Succeeding as an Actuary in a Changing Business World
Russell Yang Gao
Seasons of Preparation
As an actuarial student, I often joke with friends that my major is astrology. They always say: “Oh, that’s neat. I didn’t know we had that major here.” I find it amusing that my fellow students would believe astrology is a scientific major. On the other hand, if I tell people my major is actuarial science, the conversation would be much less interesting. People who have never heard of actuarial science would say, “Oh, what is that? Sounds scary.” People who seem to know a little about the major would say, “Oh, you’re one of those geeks.” Either way it shows that there are deep misconceptions of actuaries.
The fact is an actuary’s work does share some similarities with that of an astrologist. Actuaries try to predict the unpredictable and control the uncontrollable. They identify risk factors and design systems to minimize the financial impact of unfavorable events such as death, fire or hurricane. They apply analytical skills to develop statistical models. In short, they keep people smiling when facing risk.
Actuaries are mathematicians, statisticians, economists, accountants, computer scientists and lawyers. It takes extensive career training to possess such a broad skill set. The most important professional training is the series of actuarial exams. The number of exams they have passed typically impacts actuaries’ salaries. Therefore, studying for exams has always been a major part of actuarial students’ lives, taking years of preparation.
Like the climate of a tropical grassland, an actuarial student’s life usually has only two kinds of seasons. The dry season runs from August to November and March to June, during which they spent most of their time outside of work studying for actuarial exams. Between the dry seasons are the rainy seasons, in which actuaries enjoy various kinds of social life. The rainy season is essential in preparing actuaries for the next dry season.
My summer internship was a perfect opportunity to explore an actuary’s life seasons. I started my job right after the May exam. During the first two months, my colleagues often talked about their summer vacation and weekend plans during lunch. As the dry season approached, we started to talk about exam results during lunch exchanging test experiences and preparation plans for the next exam.
What Lies Ahead
Perhaps the stereotype of a person who sits behind a computer all day long and mutters mysterious numbers is deep-rooted. Or perhaps we haven’t communicated the value of our profession to the outer world, a world full of challenges and opportunities.
Employers stated in an SOA survey that many actuaries need to better develop communication skills and business acumen. It is evident that the deficiency in communication leads to the common misconception of the profession. Another perceived weakness of actuaries is the scope of perspective. Steve Pummer has a popular joke online: “Actuaries are those who tell you how to build a watch when you ask them for time.” This metaphor illustrates how an actuary’s attention to detail and accuracy can stand in the way of focusing on the issue at hand. If armed with the ability to see forests from trees and the ability to elucidate their vision, actuaries can become excellent leaders, such as chief financial officer (CFO), chief risk officer (CRO) or even chief executive officer (CEO). The increase of actuaries in these and other leadership positions is a trend for future actuaries.
The Society of Actuaries strives to enhance the value of actuarial designations and to rebuild the image of actuaries through its ongoing campaign. The campaign, “Turn Risk into Opportunity,” portrays actuaries as business leaders. Traditionally, actuaries only play key roles in insurance companies. However, during the past few decades, innovation in financial technology and emergence of novel financial markets have dramatically increased the diversity and complexity of risk management vehicles. With the help of more powerful computers, actuaries have not only developed more sophisticated insurance models, but they have also extended theories in financial derivatives. Starting this year, insurance companies are required to conduct stochastic cash-flow testing, which is another measure developed by actuaries to manage risk more effectively. The revolution in risk management has created increasing opportunities for actuaries. For instance, as ordinary individuals feel overwhelmed with the health care and Social Security crises and as daily financial decisions become increasingly complex, personal actuaries will start to help consumers manage personal risk and make smarter choices. In addition, the notion of enterprise risk management (ERM) has been developed and put into practice. As we can read in the Wall Street Journal and see on CNN, more and more non-insurance businesses have instituted CROs in recent years.
The actuarial community is evolving, too. Actuarial students can satisfy some educational requirements by taking approved college courses now. With online VEE courses offered by certain training institutions and FAP courses substituting Exam 5 and Exam 6, our life as actuarial students will be more balanced in the future. We can pace ourselves in online study and enjoy the oceanic climate, which is characterized by a narrow range of moderate temperature and a reliable amount of rain every month.
To enjoy such a pleasurable climate, we have to be prepared for the coming seasons. Our new-generation actuaries should strive for transcending the clichéd perceptions of actuaries. We can succeed by taking courses in writing and speech and actively participating in college activities, such as student government, sports and academic clubs. Furthermore, we can take advantage of study abroad opportunities, as suggested by Justin Panther’s article in the last issue of The Future Actuary. In a word, we have diverse ways to strengthen our communication skills. The bottom line is, we need to integrate communication training into our professional development. An astrologist would predict that the future of the actuarial profession is in our hands, and with sound planning and hard work, it is bright indeed.
Russell Yang Gao is a student at Worcester PoIytechnic Institute, Class of 2007, and can be reached at russell@WPI.EDU.