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Report of the CEO Advisory Task Force

by Curtis Gary Dean, CAS Vice President-Administration

A CAS task force completed a series of interviews with CEOs and other insurance industry leaders during the summer of 1999. The mission of the task force was to identify the needs of potential customers/employers of actuarial services and to explore how actuaries might best meet those needs. The members of the task force were Mavis A. Walters (Chair), Curtis Gary Dean (Vice Chair), Linda L. Bell, Jerome A. Degerness, David P. Flynn, Alice H. Gannon, Steven G. Lehmann, Stephen P. Lowe, and Michael A. Walters. The report of the CEO Advisory Task Force was presented to the CAS Board of Directors on November 14. The executive summary from the report follows.

Executive Summary

In recognition of the rapidly changing business environment and realizing that the role of actuaries is expanding from the traditional ratemaking and reserving activities, the CAS Board of Directors established a special task force to help plan for the future. The mission of the task force was to identify the needs of potential customers/employers of actuarial services and to explore how actuaries might best meet those needs.

Fourteen P/C insurance industry leaders—CEOs or practice leaders from insurers, reinsurers, consulting firms, and brokers—were interviewed by task force members.

The interviews began by asking the leaders to identify the strategic issues facing the industry and any particular challenges facing the CEOs' organizations. This led to a discussion about the skills needed to address these issues and challenges, and the role of actuaries in the organizations. Other topics that followed included the importance of professionalism, competing professions, the quality and relevance of actuarial skills, and what skills actuaries need to develop.

Consolidation, convergence, and globalization were identified repeatedly as major strategic issues of concern. There is uncertainty about where the financial services industry is going and who will dominate. Concerns were expressed about the continuing changes in risk management: self-insurance, integrated risk management solutions, securitization, and new products. Competition from within and from outside the industry was mentioned as a major challenge. According to the CEOs, there is a lot of capital chasing few growth opportunities. Consequently, it is crucial to create the right products and then have an effective means to distribute them to customers.

The CEOs concluded that a combination of people and a variety of skills are needed to meet the challenges. Among the skills or qualities mentioned were the abilities to learn continuously and to produce results, as well as curiosity, people skills, creativity, enthusiasm and passion, management skills, general business skills, and business sense.

Of the fourteen leaders interviewed, most believed that actuaries were important contributors to their organizations. In fact, several said that actuaries were vital and that actuaries were working throughout their organizations. Actuarial skills, particularly their analytical and technical/mathematical skills, are valuable and difficult to find in other professionals.

A common criticism of actuaries from the CEOs, however was that some actuaries are too narrow and too technical and that they need to develop general business skills and a broader business perspective.

Three who were interviewed have serious reservations about actuarial contributions. One said that actuaries at his company are used only in reserve analysis and are used there only because their certification is important to outside parties. He said that actuaries do not have an interest in running a business and therefore are of little value in his organization. Besides that they are expensive. Another said that he is not getting help from actuaries on his most important business issues. There may be too much comfort for actuaries to stay within their own "narrow" discipline. He said, "Actuaries are pursuing greater precision in areas of decreasing relevance." A third CEO stated that actuarial tools were not adequate to handle the demands of the fast-paced, competitive world in which we now live.

There were a number of suggestions on the things that actuaries or the actuarial profession can do to enhance their value, including:

The consensus was that professionalism, a code of conduct, and standards of practice are important. In fact, one CEO stated that these are absolutely essential to the actuarial profession and a major reason that he has so much respect for actuaries. But another said that although standards are important, actuaries need to be careful and not hide behind these standards instead of expanding their horizons and expertise. A couple doubted the real value of codes of conduct. Honesty and integrity are very important but cannot be taught or mandated by codes of conduct and standards.

The following professionals were named as possible competitors to actuaries: MBAs, economists, management consultants, mathematicians, statisticians, financial accountants, and investment/financial professionals. MBA training was described as providing broader business skills and one company uses MBAs instead of actuaries. But several companies said that they do not seek out MBAs for recruitment. Some commented that most MBAs do not have the math or statistical skills that actuaries have.

CAS members are encouraged to read the entire report and, in particular, the section titled "Actuarial Skills and Training." This section describes CEO opinions about "characteristics of the best actuaries" and lists skills and competencies that actuaries or the profession need to develop. The full report can be read or downloaded from the CAS Web Site at www.casact.org or a copy may be obtained by contacting the CAS office.

The Long Range Planning Committee is reviewing this report and will develop recommendations for the CAS Board of Directors on how the CAS should respond to the CEO input. As a result of this report, CAS committees currently are considering ways to include sessions on communications and general business skills in CAS annual meetings and seminars.