From the President

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Odds and Ends from Around the World
by Mary Frances Miller

Over the past year and a half, I’ve had the great honor to represent the CAS all over the world. I’ve met actuaries and candidates from established actuarial societies and from brand new associations, and I’ve learned some interesting things about insurance and actuaries. Here are a few items you may not know:

Insurance is growing at an astounding pace throughout former communist Europe, and property/casualty insurance is leading the charge. At a meeting of leaders of the profession in Central and Eastern Europe, presentations showed that auto liability insurance accounts for nearly half of all insurance premiums and is also the fastest growing line. Coverage is mandatory in most countries, although the minimum limits are truly minimal. Auto liability in countries like Russia, Poland, Croatia, and Bosnia is heavily weighted toward property damage. Government-supported health care is generally available, and evidently these folks have not yet discovered suing one another, so getting your car repaired is the first priority. Car repair prices even drive the territorial relativities. In Russia, adjustments had to be made near the oil fields. Oil workers make high salaries, and car repair shops charge higher prices. Market forces at work! As international accounting standards are finalized and countries adopt these standards, there will be opportunities for the CAS, in particular, to provide focused, practical training for the emerging actuarial profession working in this new industry.

In India, auto liability is also the largest property/casualty insurance line, with premiums growing due to an expanding middle class. Here, though, without the strong governmental health care safety net, bodily injury claims are far more common. Traffic congestion is constant and many vehicles show evidence of minor accidents, so perhaps it’s not worth the effort to make small claims. To drive in India, I was told one needs “good eyesight, good reflexes, good luck.” I was astonished to discover that in a random sample of bodily injury claims, death was the most common injury! Report lags are also very long for these claims, averaging over eight months. Could this be a function of insurance as a new phenomenon, so people have to learn how to submit claims? Because the insurance industry was nationalized for about 30 years, actuaries in India are over 65 or under 30. The CAS has already conducted seminars in basic and intermediate reserving in India, and we anticipate an ongoing need for good, practical training.

India is also home to a growing number of employees of multi-national insurers, including actuarial units. Both XL and GE Capital have substantial actuarial departments in the growing Indian back office economy.

All types of insurance, and insurance as a part of a working economy, are a huge new focus of universities in China. Beijing is one of the five largest exam centers for the joint preliminary actuarial exams.

Ireland, South Africa, and New Zealand are similar to Canada in that they have only “derived” Fellows. To be a member of the Society of Actuaries in Ireland, for example, an actuary needs to be a member of either the Institute of Actuaries (England) or the Faculty of Actuaries (Scotland). It’s taken several conversations with leaders of these societies to convince them they should consider adding CAS to the list of accepted designations. In fact, so great is these societies’ reliance on their derived designations, it appears that we will have to finalize mutual recognition agreements with the exam-giving organizations before we can get recognition from the deriving societies.

Mutual recognition agreements are in the draft stage with the Institute and Faculty, and approaching a draft with the Institute of Actuaries of Australia. I still hope to have all three agreements on the September Board agenda.

A huge Australian property/casualty insurer (HIH) went insolvent due in part to California workers compensation. The world gets smaller every day, but that doesn’t mean we all understand one another’s markets! The ensuing governmental investigation indicated a need for a stronger actuarial role. This company was dominated by a single personality and the actuaries could not (or did not) have enough voice in the decision making process.

On the other hand, an actuary may have too much voice. In the United Kingdom, an appointed actuary system for life and annuity insurers was supposed to provide an independent, quasi-regulatory view to the board. But there was no requirement that the appointed actuary not be a member of the board. The Equitable (the oldest life insurer in England) went all the way—appointed actuary as CEO. Coupled with weak standards of practice, this was a recipe for disaster. They’re not insolvent, but the scandal led to a complete overhaul of regulation.

Who should determine standards of practice? Who should sit on disciplinary tribunals for the profession? In the U.S., standards of practice and discipline are handled entirely within the actuarial profession and discipline is conducted in a closed environment. Only the results are made public, and then only if the Society disciplines the member. In Canada, standards are internal, but discipline tribunals include a judge. In the U.K., both the new actuarial standards board and the new discipline system include extensive input from professionals other than actuaries. The European Union requires all member countries to have discipline processes that are open and include nonmembers of the profession. Does the public in North America expect a more open process than the current system?

Other Odds and Ends
I’ve also learned some cultural and geographic lessons.

Most actuarial functions around the world have corporate sponsorship. Usually the sponsorship is limited to an acknowledgment in the program and perhaps a thank you from the podium. Sometimes it extends to things like name-badge lanyards with a company name on them or even a gift with a logo. At the ASTIN meeting in Norway this May, for instance, the umbrellas issued to participants (sorely needed!) had a local insurer’s logo. Such sponsorship doesn’t seem to detract from the independence of the opinions expressed at the meeting. It does help to keep the fees down.

A person who speaks three languages is trilingual. A person who speaks two languages is bilingual. A person fluent in only one language is an American (or maybe a Brit). I am humbled by the ease with which so many people go from one language to another. I am truly grateful to the many hosts who have so graciously conducted proceedings in English to accommodate their guests. Even the Swedish Society’s centenary dinner was held in English for the benefit of the visitors.

Croatia is not contiguous. If you try to drive from Dubrovnik to Split, you pass through Bosnia. But the border crossing is unguarded and looks more like a tollbooth. So I had lunch in Bosnia—by mistake. Check a map.

If you drive in India, you are likely to see:

• Late model cars, generally with professional drivers,
• Every model car ever manufactured,
• Trucks with cows painted on them for good luck,
• Tiny taxis that look like covered golf carts, with as many as 10 passengers,
• Donkeys buried under loads bigger than they are,
• Camels and elephants,
• Cows in the road, and
• The busiest people I have ever seen.

Scandinavia is breathtakingly beautiful. From Oslo to Stockholm looks like the upper Midwestern U.S., only the farms are smaller. I can see why the first immigrants from Norway and Sweden got to Minnesota and wrote home to send the cousins. Western Norway is a civil engineer’s dream. The oil money has led to great roads and railways, and you see a lot of the mountains—from the inside.

I’m looking forward to the next round of adventures!