Communication: Skills plus knowledge
01 February, 2010
Jerome Nollet encourages actuaries to take pride in their skill-set, which involves more than just calculations
It was 20 past eight in the evening. We were all packed in a small meeting room, going over the final details of a complex deal. It was all coming into place: we were about to issue a bid. Then, in one of the analytical papers supporting our target price, I spotted a mistake: “Er, I think this part here is not correct…” I said, quite anxiously. The response from the team leader came back immediately: “Don’t worry, this part of the analysis is written for actuaries!”
Written for actuaries? This could only mean one of two things; either that my intellectual capacity was not sufficient to comprehend the analysis, or that actuaries are allowed to leave errors in their analyses. When I ask my actuary friends which one they think was the intended message, they all point to the first option without exception and add: “Well, old friend, it is not so much that you are daft, but it is the suggestion that errors are acceptable in an actuarial paper that is simply unthinkable.”
This is a grave misjudgment. Actuaries should be more worried about the ability of lesser minds like mine understanding their work than about imperfect outcomes. This is not just because it places too great a burden on actuaries to be right (something the Morris report highlighted as a key issue) but very much because a key role for actuaries is to make financial sense of the future for common mortals. There can be no greater illustration of the reason behind this than the recent financial crisis: the reliance of many on the knowledge of few, at a time when there was a growing common feeling that things were wrong.
Actuaries should have the confidence to explain how uncertain outcomes can be, that there is a great level of uncertainty and that there can be mistakes. Doing so, they help clients and users to think about the risks and take a proactive approach to these risks. Knowledge is always limited. The skills to work with these limitations are the greatest added value of actuaries. The Merriam-Webster dictionary defines an actuary as ‘a person who calculates insurance and annuity premiums, reserves, and dividends’. Is that it?
“Excuse me, I have been working with you for a while and noticed the way you approach every problem and task in a systematic manner. You seem always keen to do things well, to analyse how best to accomplish the task and to make sure that you have the right information to work with even when your knowledge is limited. You actively seek the various possibilities and thoroughly explain and lay out all the alternatives. You are regarded as a person of integrity and respected for your intellectual honesty. So, I hope you don’t mind but… can you tell me how you became like that?”
There might be a slight exaggeration in that statement, but suppose someone asked you this—what should you answer? Obviously, the correct response is: “I am an actuary.” This is serious. This whole description is what should define actuarial work. It is the method, the approach. In a word, the skills. Nothing else matters as much.
Indeed, actuaries could start looking at other people’s shoes, dress normally and even drop the letters after their name, for example, and let their skills speak for themselves. Unfortunately this is not yet happening. We keep hearing phrases like “I am an actuary but not practising”, or: “I am a pensions/life/GI actuary”. Very soon we will have a brand-new group of ‘risk actuaries’. It is as if just being an ‘actuary’ means nothing.
While greater knowledge and learning is commendable, and there are a few cases where the regulator will ask for a specific certificate, the DNA of actuaries is in the skills. These skills make actuaries particularly suited to any complex task including risk management, but they can be applied equally across all responsibilities.
Actuarial skills can bring tremendous benefits to any profession (well, with the exception of politics — you can’t really say the truth about the likelihood of keeping promises and still be elected, can you?). More so, actuaries can, in fact, lead the improvement of any profession, bringing their analytical skills and high standards to bear in their daily tasks.
Knowledge is certainty, but this is not the world we live in. The profession’s motto is right about what defines actuaries. The future of the profession requires actuaries to destroy the old silos and focus on their skills.
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Jerome Nollet works in risk management in the insurance industry. He serves on the Board for Actuarial Standards and on the Council of the Insurance Institute of London. The views expressed in this article are his own.
