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Opinions
A United Actuarial Profession...
FOR
by Donald F. MangoI support the unification proposal in Clive Keatinge's opinion piece, "A United Actuarial Profession Makes Sense" (The Actuarial Review, November 2001).
First, from the point of view of the general public, unification may be a nonevent, since we effectively already are one profession. Distinctions among pension, life, health, and property/casualty are similar to those among electrical, mechanical, and civil engineering: practice areas within a single discipline.
Second, where are the compelling arguments for the separation? Our counterpart societies around the world do not separate life from nonlife (as the European actuaries would say). The similarities and potential synergies are striking. Are there any arguments for maintaining separation that cannot be overcome in a well-structured unification process? I have yet to hear any.
Keatinge's concept of self-directed practice areas within the larger organization means the value of the casualty actuarial designation will be preserved. I have heard concerns that a unified actuarial society would allow "cross-over," with, for example, life and pension actuaries taking property/casualty actuarial positions (although arguably the converse could occur as well). Speculation like this certainly speaks poorly of property/casualty actuarial hiring practices. What property/casualty firm would hire someone for a senior property/casualty actuarial role solely based on an "indivisible" designation? Experience always has been, and will continue to be, the predominant factor in hiring. If further "protections" are needed, the new designations could be extended to include practice-specific suffixes, for example.
Financial services convergence: Firms like Citigroup now struggle to consistently measure and price the risk of life, pensions, annuities, disability, health, auto, homeowners, general liability, workers compensation…not to mention their own asset holdings. I was contacted recently by a financial risk manager from such a firm, who wanted to allocate capital across all these categories. He asked if actuarial science had a "unified insurance risk theory." Sadly, I had to inform him that no such theory existed, in no small part due to the separation between the societies. How much longer can our profession afford to give such an answer? It is imperative for the future of the actuarial profession as a whole that we formulate and communicate a joint theory and practice of risk evaluation.
Hybrid vigor: Paraphrasing Peter Drucker, innovations in the information economy will increasingly come as a result of "cross-over" from other industries. The SOA is far ahead of the CAS in asset modeling and asset-linked products, and has developed the concept of the QRA designation, the Course 7 modeling seminar, and innovative continuing education techniques. The CAS efforts in DFA, catastrophe modeling, and credibility theory would certainly benefit SOA members as well. The insurance industry as a whole would benefit from the cross-pollination of ideas between our societies.
Critical mass: The Strategic Plans of both the CAS and SOA speak of a desire to broaden the scope of the profession beyond traditional insurance domains into "financial risk management." Joining forces would only improve the prospects for the success of these plans for the profession as a whole.
Keatinge proposes the creation of a new joint organization. This is critical to the success, for a combination is more palatable than a takeover or annexation. It is also easier when creating anew to blend the best of both predecessors, while eliminating ineffective prior structures and practices.
Bottom line: This is not a crazy idea! Keatinge's proposal is well considered, realistic, and provides a realizable plan. With a reasonable, sustained effort, this could actually happen. I wish to add my name to the list of those in support of this critical step for the future of our profession.