Even actuaries can tell a joke and fear a future of machines
• Risk analysis cannot predict exactly what lies ahead for these ‘human calculators’
There can’t be a profession that is as selfconscious about its image as actuaries. Their core business is to compile and analyse statistics and use them to calculate insurance risks and premiums. It might not sound exciting, but it’s preferable to the even more mundane world of accounting.
Recently much of actuaries’ work involves calculating longevity. There will always be plenty of this work; on average babies born today will live to 104. Precisely how that is calculated remains a professional secret, to some extent.
One of my favourite Financial Times columns started, “It might be like comparing ebola to the plague or the musical abilities of Celine Dion and Michael Bolton, but I would rather be an actuary than a accountant.”
Actuaries look to the future, while accountants focus on showing the past in the best light. It still astonishes me how accountants refuse to take any responsibility for frauds that take place at their clients.
Of course, some actuaries have been chancers, particularly in pensions. Without actuaries, there would have been no bulking scandal, in which money was skimmed off pension funds. And they have a preference for black box products only understood within the brotherhood.
I was at the Actuarial Society convention in Sandton this week. It is a much more diverse profession than it was, though still nowhere near reflecting the demographics of SA.
To be fair, actuaries are far more diverse than financial planners, though that’s quite a low bar.
I am sure Peter Withey, the Actuarial Society’s incoming president, is glad he is an actuary and not an accountant: he works for KPMG. Like the pianist in a house of disrepute, he can say he didn’t know what was going on upstairs.
Actuaries like telling bad jokes. I have fond memories of the double act at Alexander Forbes Hot Topics of actuary Rowan “Cheesey” Burger and his legal colleague, Leanne van Wyk. John Anderson, who has Burger’s old job at Forbes, tried his best to keep up the tradition of telling jokes, but as soon as he said “I am an actuary”, he started cackling like a witch.
Sometimes actuaries need help. The best actuarial joke was when someone introduced himself as a marketing actuary. You would think a marketer could be found at one of the advertising agencies or the marketing departments of Unilever or Nestlé without drafting in an actuary.
I think he got fed up with all the ridicule and is now called CEO: employee benefits client solutions.
Admittedly, on the rare occasion actuaries understand marketing it can be a lethal combination — think Adrian Gore and Barry Swartzberg at Discovery, or Magda Wierzycka at Sygnia.
To be more serious, an actuarial career can be a good choice for the more statistically minded. Accounting is in a state of flux — KPMG will shrink even if it stays in business and the profession has a lot to do to rebuild trust.
The convention showed me the breadth of issues actuaries address. Healthcare actuaries, for example, look at some down-to-earth topics.
There was a paper on the high cost of births in the South African private health sector.
They also look at the other end of spectrum, with a paper on end-of-life care.
Actuaries are coming back into investments as demand for products other than traditional investment-linked offerings increases. Natasha HuggettHenchie, an investment actuary, says actuaries have not become involved enough in defined contribution funds — it seems easy to do without actuaries as these funds are simply about building up a pot of money. But factors such as funding levels, postretirement income sustainability and longevity risk management need to be addressed.
One of actuaries’ strongholds is liability-driven investments, which specifically link a fund or insurer’s assets to meet liabilities. Actuaries also want to make a contribution to the continued demand for governance.
One paper took a stab at the interplay between corporate innovation, risk management and internal governance.
Like all professions, actuaries feel threatened by technology, more so as their primary role is to act as a “human calculator”.
There was one particularly gloomy presenter (and if there was an Oscar for gloomy presentations, actuaries would have a monopoly). Paul-Willem Janse van Rensburg says machine learning merges two fields, software development and statistics, to produce an approach to modelling that changes as its environment changes and allows building of these models — once the preserve of actuaries — by people previously viewed as non-experts.
This poses a threat to the role the traditional actuary plays in a business as a key decision maker. This topic was explored in further detail by Peter Temple, a prominent reinsurer with a rare streak of charisma — if not Brad Pitt then a whiff of Tom Cruise.
Temple says we need to get used to fundamental changes in lifestyles: many people in their 20s have no intention of owning a car and have no difficulty living in a house they don’t own.
They are very happy in what is coming to be known as their “meco system”. Temple was talking on the future of life insurance, which remains the core employer for the actuarial profession. He believes insurers lag behind banks when it comes to embracing innovation.
There is still a view that considers a 10% increase in the previous year’s profit to be satisfactory — but the survivors will need to be much more ambitious than that.
“Are we going the way of Europe, which sees technology as a threat to be contained, or should we point towards Asia, where technology is seen as an opportunity?” Temple asked.
The new tech-focused customers cannot be seen as an extension of an existing market; they didn’t “graduate” from a PC to a mobile device.
In China, few people carry plastic, paying for everything via WeChat. And Temple says predictive analytics will get so sophisticated that financial advisers will battle to give as accurate and sophisticated a financial needs analysis as the robo adviser.
Temple talks of insurers moving from life protection to life enrichment. If this happens, actuaries will have a future.