Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • November 2015
11

What are actuarial skills?

Open-access content Monday 2nd November 2015 — updated 5.50pm, Wednesday 29th April 2020

Jon Spain believes actuaries must extend their skill sets to ensure they, and the profession, can thrive

2

—

Although Kirsty MacColl's song title 'What do pretty girls do?' is probably more intriguing, that is not the question that has been troubling me. However, what actuaries do is something that puzzled me as far back as 30 years ago, when I wrote a brief piece for Fiasco, the predecessor publication to The Actuary.

More recently, in her presidential address in June, Fiona Morrison used the phrase 'actuarial skills' several times, which I challenged privately. No claim to originality of my opinion is asserted as I understand that this theme of actuarial skills is already being explored, and ideas have been sought via Twitter. While my background has been in defined benefit (DB) pensions, I hope some of the following can be accepted as broadly applicable to other actuarial areas of work.

Basic requirements are not enough
Mathematical ability and statistical ability are certainly necessary but insufficient ingredients. In practice, I suspect that very few pensions actuaries have needed to solve true mathematical problems. I've seen two cases in the past 40 years. We also need good modelling ability, with attention being paid to benchmarking and thorough testing. Numeracy is more important than mathematics.

A well founded perception about the actuarial profession is that professionalism is embedded through our code of conduct, making us a profession rather than a mere trade. We owe a duty of care to our client and to others who may be adversely affected. We also understand that lowering standards has behavioural effects, which could lead to, say, a worse claims experience, potentially bankrupting a client. Finally, we are able to identify options (the 'O' in COBIMET - contingencies, options, bonus loading, interest rate, mortality, expenses and taxation) and then try designing apt responses. Pretty much all actuarial problems can be so classified. But, despite all this being good stuff, it is simply not enough to justify patting ourselves on our backs. Indeed, I believe there has been too much 'groupthink' for too long.

Rather than mathematics, we desperately need critical thinking, which is still far too rare, to be rooted within all kinds of actuarial firms and expected at all levels. Being challenged is a great way of being forced to review what one is doing and why.

We need to accept that real-world financial statistics do not have a normal distribution, and some of us need to enhance our general statistical knowledge. We also need to restore a sense of balance over time, which I believe has been missing for at least 15 years (in DB pension space, at least). This could enable us to restore more balance between risk and reward, the latter being an essential element of institutional finance.

Lead the way
While I used to think a long-term approach was an essential actuarial ingredient, I have changed my mind. Rather, it is vital that the relevant time horizon is chosen in any particular situation, differing radically between DB pension space and general insurance. As it happens, the covenant requirements for DB pension schemes are a valuable feature because they enable pension fund trustees to gauge their likely support better than used to be the case.

We need to retain and reinforce our ability, generally not offered by other financial professionals, to look beyond the horizon. For example, asserting that the overall deficit is many trillions of pounds can only, loosely at best, be supported by projecting short-term conditions over a long period. That, however, cannot possibly be described as a long-term approach, because we can be pretty certain that things will be different.

Reverting to models, we need to remember that they can only be a guide and that results need to be tempered by common sense. If, say, the probability of rain is 80% and it has been raining for four days, looking out of the window on day five would be a good move.

Actuaries are accustomed to thinking in collectivist terms, which used to make more sense. However, especially with the new pension freedoms, we need to recognise that others think binary and we need to communicate better with them.

Lastly, apart from bringing us immunisation theory in 1952, Frank Redington also coined the phrase "the actuary who is only an actuary is not an actuary" (1968). Both were huge contributions to the profession, which we should recall with gratitude.

When, and how, are we going to reform our skills? 


Jon Spain is a pensions actuary at GAD, specialising in TUPE employment transfers

This article appeared in our November 2015 issue of The Actuary .
Click here to view this issue

You may also be interested in...

2

Actuary is fourth most misunderstood job

The role of an actuary has been identified as the fourth most misunderstood job in the UK as revealed by LinkedIn.
Thursday 5th November 2015
Open-access content
2

Letters to the editor: Life membership at 80?

