Parameters? Model? Hypothesis? Forecast? These are terms traditional actuaries repeat many times every day. However, as professionals, while we work hard, inevitably we think about our career development paths.
As an atypical actuary, I experienced the transformation among different sections after I landed my entry-level actuarial role and completed all of the actuarial examinations. From a green hand to a senior manager as of today, my understanding of the career development of actuaries has changed, my understanding of the life insurance industry has deepened, and meanwhile, I have improved my professional image with a more professional and pragmatic attitude.
Choose “1” or “N”
The traditional actuarial career development path typically starts with being an actuarial student and then actuarial specialist, actuarial manager and all the way to actuarial executives (e.g., chief actuary, chief financial officer, etc.). Following this path, many actuaries start from technical positions, then gradually progress to management functions and finally participate in the company’s high-level management as executives.
However, not all actuaries want to follow this career path. After being engaged in basic actuarial work for a period of time and accumulating professional knowledge, some actuaries will be faced with many other choices. For example, in a life insurance company, staff with an actuarial background will be in high demand across the organization—from the business channels of the front desk; to the products, marketing and operations of the middle desk; to the finance, risk compliance and information technology (IT) functions of the back office. In addition, there will be many employment opportunities from companies outside of the life insurance industry, such as consulting companies, securities companies, internet companies and so on.
Actuarial science is not strictly a subject of science; rather, it is more like a professional training. From the study of basic mathematical models and macroeconomics and microeconomics, with the knowledge of basic cash flow to the finance management, anyone who has a complete actuarial training would have constructed a solid theoretical knowledge structure and would have a basic understanding of business operations, especially in the life insurance industry, as well as the insistence on sustainable operations. With such a starting point, actuaries take policies and profit models into consideration when they need to make business decisions. The trainings, knowledge and the construction of basic concepts make actuaries valuable assets in the insurance industry, and they are welcome in all sections of the industry.
In the face of so many career development possibilities, the best choice will vary from person to person. When I was 30 years old, I encountered a choice. Between the choice of following the path of being an actuary until the end and embracing the possibilities of other sections, I chose the latter. I joined the company where I still work today, appointed as the director of the business planning team, and became one of the first group of employees in the company’s new headquarters. Looking back, this choice expanded my horizon and gave me more opportunities to be involved in the high-level management decision-making process, from which I learned a lot of practical business concepts.
When the content of our work changes, other aspects of our work, such as working model, the cognitive level required to do the work, corporate culture and so on, may change as well. In the process of breaking and rebuilding, we can summarize the basic business logic and universal principles of management, which will help us adapt to various changes more smoothly.
“Think With the Mindset of Others”
Communication is a necessary prerequisite to ensure the smooth progress of work in every stage of career development. What is the essence of communication? I think one point is particularly important, which I summarize as “think with the mindset of others.”
There are plenty of subjects on communication throughout the actuarial examination tracks, but in practical work, communication is still a weak point for many actuaries. The general advantages of actuaries in the workplace are high intelligence, strong logic skills, sensitivity to numbers and pursuing the perfection of details. However, the essence of actuarial work is to present results rather than pursue the process.
Modern enterprises operate smoothly thanks to both the division of work as well as cooperation—and communication is the premise of cooperation. Actuarial theory is complex, with many professional terms and often nonlinear analysis methods. As a result, it is quite difficult for nonactuaries to understand what actuaries are working toward or trying to present. Thus, actuaries should practice thinking with the mindsets of others, and try to speak in language that will be understandable to other colleagues and simplify the complexity of our analyses.
Good communication can win more cooperation and more opportunities to get business resources. These are the working skills that can help actuaries accomplish something or contribute to the management of a company. If actuaries only stick to the pursuit of polishing the process without thinking about the reason or the final target of doing the task, the methodology might go wrong at the starting point.
Make Decisions by “Returning to the Scene”
We have to make all kinds of decisions as actuaries. With each job promotion in our career, the importance of the decisions will be elevated at the same time. During the process of work, I have realized that we should make decisions by “returning to the scene.” This rule will help us make decisions by ourselves and assist our superiors with making their decisions as well.
