Loss reserve analysis, in contrast to other business functions, has been mostly unaffected by technological advances. Despite modern computing power and huge advances in most areas of business operations, a typical loss reserve analysis today would be mostly familiar to actuaries from 100 years ago. This is starting to change.
Through the power and sophistication of modern technology and algorithms, prototype analyses are achieving promising initial results. But in order to realize the benefits of reserve automation, management will have to learn to trust increasingly opaque systems. The perceived transparency of existing loss reserve analyses will likely be replaced by rapid feedback of automated systems. Continuous feedback of actual results versus frequent forecasts will likely drive acceptance of automated methods despite an increased reliance upon a “black-box” solution.
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