Are Spreadsheets Slowing Down Your Actuarial Work?

Imagine this: years ago, you went to a restaurant—let’s call it “Bread Treat”—and you had one of the best meals of your life. It was just a sandwich, but you could customize the toppings and it was delicious. Your friends also liked it; it was a reliable consensus choice for a group outing. Further, the chain expanded rapidly and in no time at all, there was a  “Bread Treat” on every corner in every city. You ate at “Bread Treat” many times a week and you hardly ever went to any other restaurant. 

But then things changed. At some point, you find that—although you can’t say that you hate it—you aren’t satisfied either. For one thing, “Bread Treat” hasn’t changed their menu in years. They don’t offer wraps and they insist that a hot dog isn’t a sandwich. Worse, the staff are not always reliable. When you bring back sandwiches for the office, lunch meetings always begin with everyone having to double check whether they got what they ordered. Invariably, something is wrong.

OK, there is no “Bread Treat” restaurant in your town, but I bet you’re using a spreadsheet. In the actuarial world, spreadsheets are everywhere. Pricing models, reserving calculations, capital assessments—you name it, someone’s got it running through a tangle of tabs, formulas, and color-coded cells.

But just because spreadsheets are popular in actuarial work doesn’t mean they’re the right choice for modern actuarial modeling. So what’s the problem? Two things: 1) spreadsheets have a limited feature set, and 2) they have a high degree of operational risk. They are the unchanging menu prepared by the unreliable staff of the restaurant you used to love.

Excel Limitations That Hold Back Actuarial Modeling

Let’s be clear: spreadsheets have their place. They’re approachable, flexible, and every organization uses them. Spreadsheets make it easy to enter data and get some answers quickly. High-quality graphs are easy to generate without needing any programming skills.

Spreadsheets can do anything that a financial calculator can do. Heck, they can do more than most financial calculators. Go ahead and put your ancient TI or HP calculator back in the drawer, because spreadsheets have functions to calculate net present value, standard deviation, square roots, and natural logs. Want to take a weighted average? That’s easy to do in a spreadsheet. Beyond simple statistics, there is also support for probability distributions like the normal, lognormal, chi-square, and even Weibull.

Spreadsheets show their limitations when actuarial modeling becomes complex and demand goes beyond what Excel can handle. Sure, you’ve got your normal and lognormal distributions, your NPV and standard deviation functions. But try building a Tweedie model or running a random forest, and suddenly Excel looks like a glorified calculator.

You might be able to bolt on some external code, or shuttle your data to R or Python—but then why are you still using a spreadsheet? You can twist them into it, but you’ll spend more time maintaining the model than actually using it.

Spreadsheet Risk and Version Control in Actuarial Work

Even if you’re fine with Excel’s feature set, actuarial teams still face significant spreadsheet risk and operational inefficiencies. (All of the sandwiches need to be audited before we can eat them.)

What does operational risk in a spreadsheet look like? It often looks like multiple copies of the same spreadsheet with filenames that are slightly different. Are the results in the file called “final”? Probably not as there is also one called “final corrected.” Clearly, it’s not meant to be one of the files in the folder called “old versions.” But why is it not in the folder called “final”?

The central issue at play is that any nontrivial spreadsheet will have corrections made over time.  However, Excel lacks the version control features actuarial teams need to ensure transparency and a reliable audit trail. Neither the timestamp of a file, nor the name of a file are reliable indicators. Sure, it says “BLT” on the sandwich wrapper, but there are decent odds you’re holding a “PB&J”. 

It gets worse. A spreadsheet also contains data and this data will change, even if the cell formulas never do. However, unlike a database, a spreadsheet has no control over what changes are permitted, often leading to undetected spreadsheet errors and data inconsistencies. It will dutifully update as new data is received, overwriting whatever was once there. It will also calculate on data from two years ago. Did you just open that jar of mayonnaise, or is it from two months ago?

In actuarial work—where accuracy, transparency, and traceability matter—this kind of spreadsheet risk is no small thing.

Why Spreadsheet Risk Outweighs the Cost for Actuarial Teams

Perhaps the thinking is that the limited menu and occasional mislabeled sandwiches are worth it. After all, the food is cheap, we all need to eat and it’s only lunch. Why invest in a fancy restaurant?

Some organizations hesitate to adopt actuarial software or Excel alternatives, assuming spreadsheets are cheaper—but that ignores hidden costs and risks. These tools often require hours of custom coding to fill functionality gaps, followed by even more time spent debugging and maintaining that code.The more complex your model, the more likely spreadsheet errors are to creep in—putting actuarial results and business decisions at risk. This is just one of many dangers inherent in relying on spreadsheets for serious actuarial work. And the idea that spreadsheets are “free” doesn’t account for the operational and reputational risks of a tool with no version control or audit trail. A janky spreadsheet isn’t saving you money and a 3rd party tool may be a greater value than you think. 

Let’s break down how Excel alternatives can transform actuarial modeling:

• Advanced analytics, out of the box: Need a GLM with automatic variable selection? Want to try a machine learning algorithm on historical loss data? These tools make it possible—without writing a single line of code.
  
• Robust versioning and governance: Every change is tracked. Every model update is logged. No more guessing if you’re using the latest version. Unlike Excel, which lacks robust version control, actuarial modeling tools track every input and formula change automatically.
  
• Data integrity and transparency: Inputs, outputs, assumptions, and transformations are all visible, traceable, and auditable.
  
• Scalability and collaboration: Designed for teams, these tools handle high data volumes and allow actuaries to work together in real-time, across geographies and functions.
  
• Built-in quality control: Unlike one-off spreadsheets developed by overworked humans, third-party tools are tested, validated, and maintained by professional software teams. They bake in quality assurance so you don’t have to.

The Case for Modern Actuarial Software

Spreadsheets aren’t going anywhere. Furthermore, sometimes all we need is a sandwich and to get on with the day. But, it’s worth remembering that third-party tools can offer long-term value through greater efficiency, accuracy, and peace of mind—often at a comparable cost when intangible risk and expense are considered. While spreadsheets may feel familiar, actuarial software offers a scalable, governed, and auditable alternative designed for modern actuarial teams. Tools that offer built-in versioning and a full spreadsheet audit trail help mitigate risk and improve regulatory confidence. Speaking of getting on with the day, I heard there’s a new restaurant in town—you might want to give it a try.