From the President: What Employers Demand: Integrity. Insight. Innovation.
By Pat Teufel
Whatever our course in life, there will be challenges. The ultimate measure of our success is not how we handle the peaceful moments of our lives, but where we stand during times of challenge and controversy. A winning course, I believe, is to keep focused on the long-term vision for the future, while meticulously executing the short-term agenda.
This philosophy has been my guidepost as I have executed my responsibilities as CAS president. The operations of the CAS— administration of basic education and examinations, design and delivery of continuing education offerings, advancement of research, building and maintaining relationships with other actuarial organizations—can be daunting and are certainly a key component of the job. To be effective, each facet of our operation requires the direction and oversight of dedicated leaders—staff and volunteers. One could easily be sidetracked by the myriad issues involved in managing an organization of the CAS’s size and complexity! I strive to be a leader who keeps her focus on the longer term, steadfast in moving the organization forward. To that end, this year I have tried to focus my attention on enhancing the value that CAS members bring to their employers and principals.
The value that our members bring to their employers and users of actuarial services will ultimately ensure our continued success. To ensure this success, the CAS needs to listen carefully to the views of employers, principals, and regulators. While the CAS credential may be a requirement for certain positions or roles, it is generally not sufficient. Employers demand more.
As an employer of actuaries, I expected that candidates would possess fundamental skills. In addition, I wanted professionals working for me to demonstrate three key attributes: integrity, insight, and innovation. Where individuals delivered these standards, they excelled—regardless of their exam status.
Our principals and employers see us as trusted advisers. We need to measure up to their trust.
The CAS Code of Professional Conduct is fundamental to our work as actuaries and defines the standards for how we conduct ourselves as professionals. It sets us apart from others; it communicates to our principals what they can and should expect. Employers can rely on our Code in setting the “tone at the top,” incorporating the Code in internal controls considerations. Business schools are just now recognizing what we have known for some time—wherever there is uncertainty in outcomes, it is critical that ethics training be integrated into the curriculum. Our CAS Course on Professionalism is perhaps the most important training that the CAS provides to our candidates and members. As I told a recent Course on Professionalism class, each of us can expect to experience at least one defining moment in the course of our careers. Those moments won’t be decided by the technical training we have mastered, but by how we handle the ethical aspects of our work.
As an employer, the educational background that I expected from my actuaries was much broader than that tested in our examination process. It was a given that actuaries would be able to apply accepted actuarial methodologies to business issues, but their value came from being able to orient the application of those methodologies to solve business issues. An understanding of the business was essential, and often a missing factor for those candidates who breezed through the exams before gaining work experience. Only when actuaries are able to translate our analyses so that they can have business impact will the real value of our educational process be deployed.
The CAS continues to rely on an apprenticeship format for our education, which combines book learning and testing with practical work experience. This two-faceted approach to education, where the CAS partners with employers of actuaries, has been successful to date. But, as we grow geographically and contextually, we must find new ways of ensuring that all of our candidates can test their ability to offer practical business solutions. Adoption of a formal mentoring program by the CAS could help here.
The integrating of business perspective with actuarial techniques is leading to new roles for actuaries in product management. Increasingly, predictive modeling forms the basis for pricing decisions but these results also need to be interpreted and refined from a business angle. Even when actuaries are not directly responsible for performing the predictive modeling, they have a role in interpreting the results with a critical business eye and in communicating the limitations of the models.
Applying our actuarial education need not be confined to insurance and insurance-related settings. For example, I volunteer within a private-school system that was experiencing a drop in overall enrollment. Initially they believed that the retention issues were the result of the current economic environment, and they were adopting strategies to ride out the storm. Using a standard development triangle, the schools saw that retention had been an issue for some time, with students most at risk during natural transition periods (pre-kindergarten to kindergarten, elementary to middle school, middle school to high school). This insight led the school board to develop and adopt enhanced enrollment management processes.
Many have suggested that the CAS should expand the actuarial footprint beyond insurance and financial services. While I am all for such an expansion, members should recognize the investment that they’ll need to make. Only if our members gain an understanding of these new businesses and the risks inherent in those businesses can we hope to be successful in expansion. Just as the risks inherent in casualty insurance operations are different than those of life and pension insurers, so too are the business fundamentals different for other industries.
The discussion of new horizons leads naturally to a discussion of the third key attribute that I valued as an employer: innovation.
Our world is constantly changing; as actuaries, we too need to change. Intellectual curiosity is key to that change—curiosity that will lead us to refine our methodologies and hone our assumptions. Curiosity will take us outside of our natural environs to learn from others. Innovation is also fundamental to the CAS mission to advance casualty actuarial science.
We must be open to advancements occurring outside our normal sphere of influence, and consider adopting them in our work. That’s how catastrophe modeling began, and predictive modeling has been another success story for adaptation!
What materials are on your current reading list? What kinds of seminars do you attend and which sessions do you go to? Do you make it a point to explore areas outside your natural comfort zone, and consider the applicability of that work to your business?
I attended an educational session at the most recent IAA Council meeting on environmental risk (climate change). The views of the non-actuary—a biologist—were particularly stimulating for me. Her interest in environmental risk stemmed from a project in Africa where she helped a community, whose primary industry was farming, adjust to soil erosion. While the project was very successful from a biological standpoint (the community harvested a robust crop of tomatoes), export restrictions severely hindered the marketing of the tomatoes. In her current work, she consults with several departments in the U.S. government on environmental issues. She talked about jurisdictional silos, data quality, and health aspects of her work. She certainly broadened my views on the role of actuaries in this important global topic! Also interesting was the fact that she connected with the actuarial community quite by chance. Her seatmate on a flight out of DC happened to be an actuary who knew of the climate change working group and suggested both sciences might benefit from greater collaboration. (You never know the opportunities that business flights can present!)
Harvard Business Review featured an article recently titled “HBR’s List of Audacious Ideas.” The article suggests that difficult times are a time for audacity, not austerity. Bold ideas represent real business opportunities. So, where do you think the best opportunities lie for you, as an individual member and for the Society? The CAS has increased its budget for research substantively in recent years, but are we investing enough? Today, our research budget represents approximately 5% of annual revenues. This seems a modest investment when research is one of our primary missions. So, what are your audacious ideas for the CAS, and how much of an investment should we be making in those ideas?
These have been challenging times for the CAS, but they are also exciting times—times of great opportunity. Let’s be audacious in our vision for the CAS!