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The Actuary The magazine of the Institute & Faculty of Actuaries

A Wales of a time

For two days in early December, more than 200 ‘younger members’ of the actuarial profession gathered in Cardiff for the 4th Younger Members’ Convention (YMC). The YMC is an annual event for newly or nearly qualified members. It provides a platform for younger members to come together to share current technical insights and to discuss issues important to the profession as a whole.
Members aged under 40 now account for nearly three-quarters of the profession, and students now outnumber fellows. Younger members have been notoriously quiet when it comes to voicing their opinions. The time had come for younger members to give their input into the shape of the profession of which they will be a part for years to come.

Professional bargains
No sooner had we arrived and grabbed a coffee than the first talk of the day was upon us. Appropriately the topic of the morning was strategy and the role of the profession.
As the reader may be aware, following the recent criticism of the profession via the Morris review and others, the profession has been assessing the perception of actuaries by canvassing the views of customers, employers, universities, and recruiters. The findings of this research are set out in the strategy review discussion paper issued by the profession in September 2005. The most commonly cited criticisms of actuaries are that they lack real-world understanding, business judgement, and communication skills. Any future strategy for the profession will need to address these areas.
Interestingly, in spite of this criticism, the demand for actuaries has continued to grow over recent years, and the expected decline in the traditional areas of pensions and life insurance is yet to materialise. The presidents of the Faculty and Institute discussed the options being considered for a coherent strategy for the profession, with the aim of building on recent growth and ensuring a continued market presence for actuaries into the future.
The first external speaker, Professor Alan Paterson, director of the Centre for Professional Legal Studies at Strathclyde University, spoke on the changing nature of professions and was able to draw comparisons of the recommendations of the Morris review with the Clementi review of the legal profession. According to Professor Paterson, the nature of a profession hinges on the interpretation of the ‘professional bargain’, as set out in table 1.
Professor Paterson’s view was that recent changes in the environment have led to a re-evaluation of what it means to be a professional. The perceived ‘cosy arrangements’ of the past will no longer be acceptable as markets widen, regulation changes, and consumers become more sophisticated.
Professionals will be held to their side of the bargain to a far greater degree in the future. The forces driving this change are likely to be increasing external regulatory scrutiny, erosion of professional monopolies, and a greater need to prove that value for money is provided.
The actuarial profession will be no exception to this. To continue to enjoy our side of the bargain, we as professionals are going to have to make sure that we deliver on society’s side. As a consequence, the profession must be prepared to expand its skill set to meet the changing needs of consumers and the wider market.

Softly softly
Over the two days of the conference, members were invited to attend a mixture of technical and softer skill workshops.
The technical sessions on the first day focused on the traditional work areas of pensions, life insurance, general insurance, and investment.
The pensions sessions focused on the technical implications of recent new legislation and the new regulatory environment. We had the opportunity to attend separate sessions given by a lawyer and a credit advisory specialist. In the future it is clear that actuaries will need to work more closely with other professions to meet the needs of their clients.
For general insurance actuaries there were, among others, sessions dealing with the thorny issue of quantifying and communicating uncertainty in actuarial results, and on alternative pricing models inspired by budget airlines.
The wide range of soft skills workshops followed on the second day. One session, intriguingly titled ‘Mind control 101’, while falling short of teaching us Jedi powers, did include advice on and we quote ‘pulling birds’ and ‘pulling blokes’!

Fun with furniture
Over the course of the conference, members participated in a team business challenge. Teams were given the role of acting as a board of directors for fictional furniture companies, competing in the same market. Over the two days, we were able to watch the share prices of each company rise or fall, depending on the decisions made by the board. We later discovered that this game is based on the business awareness module that now forms part of the exams for new actuarial students.
The teams were placed in three leagues of six companies, with the winning and losing team from each league having to give a short presentation to the rest of the group on where their strategy went well, or where it went wrong.
The game involved decisions about the companies’ operations. These ranged from choosing which market segments to target and what level of controls to have in place, to how to respond to issues as diverse as rising retirement benefit costs and allegations of sexual harassment among the workforce. The decisions all had to be made in the half-hour segments between the technical and soft skills sessions.
The decisions taken at each stage of the game were entered into a computer program, which then simulated the furniture market, and calculated the share price for each company at the next stage of the game. It was fairly clear from the wide range of share price movements that there was a significant diversity of strategies between the teams.
This proved to be an enlightening experience as teams struggled to make decisions with both less-than-perfect information and limited time to analyse that information. The game gave an insight into the types of pressures that really do exist in the commercial world, and gave an illustration of how much financial impact board decisions can have on a company. The authors’ respective teams fared differently on their leader boards. Tom’s team’s dubious strategy of targeting a shrinking market, and failing to grow their share of this, led to significant share price falls. Luckily, however, they managed a mid-table finish so as to avoid presenting their flawed strategies to the entire conference.
Matt’s team had been cruising in second place for much of the game, but a last-minute share price tumble from the leading team left them winning their league.

Some culture
The Monday evening featured a social event to allow everyone to meet fellow younger members in a more relaxed social environment. The Welsh National Museum and Galleries provided a splendid setting for a drinks reception and dinner. After dinner, as we were told is traditional in Wales, we were entertained superbly by a male voice choir. Towards the end of its set, the choir bravely invited the audience to participate in a few songs. Many members seized this opportunity with gusto, and indeed one of the presidents (who shall remain nameless) deserves particular credit for his rousing contribution to the ‘12 Days of Christmas’!

YMC 2006
The YMC 2005 provided an enjoyable mix of professional development, both technical and non-technical, and opportunities to socialise with fellow young actuaries. It gave us food for thought the actuarial profession is facing a period of difficult choices, and input from the younger members is vital in rising to the challenges of the future. It also highlighted the ever-increasing importance of skills that are outside the ‘traditional’ actuarial arena, such as commercial judgement and communication.
On the downside, the level of participation in discussion forums was limited, again perhaps reflecting the reluctance of younger members to make a contribution.
While change can be daunting and uncertain, it is an inevitable part of life. It is the opinion of the authors that exciting times for the profession lie ahead. We would urge younger members to have their say, because there are important choices to be made that will determine what being an actuary means in ten years time. This will obviously have most effect on younger members.
The authors would like to extend their thanks to the chairman and committee, the presidents and speakers, and to everyone else involved in putting on what was an excellent conference. We look forward to YMC 2006.