Key Characteristics of the Actuarial Leader Key Characteristics of the Actuarial Leader

Richard Fein, Ph D, FCAS, MAAA rfein@rifconsulting.com CAGNY Meeting June 2010 RIF Consulting, LLCRichard Fein, Ph D, FCAS, MAAA rfein@rifconsulting.com CAGNY Meeting June 2010 RIF Consulting, LLC

The Actuary as Leader

• Agenda

• Goals

• Characteristics of Teams of Professionals

• Guiding Principles

• Expectations of Stakeholders

• Characteristics of Leaders of Pros – Chief Actuary

• The Rubber Meets the Road

• Conclusion

Characteristics of Professional Teams

• Working with Professionals

• Many discussions and characterizations are available

• Good site: Bob Kizlik reference on my site

• Self motivated to learn profession

• Takes on responsibilities and obligations

• Cannot dictate/coerce professionalism

• Work “with” as opposed to “manage”

Characteristics of Professional Teams

• Identified need/service

• Defined body of knowledge which supports decision making

• Highly Educated/Broad Areas

• Protracted preparation process

• High level of public trust

• Strong service motivation

• Authority to practice from the client

• Accountability by the practitioner

Guiding Principles

• CAS Credentialing

• CAS Statements of Principles/Exposure Draft of Foundational Statements

• Regulatory/Financial/Jurisdictional Requirements

• ASOP’s

• Codes of Professional/Ethical Conduct

• Precept 3 : 3-1, 3-2, 3-3

• Precept 8 : 8-1

• Personal Beliefs - Individual, Family, Community

Stakeholders

• Board of Directors, Owners/Shareholders

• Auditors, Regulators, Others

• CEO, CFO, Chief Underwriter, Executive Management Team

• Actuarial management staff, Actuarial team

• Family, Friends, Community

• Yourself

Expectations

• Expectations of Stakeholders

• Honesty & Integrity

• Professionalism

• Knowledge - Business & Technical

• Credible Understandable Analysis of Alternatives

• Acknowledgement/Communication of Risks

• No surprises

Key Characteristics of Chief Actuary

• Clear line of sight to CEO/Audit Committee/Board

• Acceptance of and support for Authority over Actuarial Matters - Who sells vs. Who books.

• Credibility among Executive Management• Experienced, qualified and communicative

team with open 2-way communication at all levels - training and rotations? 2 edged sword.

• Assures team’s high level of active knowledge of firm’s businesses and operations

Key Characteristics Chief Actuary

• Identifies and shares risks and uncertainties of estimates with Executive Management

• Has clear understanding of assumptions and bases for conclusions drawn by support team and across operating areas in which teams operate - Consistency matters

• Formalizes communications with key stakeholders: Senior Executive Management, Claims, Underwriting, Pricing, Reinsurance, Finance

• Clear, well-documented presentation to management of support for methods, estimates and relevant changes

Key Characteristics Chief Actuary

• Assures stable and responsive methodologies, updated and supplemented by objective tests and special studies

• Vision/Proactive• Anticipates future areas requiring

additional analyses/data• Assures a sound, high quality, relevant

database to support methods - Who owns/secures?

• Assures clear professional and managerial direction to all staff

• Assures continuing education and training

The Rubber Meets the Road

• Example - Sample Quotes

• “You need to be a team player”

• “We can’t afford to price it that high”

• “Forget the tail, it gets washed out by competition”

• “This is an important client/quarter/year/result/etc.”

• “Ignore that aberration - it won’t happen again”

The Rubber Meets the Road

• “Just take 3 year averages and use them - can’t go wrong as it’s a time tested and utilized methodology”

• “There goes the bonus!”

• “My supervisor insists on looking at all my assumptions - rude and unprofessional.”

• “Guess what, my supervisor doesn’t look at any of my assumptions, unless the overall result is unexpected - no worries for me.”

• “The Auditor is challenging our results - YIKES, you did what???”

The Rubber Meets the Road

• Words have power:

• “We can’t afford another hit to income this quarter/year” “This kills our earnings”

• Leader

• Team Members

• “Just use the “tail” factors we developed in 19XX. Used the last year. We always use them. “

• Leader

• Team Members

Conclusion

• Environment - Professional, Business, Personal

• Broad Spectrum of Stakeholders

• Broad Expectations - At Times Conflicting

• Miscommunication is high risk

• Theoretical vs. Actual

• Had to pick one: Personal Accountability

Key Characteristics of the Actuarial Leader Key Characteristics of the Actuarial Leader

Richard Fein, Ph D, FCAS, MAAA rfein@rifconsulting.com CAGNY Meeting June 2010 RIF Consulting, LLCRichard Fein, Ph D, FCAS, MAAA rfein@rifconsulting.com CAGNY Meeting June 2010 RIF Consulting, LLC