Actuarial Career and Trends in ChinaQ&A with Sun Hanjie, FSA, assistant general manager and chief actuary at Ping An Life Insurance October 2022
Photo: Serena Wu
What do you like best about working as an actuary?
As an actuary in China, the main work includes liability assessment, product pricing, solvency position assessment, profit forecasting, experience studies, participating in universal life account management, embedded value and so on. In fact, every job is a small world you can go deep into, and the skills of actuaries can be brought into play. At the same time, if you have a deep understanding of each job, you find these jobs are closely related to one another. As actuaries, the core skills of analyzing and modeling future risks run through these jobs. Therefore, my favorite thing about being an actuary is the analysis, modeling and assessment of risks, and then researching how to manage these risks.
Video Exclusive: Sun Hanjie Discusses Trends in the Life Insurance Industry in China
Which aspects of your job bring you the most joy and satisfaction?
The work of an actuary can involve all aspects of a company’s operations. Going further into each type of work has an important impact on the company’s operation. In my current job, the core parts of my role are liability valuation and product development.
Liability valuation: In the context of increasingly systematic and refined regulatory standards, there is a constant quest to develop more elaborate assumptions and models to achieve complete and accurate liability assessments. At the same time, we must consider the long-term operation of the company’s capital requirements, profit performance, investor demand and other factors. The biggest challenge for actuaries is to coordinate multiple objectives as much as possible. Tackling and solving these challenges brings me joy and fulfillment.
Product development: The challenges after meeting regulatory requirements include liability design, incidence rate assessment, premium rate calculation, profit and valuation calculations, risk stress testing and reinsurance. These challenges are complex. On one hand, product design should meet the multidimensional needs of customers, channels and company operation. On the other hand, pricing risk should be well managed—that is, multidimensional evaluation should be considered in the design of safeguarding responsibility to ensure the formulation of occurrence rate is reasonable and thorough. For example, for a mild disease product design, the incident rate of stand-alone mild disease products is quite different from the incident rate of mild disease benefits included in dread disease products. The reason is mild diseases often are the early stage of dread diseases, and the mild disease that is included in the dread disease product can get a larger compensation from having both mild and dread disease liabilities while the stand-alone mild disease product only can be compensated for the mild disease liability. In addition, it is challenging to seek risk hedging for high-risk responsibilities, such as the growing risk of critical Illness incidence and longevity risk. For the development of a new product, the impacts of a company’s risk management, profit, capital, sales support, underwriting and compensation, investment management, IT system and other aspects must be evaluated. Therefore, developing a new product is complicated. Actuaries, as the core personnel of product development, solve these complex problems and successfully develop products that meet the needs of all parties—that is the greatest happiness and achievement of my work.
These are just two examples. Actuaries can exert their value in many positions and jobs within insurance companies. These jobs not only bring value to customers, companies and shareholders, but they also bring happiness and a sense of achievement to actuaries themselves.
How do you incorporate innovation in your work?
Today’s world is rapidly changing. As technology changes with each passing day, so do customer needs. At the same time, regulatory rules such as International Financial Reporting Standard (IFRS) 17 and C-ROSS Phase II are updated constantly, while actuarial IT technologies, analytical methods and dimensions are evolving rapidly. Under such an environment, actuarial innovation is inevitable.
Actuarial science requires constant use of technology to improve efficiency. For example, at Ping An, we built our own product pricing system, which resulted in the product pricing test being shortened from at least one day to hours, which greatly improved our efficiency and scenario testing capabilities.
At the same time, actuarial science constantly needs to price and assess the occurrence of risks and arrange reinsurance reasonably based on product liability innovation. Actuarial science needs to deepen experience analysis to find risk control points, improve pricing accuracy and improve management through experience analysis.
Actuarial science also needs to assess a company’s capital requirements and profit trends over the next three to five years—or even longer—and make suggestions for relevant management.
