Artificial Intelligence, Your New Competition?

May 17, 2023

To me it feels like the conversations about Artificial Intelligence (AI) are intensifying. The Senate has just met with the CEO of OpenAI to discuss how best to regulate emerging AI technology, and how to take advantage of the opportunities offered by AI. The European Union is already well down the road to developing regulations on AI. Closer to home, this month’s lead feature in Contingencies is “Artificial Untelligence” by Jim Lynch.

All this made me wonder how close we are to having AI offer the kinds of advice that might typically come from consulting actuaries. Earlier this month a story was released that reported a UK stock portfolio created by ChatGPT materially outperformed 10 popular UK funds over an eight-week period. Could this affect how 401(k) fund managers are evaluated? I then posed some very basic questions to ChatGPT that consulting actuaries might be asked by clients. What follows is first a healthcare question, then a pension question. I edited the responses for brevity.

Question: How can I reduce my employees' healthcare costs?

ChatGPT response


Reducing healthcare costs for your employees can be a challenging task, but there are a few strategies you can consider:

  1. Promote preventive care: Encourage your employees to undergo regular check-ups, screenings and preventive measures.
  2. Offer a high-deductible health plan (HDHP) with a health savings account (HSA): HDHPs typically have lower monthly premiums than traditional health insurance plans, but they come with a higher deductible. Employees can use an HSA to save money on medical expenses by contributing pre-tax dollars.
  3. Negotiate with healthcare providers: Work with healthcare providers to negotiate lower prices for medical services.
  4. Implement telemedicine services: Telemedicine allows employees to receive medical consultations and care remotely. It can reduce healthcare costs by eliminating the need for in-person visits and reducing the use of emergency rooms.
  5. Promote healthy habits: Encourage your employees to adopt healthy habits such as regular exercise, healthy eating and stress management. This can reduce the risk of chronic illnesses, which can be costly to treat.
  6. Offer employee assistance programs (EAPs): EAPs provide employees with resources and support for mental health, financial counseling and other personal issues. This can reduce stress and improve overall health, which can lead to fewer healthcare costs.

Overall, reducing healthcare costs for your employees requires a comprehensive approach that focuses on promoting health and wellness, negotiating with providers and providing cost-effective insurance options.

Question: How can I reduce the risks to my employees' pension plan?

ChatGPT response

There are several steps you can take to reduce the risks to your employees' pension plan:

  1. Diversify investments: Investing in a variety of assets such as stocks, bonds and real estate can help mitigate risks and reduce the impact of market fluctuations on your employees' pension plan.
  2. Regularly review and update investment strategies: It is important to periodically review and update investment strategies to ensure they remain aligned with the pension plan's goals and objectives.
  3. Maintain adequate funding levels: Adequate funding levels can help ensure that the pension plan can meet its obligations to employees even in adverse market conditions.
  4. Implement risk management strategies: Risk management strategies such as hedging and asset-liability matching can help reduce the risks associated with pension plan investments.
  5. Consider a defined contribution plan: Consider shifting to a defined contribution plan, which places the investment risk on the employee rather than the employer.
  6. Work with a financial advisor: Seeking the advice of a financial advisor can help ensure that the pension plan is managed effectively and that risks are appropriately managed.

By taking these steps, you can help reduce the risks to your employees' pension plan and ensure that it remains a valuable benefit for your employees.

To me these responses are very rudimentary and would not provide any real value to large or sophisticated clients. But we need to remember that ChatGPT was only released six months ago and a new version, GPT-4, is now available. So, I think we can safely assume, the AI answers will only get better, more advanced and more creative. 

Here is a question to ask yourself: is my advice better than the advice that can be obtained from an AI tool? The real advantage for the consultant is that they know the client better than the AI – for now. But as AI progresses, and processes for introducing client-specific information to the AI sources progress, consultants will be challenged to stay ahead of the AI tools. This may suggest that you will need to treat AI as another competitor and be sure that you are keeping up with them in the same fashion you would track other competitors.