The Actuary Who is Only an Actuary is not an Actuary
Introduction
If you were to research “What does an actuary do?” today, you would get a very different answer to what you would have got a few years ago. When researching Actuarial Science as a potential degree and career path, the information I was provided with led me to draw the following conclusion:
“An actuary uses their mathematical and statistical skills to manage risk and uncertainty, with their role including building models, carrying out valuations and analysing data before passing it on to a stakeholder”
This is how most people would quantify an actuary’s value to a company. However, it is becoming more evident that the value of an actuary today goes beyond this description. Now, we must possess an array of skills beyond what would be regarded as a typical actuary’s skills.
With the profession currently undergoing a transition period, Frank Mitchell Redington’s quote, “The actuary who is only an actuary is not an actuary” seems very fitting at the minute.
The Actuary Who Is Only An Actuary…
In June 2020, the newly elected president of the Institute and Faculty of Actuaries, Tan Suee Chieh, further reinforced this point in his presidential address, paraphrasing Redington’s quote three times. This quote seems quite relevant to the actuarial world today, so I thought I would delve into it a little further to consider the meaning behind it.
I have considered how the modern-day actuary differs from the outdated, typical perception of an actuary. Within this, I have discussed how the skills and attributes of the modern-day actuary go beyond the standard technical skills actuaries are typically associated with, and how the emergence of artificial intelligence and automated machine learning has contributed to the need for these new skills and attributes.
More Than Just An Actuary
Some of the traditional phrases used to describe actuaries would include “number crunchers” or “risk specialists” amongst others. The chances of hearing phrases such as “innovators” or “great communicators” would be slim to none.
There is a common misconception that an actuary’s job is to sit behind a computer screen carrying out calculations all day. Over the last few years, the profession has evolved, and this misconception could not be further from the truth!
Softer skills are becoming increasingly vital in the actuarial world. The days of low-level human interaction for actuaries are long gone. Surprisingly, spending hours carrying out calculations to solve complex problems is becoming a thing of the past too. We can thank, or blame, the emergence of AI and AML for that.
I should acknowledge that actuaries have extraordinarily strong mathematical and analytical brains. We are extremely competent in the hard, technical skills. It’s what we enjoy and probably why we first chose to become actuaries. For years, companies and governments have relied on us to predict the future, mitigate risk and plan for tomorrow. Intuitively, this would require you to have a strong grasp of numbers, data and statistical practises.
Or in other words, the hard technical skills. We need these to build a model, which helps us arrive at a projection into the future. This helps pedal the aforementioned perception of actuaries as complex problem-solvers, who focus on carrying out calculations with no real need to interact with others that often.
Historically, the actuary’s biggest downfall was our notorious reputation for being poor communicators. Being able to use your technical expertise to carry out a valuation is great, but how useful is it if you can’t get your point across to a board member or a client? Consequently, we can sometimes be stereotyped as introverts with weak interpersonal skills. However, there are factors outside of someone’s personality that contribute towards this “poor communicator” stigma.
The information we must get across to others is extremely difficult to understand, especially for those with no actuarial background. Despite understanding the material better than anyone else, we have faltered in communicating our findings to others in lay terms due to the sheer complexity of them.
Today’s actuaries are starting to pull away from this “poor communicator” label that we are branded with. We understand that we need to be not only great actuaries, but great speakers, great collaborators and perennial learners moving forward. In a nutshell, we must have skills beyond the core technical ones.
For those who elected to study an Actuarial degree at university, the road to success was laid down in front of you from day one. Simply get your degree and take a number of exemptions from professional exams with you into the world of work. At this point, pass the remaining exams and you’re at the end of the road. You are a fully qualified actuary and a Fellow of the esteemed IFoA, freeing you up to enjoy a comfortable and rewarding career. It may not be easy, but it seems very straightforward, right?
This created a ‘tunnel vision’ mindset that a lot of actuarial students have got trapped in. The sole focus of passing exams in their formative years of an actuary led to an over-emphasis on the technical skills, hence the neglect of these ‘softer skills’. This is reflected in the recent IFoA syllabus change, with increased focus on these softer skills alongside the technical ones.
Most actuaries have now realized that this direct career path may not be as straightforward as they were once told. The single road to a successful career as an actuary has now broken up into multiple roads, which may have plenty of twists and turns ahead. Newly qualified constantly learning and evolving during their career as an actuary. Hence the requirement for more than just technical skills. Why is this you may ask?
“The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.”
– William Pollard
The Tech Savvy Actuary
Today’s world is inundated in data. Everything we do now can essentially be tracked and recorded. Ed Klinger, CEO of Flock (a provider of on-demand drone insurance) said that 90% of the world’s recorded data was produced in the past two years. This emphasises the recency of this data explosion. Our smart watches track our current health; how many calories we burned today or how well we slept last night.
Our smartphones can recognise our interests & hobbies, using them to tailor personalised adverts to us. Through telematics, we can assess how safely we drive on the road, basing our insurance premiums off the data collected! This data explosion is changing how insurance and pension companies do business, hence changing the role of the actuary.
