Policies in Australia

Briallen Cummings, Grant Robinson, Chris Scheuber

IFRS 17 will typically require Traditional Life Insurance Policies (Whole of Life, Endowment, etc) to be valued using the Variable Fee Approach. The Life Insurance Act and APRA Regulations contain significant restrictions regarding the management of participating business. This presentation explores the nature of those restrictions together with the requirements of IFRS 17 to consider if there is common ground whereby both sets of requirements could be satisfied simultaneously.

Insurance Governance and Regulations from Overseas – What may we have coming?

Robert Kerr

There has been increasing scrutiny on the life insurance through the Parliamentary Joint Committee on Corporations and Financial Services and the inclusion of life insurance industry within the scope of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

These may lead to pressure for change in some of the governance and regulations around life insurance to improve consumer outcomes.

This session will look at some other markets for examples of the regulations that might be reviewed by policy setters, and the implications these might have on the life insurance market in Australia.

This will include

• Genetic testing
• Premium reviewability
• Restrictions on pricing
• Duty of disclosure regulations
• Data protection

Processes, Products and Practices

Kenny McIvor, John Nicholls

Insurers, and the insurance industry more generally, is ready for transformation – we’ve already seen an uptick in various types of transformation activity.  The drivers can be cost-efficiencies, decision-making agility, customer responsiveness or simply regulatory in nature.  Usually the outcome is a better deal for the customer.  What are the best performing businesses doing?  What kind of resources and timelines do these transformations require?  We’ll discuss real life examples where companies have committed on a path of transformation for better or for worse.

Protection Product Pricing - Ripe for Revolution?

Alan Merten and Catherine Edgar

In a world of disruption and rapid change, repricing of life insurance protection products has yet to evolve beyond the practices that life actuaries have been using for many years. 

Some of the dimensions for change include needs for

• A better integrated understanding of financial outcomes and competitive position of pricing at a more granular customer segment level
• More rapid response to competitor changes with more effective and faster internal working between Product and Pricing teams
• Evolving beyond cost-plus pricing to incorporate demand and price elasticity factors
• Re-thinking pricing to reflect the ways distributors advise and customers purchase on the basis of product or coverage bundles and non-price factors
• The use of data on quotations, sales and non-sales to inform distribution relationship and pricing strategy
• Establishing decision processes relating to trade-offs between value, sales and other metrics and facilitating the optimisation of pricing decisions across a portfolio.

There are a variety of barriers to change but availability of data and tools have developed to a point where innovative actuaries and companies can overcome the barriers.  During the session the presenters will lead a discussion on some of the drivers of change, the opportunities and the challenges for actuaries to take back to their organisations.  In an increasingly competitive life insurance environment, those companies that don’t change could be left behind and become extinct!  Actuaries can lead the evolution!

Removing Inefficiencies in the Life Insurance Value Chain

Tyson Johnston, Matthew Larking

This presentation will seek to explore how we can use analytics and technology to better understand risk, to improve our service offering and to create a more efficient market across all distribution channels. This presentation will also seek to explore the lessons learnt from the industry’s response to some of the challenges faced by the life insurance industry in recent years and how to continue to move forward.

Survival of the FitTEST – 'Life' in Asia

Yan Sun

A compilation of case studies across history in Asia.

It will be a journey through “classics” such as, Whole of Life CI to Endowment to Variable Annuities to Hospital Cash, and as much as I can cover in 45 minutes of the variations in between.

It will also cover the potential themes and survivors for the future across the Life / Asia market.

The Robots Are Coming: The Future of the Actuary

Caroline Bennet, Ajay Parshotam, Darryl Wagner and Nathan Pohle

The purpose of the presentation is to highlight new exponential technologies, how these will disrupt the future of work for professionals and specifically the actuarial profession.

These technologies are applicable to actuaries working in any industry -  life insurance, health insurance, general insurance, and retirement / pensions.

The specific applications include all the procedures and processes that involve actuaries: from data manipulation to actuarial models to reporting/analysis of results. Additional applications include the overall operating model, along with how the actuary continues to meet their professionalism responsibilities amidst evolving technology and changing processes.

We asked how 2,500 planners formulate retirement income advice….

John De Ravin, David Orford, Jim Hennington, Paul Scully

The paper reviews guidance available to retirees to help them decide the right rate of “drawdown”.  It suggests criteria for an appropriate drawdown rate and develops a simple “app” returning a reasonable drawdown rate.

CIPR - What's happening in Public Policy?

David Bell, Darren Kennedy

This session will provide an update on the policy landscape for CIPRs (comprehensive income products for retirement). Darren will outline how Treasury's thinking has progressed. David will illustrate how his award winning research (the MDUF, a utility function which can help determine how various retirement solutions can address members' needs) can be used to derive policy conclusions on CIPRs.