China’s life insurance industry has a relatively short period of commercial operation, and the accumulated experience and management platform are still weak. In particular, actuarial science needs continuous innovation and breakthroughs to improve the management of companies, which will be one of the core tasks of actuarial work in the future.
How much does strategy play a role in your job?
As an old Chinese saying goes, “A man who has no foresight must have immediate worries.” As the person in charge of the actuarial work at a company, planning is an important part of the job.
Product development requires planning and developing future product strategies based on changes in the current market environment, regulatory policies, risk status, company capital status, profit planning and so on. At the same time, based on current product management experience, actuaries should estimate future trends and make a plan to respond to the product management measures in time.
Actuarial evaluation is demanding during the planning process. Reserve evaluation involves corporate profit planning, capital planning and asset liability management planning. Therefore, they have an impact on business planning. Reserve calculation methodology and assumptions adjustment need to be considered in advance. At present, it is the early stage of IFRS 17 rule switching, and the planning requirements for relevant new standard reserve work are higher. Companies need to think through their future business plans under the new standard.
When considering strategy and how one manages their team, the most important thing is to provide room for colleagues to learn and grow. It’s also critical to create a good working atmosphere for the team. Of course, fair assessment and promotion mechanisms are also important. Ping An established its own actuarial staff management system, which has been in place for more than 20 years and has been improved upon many times over the years. This system includes a series of rules, such as actuarial staff identification standard, rank system, promotion system, study leave system, actuarial allowance management system, rank treatment and so on, which plays a positive role in actuarial staff management.
Do you have any advice for those seeking to enter the actuarial profession in China?
China’s life insurance market still has great room for development. At present, China’s life insurance market is shifting from extensive development to refined operation and high-quality development, and it urgently needs talent. Actuaries, especially experienced actuaries, are the core talent of the life insurance industry and are urgently needed in the current market.
To enter the actuarial industry in China, you must have some understanding of the market situation. First, the life insurance industry is inseparable from the overall economic environment, financial market conditions and population trends, so it is necessary to have a familiarity with these areas to do actuarial work. Second, there are a large number of insurance companies in China with uneven management levels. If you want to do actuarial work in China, you probably need to consider: What value can I bring to the company? What skills or experience are lacking in the Chinese market?
Once you enter the actuarial industry in China, be sure to familiarize yourself with Chinese regulations. China is a vast country with a large population and a massive life insurance market. As an industry with a short history, there are many problems in the industry’s development process. Therefore, compliance supervision is critical, and regulators have established many systems and regulations. To do better actuarial work, it is important to be familiar with these systems and regulations.
What are the most important actuarial skill sets from your viewpoint?
Actuarial work involves a lot of different kinds of work, such as pricing, experience analysis, reserve assessment, reinsurance, asset and liability assessment, profit forecasting, solvency management and so on. These various types of work may require different skills. However, to be an excellent actuary, the requirements are similar.
First, an actuary should have the ability to model and analyze risk events and be able to make a reasonable assessment of the occurrence of future risk events through the model. Meanwhile, an actuary also should evaluate various pressure situations. On this basis, an excellent actuary should be able to put forward suggestions for the assessment of and response to risk events under a series of regulatory rules, track the implementation of these suggestions and make timely corrections.
An outstanding actuary not only has excellent data analysis abilities, but they also must be an expert in corporate management systems and regulatory rules and be familiar with the rules formulated by financial statements and the rules of various investment assets. This is necessary to be able to bring this series of work together and measure the ultimate risk by conducting experience studies, product pricing, liability valuation, solvency valuation, asset liability matching valuation, financial statement valuation and value assessment.
In addition, excellent actuaries must have good communication skills. They must obtain necessary information through multiparty communication and be able to transfer the analysis results and their own opinions to people who need to understand the information. An exemplary actuary is able to give full play to their ability and empower the company’s operation and development.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.
Copyright © 2022 by the Society of Actuaries, Schaumburg, Illinois.