|
|
|
From the Readers
Dear Editor:It seems to me that there is a lot of confused thinking today in the actuarial profession despite the fact that we regard ourselves as being paragons of logic and clear-headed thinking. One source of this confused thinking has to do with the terms science and profession, I think. They are different. And, yet, it appears that many actuaries think of themselves as professional (social) scientists. This confusion has repercussions. [When I think of that term, I can't help thinking of Madonna's "Like a Virgin." Well, which is it?]
Take, for example, the term "actuarially sound." What does this mean? Is actuarially sound something akin to the Pythagorean theorem where application of the formula clearly results in an answer that is mathematically (geometrically) sound?
We assert that we are a learned society but, at the same time, we adhere to standards of practice. What are the standards of practice, for example, for the American Mathematical Society? What about physics? Do they have standards of practice so that society is protected from unscrupulous physicists who, unknown to us, foist off fraudulent ideas based on a non-Euclidean geometry (e.g., Albert Einstein's theory of relativity)?
To me, one major distinction between a science and a profession is that the former is axiomatized whereas the second is not. I am not suggesting that a profession cannot rest, in part, on axioms. For example, the legal profession exalts the syllogism to the point of actually having had to create courts of equity to undo what the coldhearted syllogism produced!
Actually, the adjective coldhearted, as applied to syllogism, is ridiculous since mathematics does not admit any statement that cannot be assigned a truth-value. For example, the statement "A single sixteen-year old driver is worse than a married twenty-five year old" sounds perfectly fine in actuarial "science" but is inadmissible in mathematics.
Statistics is not even part of mathematics and, yet, is exalted to the point of overlooking the fact that much of what we actuaries do should be identified with probability theory rather than statistics. The answer is always "in the statistics." [This characterization would not be true in life insurance]. If the correlation coefficient is high (i.e., not equal to zero), then it's actuarially sound.]
I heard the story that a former insurance commissioner expressed the opinion that statistics (read actuarial science) could be used to find a ratable difference among drivers based on eye color, if we would but collect the data. I suspect that he is correct (although a former boss became close to apoplectic when I suggested that). The trouble is that our "science" would not prevent us from taking sides on this question with some arguing that the statistics indicate a high correlation and, hence, it would be actuarially unsound not to rate by eye color and others arguing that it would be unsound to use eye color since it is probably a proxy for other variables. Who is correct? If we are scientists, why is there a debate over credit scoring? It should be "manifestly obvious to even the most casual observer," as one of my professors used to say.
This type of question does not even arise in mathematics. It is quite all right to assume, for example, that parallel lines intersect at infinity and, voila, you have projective geometry. Mathematics is somewhat like a game of chess—define how the pieces move and you have a valid game.
What we do should not be considered a game. People are affected economically by what we do—they feel it in their pocketbooks. Hiding behind our "science" as a shield is a form of unprofessionalism caused in large part by the confusion between a science and a profession.
I challenge our profession to think more clearly about what it is that makes us a profession. I would like to see us agree that we are less of a science and more of a profession. Understanding the difference and dealing as professionals with the ramifications of such a distinction will take us a long way toward resolving questions like Mutual Recognition, for example.
To me, MR is little more than formally recognizing that, for example, a Russian mathematician and a Canadian mathematician are equivalent (ignoring the language difference). It now remains for us to formalize that "fact" in a Mutual Recognition agreement so that a Russian mathematician teaching at a Canadian university is "blessed."
If we change the situation slightly, how does it ring? An American lawyer (Russian-speaking) hangs out his shingle in the town of Borovichi, Russia (approximately 50,000 people live there). Does this present some questions as to qualifications to practice? Shouldn't it? Why?
If that is not OK, then how about a Mexican actuary (with impeccable English) providing consulting services to a monoline automobile writer in Iowa regarding a rate filing? That sounds better, doesn't it? Why?
J. Gary LaRose. FCAS