The Age Pension means tests: contorting Australian retirement

Anthony Asher & John De Ravin

Most Australian retirees are likely to be subject to the Age Pension asset or income test at some point. There is evidence is that many retirees significantly adapt their consumption to increase their Age Pension entitlements, but the long-term implications are very difficult to determine – even if the current rules were to remain in place. Our paper applies the principles set out in the Department of Social Services discussion paper covering the treatment of the new innovative income streams.  In particular, we look at the implied “effective marginal tax rates” (EMTRs) on the assets of part age pensioners who are subject to the Assets Test.  We find that depending on a variety of parameters such as assumed future earnings rates, marital status, drawdown strategy and the level of assets within the asset testing range, the EMTRs are high enough to explain material distortions to savings decisions of those still in employment, and distortions in the spending and investment decisions of retirees. Optimal decisions in this context require contorted retirement strategies that do not appear to be in the national interest.  However, it seems to be difficult to develop remedies that would be easy to implement politically.  Some possible remedies are suggested.

Aged Care Advice

Brendan Burwood

All I want is a Home Somewhere

Richard Lyon

This presentation follows a 2016 FS Forum paper co-written with Randy Amidharmo (Lies, Damned Lies and the 2015 IGR) and my 2017 Summit presentation (Fair’s Fair). It redevelops and extends the section of the latter presentation related to Australian house prices.

My analysis shows that house prices can be largely explained by key drivers. Therefore, any forecast of future price movements (and consequent decisions to buy or sell residential property) should be based on a forecast of these drivers.

I hope that there will be plenty of time for a discussion of the validity of my conclusions and of the general, thorny issue of housing affordability. After all, it is central to many people’s view of intergenerational equity (or the lack of it).

A Product to Meet Changing Needs in Retirement

David Rush

In ‘A different approach to meeting changing needs in retirement’ , Rush and Paino examined the features of existing products designed to meet retirement needs, and the current and future needs of retires.  They then suggested a different way in which longevity can be considered and addressed without providing an income stream (so that retirement needs may be better met).  Under the suggested structure, income is provided from an allocated pension product, but this income is augmented by insurance benefits paid in the event of survival.  Furthermore, it was suggested that this alternative approach may address some of the unpopular characteristics of many existing products.

This paper details a new product and sees how it helps solve the problems with existing products.  Instead of focusing on income - and the guarantee thereof – the product focuses on providing a lump sum in the event of longevity which augments the source of income and reduces the likelihood of it running out.

The requirements of the new framework for Comprehensive Income Products for Retirement (CIPRs) and the new SIS Regulations, and how this product fits with those requirements, are considered.

Data Analytics and Super

Jeff Gebler, Anthony Asher, Igor Balnozan

Deferred Annuities - What Exactly do they look like?

Tony Bofinger, Leigh Kobus, Darren Wickham

Demystifying Drawdowns for Retirees

Diane Somerville, John De Ravin

Housing Affordability in Australia - The Issues and Opportunities for Super Funds to Make a Difference

James Hickey, Andrew Doughman

The Housing Affordability Working Group consists of Actuaries from different financial services backgrounds including banking, lenders mortgage insurance, reinsurance and consulting. We have been conducting research into Housing Affordability since June 2017 and are working towards presenting a series of papers addressing firstly the conceptual issues associated with Housing Affordability and later delving into more detail on each of the components where we believe Actuaries can provide value.

At the FSF, we will look to the “Wisdom of the Crowd” by conducting an interactive presentation and engaging the audience’s views on the following key topics which will form much of the basis for our initial conceptual issues paper:

• Motive: What can Actuaries offer to the Housing Affordability debate?
• Problem definition: Is there a Housing Affordability issue in Australia (and if so, how do we define and measure it) and why is ownership of housing so important for Australians?
• Key proposal challenge 1 (demand side): Would allowing access to superannuation for first home buyers assist in alleviating the Housing Affordability issue? Are there alternative ways in which superannuation funds could get access to residential property and assist aspiring homeowners?
• Key proposal challenge 2 (supply side): Would improving incentives for retirees to downsize assist in alleviating the Housing Affordability issue? What broader range of support measures may also be required?

Each key topic above will be addressed firstly with analysis and / or qualitative arguments ahead of facilitating feedback from the audience to inform the discussion. We look forward to a healthy debate on this controversial space!

Income protection - Managing the Cycles

Ashutosh Bhalerao, Luv Bhatnagar, Phin Wern Ting

The life insurance industry has been suffering from adverse income protection experience for the last several years. There has been a whole lot of industry discussion around the drivers for the income protection (IP) experience including increasing mental illness claims, lawyer involvement, product features and disability definitions. Whilst these may be factors and/or “symptoms”, the paper/presentation will investigate to what extent economic conditions, particularly unemployment, underemployment and slow wage growth are actually the key underlying drivers of IP experience, including via their impact on income replacement ratios. We will then look at how insurers could potentially manage the related cyclical characteristics of IP experience, including how reinsurance strategies could be structured to manage this cyclical risk.

Insurance Governance and Regulations from Overseas - What may be coming?

Robert Kerr

There has been increasing scrutiny on the life insurance through the Parliamentary Joint Committee on Corporations and Financial Services and the inclusion of life insurance industry within the scope of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

These may lead to pressure for change in some of the governance and regulations around life insurance to improve consumer outcomes.

