Actuarial Profession Continues to Evolve as it Establishes Itself in New Areas of Expertise
06/18/2012 —
PHOENIX, AZ, May 23, 2012 -- Actuaries are sometimes considered a ‘crystal ball’ profession, since their challenging job is to forecast the implications of events that have yet to occur. But it gets especially difficult when trying to predict the future of the actuarial profession itself, as they did at the concluding session of the Casualty Actuarial Society’s Spring Meeting held May 20-23.
Participating in the discussion were Alice Underwood, an executive vice president at Willis Re; Mark Vonnahme, clinical professor of finance at University of Illinois at Champaign-Urbana, and Steven Armstrong, a Fellow of the Casualty Actuarial Society. They have a unique perspective as current or former volunteer leaders within the CAS, but the opinions they offered were their own.
The panel agreed that the profession is changing, with heightened competition arising from various sources. At most insurers, actuaries have been thought of as the numbers experts. But as insurers look deeper into their databases for a competitive edge, they’ve hired more “quants” -- newly minted graduates with advanced math or statistics degrees who build sophisticated predictive models. The models are designed to help price and manage a company more effectively.
How can actuaries respond? By adding to their skill set, even after receiving their actuarial credentials, Vonnahme said. Some actuaries will become predictive modelers, but if they don’t become modelers, actuaries have a role to play by using their insurance knowledge and communication skills in important ways.
At first, predictive modeling can seem intimidating, Armstrong said. He had to supervise a predictive modeling team without having been a modeler. But once he spent some time with the group, he realized, “it’s not really rocket science, even if they have PhD’s in rocket science.” After about six months, he knew enough to ask challenging questions in peer review.
Actuaries have professional standards and a code of ethics that non-actuaries might lack, Armstrong said. So the partnership between modelers and actuaries can be a beneficial one.
Actuaries also act as intermediaries. They can develop “a way to frame a problem” that modelers can understand, Underwood said, and then help management understand the modelers’ analysis.
Actuaries also play a valuable role in enterprise risk management, or ERM - a discipline that has grown over the past decade as companies have tried to deal with the risks they face in a holistic manner.
With their training, actuaries would seem well suited to key ERM roles, such as chief risk officer. But actuaries haven’t always been at the forefront of the new discipline, Underwood said. That may change, as the CAS becomes one of several actuarial organizations conferring the new Chartered Enterprise Risk Analyst (CERA) designation.
The ERM role is an interdisciplinary one, Vonnahme said - one that actuaries can fill, particularly in insurance, where their specialized knowledge is strongest. Outside of insurance, he said, the competition gets thicker, with other professions offering their own risk management credentials.
Actuaries have often struggled for recognition outside the insurance industry, Armstrong said. “It’s a PR issue more than anything else.” Outside the insurance field, he said, actuaries need to show they have the skills to justify the higher salaries they typically command.
Vonnahme said, “We have to be more proactive in marketing ourselves in a way we haven’t done before.”
Panelists agreed that competition would make the CAS stronger. The organization is re-evaluating what it does “with some sense of urgency,” Armstrong said. “The CAS is taking this opportunity and will run with it in a way that’s going to be really impressive.”
The Casualty Actuarial Society fulfills its mission to advance actuarial science through a focus on research and education. Among its 5,700 members are experts in property-casualty insurance, reinsurance, finance, risk management, and enterprise risk management.