Monday 2nd November 2015
Open-access content
2

Letters to the editor: Intemporal equity

Friday 30th October 2015
Open-access content
2

Letters to the editor: Different take on smoking

Friday 30th October 2015
Open-access content
2

The Actuary Puzzles November 2015

November puzzles, including prize puzzle, and August solutions
Tuesday 3rd November 2015
Open-access content
2

The Actuary Puzzles October 2015

October puzzles, including prize puzzle, and September solutions
Wednesday 4th November 2015
Open-access content

Latest from Soft skills

lugy

New series on soft skills: emotional intelligence

Starting our new series on soft skills in the workplace, Amy Jacobson argues that, for actuaries, emotional intelligence is as important as grey matter
Wednesday 1st February 2023
Open-access content
k

Next level: getting to where you want to be

Chetan Ghosh reflects on the path he took from university graduate to CIO, and the important lessons he learnt along the way
Wednesday 30th November 2022
Open-access content
p

In the driving seat: taking a long-term view of an actuarial career

Actuarial training is all about the long-term – Bradley Shearer and Helena Ingram explore how we can think about our careers in the same way
Wednesday 30th November 2022
Open-access content

Latest from Careers

yguk

Is anybody out there?

There’s no point speaking if no one hears you. Effective communication starts with silence – this is the understated art of listening, says Tan Suee Chieh
Thursday 2nd March 2023
Open-access content
ih

Actuary and… police officer

In a new feature highlighting the wide-ranging pursuits actuaries do outside their day job, we meet Reema Uppal, who trained with the Met
Wednesday 1st March 2023
Open-access content
Web-city-at-dusk-shutterstock_549687475.jpg

Rising in the East

Head of business acceptance and chief pricing actuary, Asia Pacific, SCOR, Hong Kong, CHINA
Wednesday 1st March 2023
Open-access content

Latest from Professional

dxf

Bespoke tailoring: the UK government’s proposed reforms to Solvency II

Vrishti Goel discusses the UK government’s proposed reforms to Solvency II
Wednesday 31st August 2022
Open-access content
Financial services seen as most desirable sector for career changers

Financial services seen as most desirable sector for career changers

Over a third of UK workers will look to start a new career in the next year due to the cost-of-living crisis, with financial services seen as the joint most desirable sector, KPMG research suggests.
Wednesday 24th August 2022
Open-access content
web_p43_Student_student_july_2_CREDIT_Simon-Scarsbrook.jpg

Three’s a charm: the next iteration of the internet

Adeetya Tantia explains what we can expect from the next iteration of the internet, and how it could shake up the insurance industry
Wednesday 6th July 2022
Open-access content

Latest from November 2015

A car crash © iStock

UK insurers 'slow' to lower premiums in response to whiplash reforms

UK motor insurers will probably only cut premiums slowly in reaction to the government's crackdown on whiplash injury claims, Fitch Ratings has said.
Monday 30th November 2015
Open-access content
Colourful houses in Bermuda © Shutterstock

Bermuda gains full Solvency II equivalence

Bermuda has been granted full equivalence by the European Commission (EC) to comply with the Solvency II directive.
Monday 30th November 2015
Open-access content
2

Risk management approach essential in response to climate change risks

In advance of the 21st Conference of Parties to the United Nations Framework Convention on Climate Change (COP21) next week, the IFoA is calling for governments and businesses to take a risk management approach to climate change as essential in addressing environmental risks.
Friday 27th November 2015
Open-access content

Latest from small_opening_image

2

COVID-19 forum for actuaries launched

A forum for actuaries has been launched to help the profession come together and learn how best to respond to the deadly coronavirus sweeping the world.
Wednesday 25th March 2020
Open-access content
2

Travel insurers expect record payouts this year

UK travel insurers expect to pay a record £275m to customers this year as coronavirus grounds flights across the world, the Association of British Insurers (ABI) has revealed.
Wednesday 25th March 2020
Open-access content
2

Grim economic forecasts made as countries lockdown

A sharp recession is imminent in the vast majority of developed and emerging economies as the deadly coronavirus forces businesses to shut down across the world.
Tuesday 24th March 2020
Open-access content

Latest from 11

2

New green pastures

No profession is better placed to tackle long-term risks and contribute to the climate change debate, says Fiona Morrison
Monday 2nd November 2015
Open-access content
2

Forefront of research

Kelvin Chamunorwa considers research and its importance for the advancement of actuarial science
Friday 30th October 2015
Open-access content
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Manager - Building new team!

London (Central)
Up to £130k + Bonus
Reference
148845

Shape the Future of Credit Risk Model Development

Flexible / hybrid with 2 days p/w office-based
£ six figure salary with excellent bonus potential + package
Reference
148843

Longevity Director

Flexible / hybrid with 2 days p/w office-based
£ six figure salary with excellent bonus potential + package
Reference
148842
See all jobs »
 
 
 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