This session will look at some other markets for examples of the regulations that might be reviewed by policy setters, and the implications these might have on the life insurance market in Australia.

This will include

• Genetic testing
• Premium reviewability
• Restrictions on pricing
• Duty of disclosure regulations
• Data protection

Metrics for Comparing Retirement Income Strategies - A Road Test

Nick Callil, Hadas Danziger, Tom Sneddon

The wide variety of retirement products available produce a range of outcomes for retiree under different scenarios.  Account based products will have outcomes linked to market investment returns; annuities provide explicit longevity protection; pooled longevity products provide longevity protection dependent on the experience of the surrounding cohort; and combinations of these products will produce strategies with a mixture of these features.

The variety of characteristics of retirement products means that the metrics for comparing outcomes under different strategies is not straightforward.  For example “likelihood of running out of money before death” may be a useful metric for account based strategies, but loses its value where a lifetime-guaranteed annuity is part of the strategy.

This paper looks at the different metric available for comparing retirement strategies, examines and contrasts their different properties, proposes a new metric – the goodness of fit index, or “GOFI”, and attempts to answer the question – is there a “silver bullet” of retirement strategy assessment metrics?

Meeting Challenges in Insurance and Super – Budget and COP

Richard Weatherhead, Andrew Howard

Join us in this interactive session for an update from Richard Weatherhead and Andrew Howard architects of the Insurance in Superannuation Code of Practice.  Richard and Andrew will provide an update on the code as well as discuss implications of the recently announced federal budget on insurance.  The session will then engage with the audience to tackle some of the biggest issues currently facing the group life insurance industry, including:

• Affordability
• Account balance erosion
• Duplication of cover, and

Implementing the code of practice

Whole of Wealth in Retirement

Cathy Nance

Reconstructing Portfolios with a Target Return Focus

Michael Blayney

CAT Bonds, ILS & Capital Market Solutions: Getting Bang for your Buck in a Maturing Market

Jon Tindall

This paper investigates the current state of the Alternative Risk Transfer market, specifically focusing on insurance and banking entities.  It looks into the drivers of recent growth in the range and volume of capital market solutions sold and details why insurers have found them attractive ways to streamline balance sheets.

After looking at global trends and changes to regulations, the paper outlines a number of practical strategies that insurers could utilise domestically to optimize the balance sheet, offload unwanted risks and exploit capital arbitrage opportunities. 

After discussing the ‘sell side’ opportunities the paper then turns to the characteristics of capital market solutions from the ‘buy side’ perspective.  What makes an attractive structure from the point of view of the investor and how can the value of these securities be assessed?

The paper concludes by looking at what needs to be in place in order to design and implement a Capital Market Solution.  The strategic, legal, investment banking, actuarial and other inputs required to successfully place an alternative risk transfer vehicle into capital markets.

ESG Impact on Investments

Justine Sefton, Stuart Wilson

Environmental, Social & Governance (ESG) issues get a lot of publicity with respect to investments but how do these factors really impact investment decisions and can they have a positive impact on investment outcomes. Before joining the investment industry as an ESG specialist at NZ Super, Justine Sefton was a senior policy analyst within the NZ Ministry for the Environment and brings a unique practitioner perspective on the role of Environmental factors play in investment decision making. By contrast Stuart Wilson was a former president of the Australian Shareholders Association before joining Sunsuper, as Manager of ESG, and he brings a strong Governance lens to investment decisions. Justine and Stuart will share their experiences and provide practical examples of how ESG factors can help drive better investment decisions.

Investment Governance (Effective Decision Making)

Andrew Fisher, Sue Brake, Sam Killmier

In the competitive world of investment management it is often robust investment governance frameworks and functional decision making structures that differentiate the very best investors from the rest of the pack. Sue Brake leads the investment governance consulting practice at Willis Towers Watson where she draws on her experience in being instrumental in the design and implementation of the investment governance at NZ Super, one of the most successful institutional investors globally. Following a brief presentation on the characteristics that leading investment organisations display, Sue will moderate a panel Q&A discussion with Sam Killmier, Director, Portfolio Strategy at the Future Fund and Andrew Fisher, Head of Asset Allocation at Sunsuper.

Total-return Investing

Greg Cooper

Leadership and Resilience – Fighting the Toughest Battles

Adam Fusca

In July 2017 an unknown mass was discovered in my brain. This began my journey through brain surgery, recovery and return to work. This presentation provides an overview of the experience, both physically and emotionally, and the insights I gained into resilience and coping mechanisms we use to help overcome adversity.

Leadership & Risk Culture - Psychology & Behaviour - an Actuarial perspective

Sean McGing, Andrew Brown

Our paper aims to assist leaders improve outcomes by improving risk culture and reducing conduct risk by better understanding:

• the hidden risks in their organisation’s product and service offerings;
• the related development and selling behaviour of its staff and partners/agents; and
• the consumer’s resultant assessment and decision making behaviour.