Artificial intelligence is the main driver for this. It can use algorithms to collate and analyse large quantities of data to project it into the future. Having an array of data readily available has enabled machines to build better, more accurate models to a higher standard than humans can. This is eliminating the typical actuarial role that I have alluded to, hence forcing us to change how we work.
Instead of worrying about how the rise of AI and AML may threaten our jobs, we are finding ways to co-exist alongside it and use it to our advantage. A lot of the solutions rely on actuaries utilising these ‘soft skills’ that are constantly spoke about. The emphasis is shifting to areas such as communicating our results & recommendations to stakeholders or applying our actuarial judgements to certain situations.
Here is an example to put this into context:
Consider an individual wanting to take out an insurance policy. After applying and answering all appropriate questions, AI can underwrite this policy for the applicant, before producing a premium based on their statistical risk factors. However, the applicant could be unfairly charged a higher premium or unfairly rejected altogether. This could be due to algorithmic bias. Applicants could be discriminated against based on previous decisions, or because of the AI being trained on incomplete or imbalanced data that is not representative of the general population.
In this scenario, human actuaries are required to understand where the computer has gone wrong. We might need to explain this to the applicant or assess and maybe override the decision made. We can apply our actuarial judgements based on our experience and education to consider how to proceed, using our overarching ability to understand business from different angles where risk is in the equation.
With the profession currently going through this transition period, actuaries have started to adapt also. Our core technical skills can always be improved, but our softer skills are becoming more prominent as we reinvent our roles.
We are becoming more tech savvy. Being able to code or having a knowledge of computer science is beneficial as we are surrounded by technology and will be going forward. Having a sound understanding of modern technology will helps us utilise it more efficiently and work alongside it more effectively.
The Social Media Actuary
Today’s actuaries are very business savvy. In the social media age this is now easier than ever. This adds a new dynamic to the actuary, giving them an ‘online persona.’ Platforms such as LinkedIn give us the perfect opportunity to connect with others worldwide. It is a great form of self-advertisement to potential employers or clients. The networking opportunities are limitless- you can connect with people via a simple click of a button.
As a result, we have exposed ourselves to a lot more opportunities and information, broadening our horizons on multiple business aspects. From this relevant ease of connecting with others, actuaries today are more confident, more social, and more ambitious.
Building a strong network online has a reciprocating effect too. More people outside of the actuarial world are becoming exposed to us. We can share our thoughts and ideas, whether that be via an article we have written or just posting informative content. This can help break down barriers by outsiders reading actuarial content and seeing it more often.
Communication is vital as an actuary today. Constantly relaying results and giving recommendations is central to our role. Therefore, we are naturally becoming better at relaying the complex information we have in a simple and understandable manner. This helps us better command an audience and be more assertive with our ideas if they can follow the information clearly. This could be in the boardroom, to clients, or even colleagues in other departments.
Previously, this was the final hurdle actuaries fell at. Getting our ideas across effectively, especially in the boardroom, enhances our credibility. As a result, we have seen more actuaries make the transition into boardroom roles with greater degrees of success. Enhanced interaction with other cohorts of our office has led us to collaborate more effectively on tasks and projects.
This will be essential moving forward as we continue the transition into a world orientated around data and technology.
The Growth Actuary
Actuaries are now in the mindset of constant growth and learning post-qualification. After going through the rigorous exam system, all actuaries enter a process of ‘Continuous Professional Development.’ This helps us become better-rounded professionals and expand our wealth of knowledge and experience.
This is essential as we touch so many areas in our daily roles, such as economics, finance, statistics and more. We must keep up with the ever-changing world to continue giving insightful and informed recommendations about the future.
Our ability to break down results from models clearly & concisely and apply our own judgements is increasing our stock in sectors outside of pensions and insurance. Using our perception of risk gives us a cutting edge here. Despite not fully penetrating other industries yet, actuaries are seeping into roles regarding data science, coding and many more. This new breed of actuary is opening doors to new opportunities due to constantly wanting to learn and grow as professionals.
Concluding Thoughts
To conclude, if we are just an actuary we won’t get very far.
We need to be more than just the stereotypical “number crunchers.” Our professional growth is a constant process that will enhance our skillset and help us foray into other business sectors. We are beginning to hold a more prominent role in the wider business discussion as AI strengthens its grip on the technical side of things.
We are more business savvy, being able to spread our ideas outside of the actuarial world thanks to the internet and social media. We are better communicators than before, leading to others valuing our opinions and judgements a lot more.
Modern-day actuaries are reinventing themselves as almost “super-actuaries” with these new skills and qualities mentioned above. This is where our value lies today and in the future.
Further down the line, the remit of an actuary could change again, and we must be willing to reinvent our roles and better ourselves once more. This sums up what Redington, and more recently Chieh, were trying to get at. As a result, we should always remember that “the actuary who is only an actuary is not an actuary,” as it could be a very relevant statement for some time to come.