First, the “return to the scene” rule could help actuaries get a better understanding of the lens through which their superiors make decisions. Even though it would be ideal to make all major decisions after all pertinent information is available and various outcomes are weighed, this is often not the case in business—especially when it is necessary to reach a balance in the negotiation within a limited period of time.
For example, the discussion on an annual business plan could be quite complicated since the discussion will need to balance the interests of shareholders, management, organizations and employees at the basic level, and the different business channels within the company. However, the general direction is often discussed during a meeting, and a certain degree of decision-making needs to be done on the spot. At this point, for management, quick feedback is far more important than accuracy.
To help management quickly grasp the key considerations in a real-life business plan scenario, my team started with an underlying database and built a light model (rather than heavy model), which can provide feedback about the financial estimations under various business scenarios in five minutes (rather than the previous two-day running of a heavy model). This makes the whole decision-making process smoother and saves time.
Second, the “return to the scene” rule could help actuaries make their own decisions. The saying goes that “good strategy depends on execution.” In fact, during the decision-making stage, it is necessary to consider the execution scenario. Any mismatch between decision-making and execution will make the decision become a bad one, and it will inevitably lead to undesirable results.
The execution scenario of decision-making includes the people involved in the execution, the time of execution, the feedback and adjustment mechanism, and so on. An example from my company’s agency channel will explain this more explicitly: It’s the ADE (junior staff of agency) who are in charge of the daily management work of the salesforce. A decision (even as small as “prolong the meeting from 4 p.m. to 4:30 p.m.”) could arouse hugely different reactions among the agents due to a gap in communication skills of different ADEs.
Major decisions, such as the adjustment of assessment policies, the design of competition plans and so on, should be determined in combination with the specific status of the team. Decision-makers should not pick “black or white” or “one or the other.” It sounds easy, but it requires us to collect a lot of information in advance, and then put ourselves back into the decision-making scene for rehearsal. By going through such a process, our probability of success will be much higher.
Thinking About Management by “Returning to the Essence”
Actuarial work is technical support work, which plays a core role in a company’s business decision-making process. The work of actuaries could summarize the company’s economic behaviors into business results with a more thorough perspective of the market and company, and the work could better assist management’s decision-making. At the company where I work, each branch has great autonomy on management, which gives me the opportunity to combine theory with practice to execute the kind of decision-making process I describe in this article.
When I first started this job as a general manager of a branch, there were four major business channels, among which the telecom channel was the fastest-growing at that time, and its monthly per capita production capacity even exceeded the company’s agency channel. However, the brilliant performance does not mean that this business channel is sustainable. As my understanding about business channels gradually deepened, the gaps and lack of a strong foundation—the overall quality of the sales staff, the setting of the compensation scheme, the sustainability of the source of customers—were also becoming increasingly obvious. All of these aspects proved that this was an unsustainable business model.
We immediately took a series of measures to shut down the telecom channel. Facts have proven that our prediction was correct. Because the business was still at an early stage, the financial cost for shutting down the channel was controlled in a reasonable range and there were no complaints or disputes either. By shutting down the telecom business channel, financial resources and human resources were freed up to benefit the development of the other business channels of the branch.
After scenario analysis and financial index tests were performed, it was more clear that the other three channels (agency, banca and group) all currently have sustainable development prospects. Therefore, our strategy is to enhance growth under the premise of quality assurance, adopt agile financial and assessment mechanisms, and allocate resources where they can produce the most benefits. In the past few years, thanks to this business philosophy, the branch in which I act as a general manager has made great progress on business and has become a rising star among all the branches under the parent company.
From a business-plan maker at the headquarters office to a branch’s business practitioner, from theory to practice, from complex to simple, I have been trying to understand business phenomena with actuarial concepts and guide management’s decisions within the range of the laws of life insurance. The process of simplifying the concepts is the process of pursuing the essence. When business operators gradually grasp the essential laws, they will become more strategic and get more opportunities to be successful.
Thinking About Management by “Focusing on Customers”
Last but not the least, let’s talk about customers—the core starting point of any business. In other industries, the dominant idea of “ focusing on customers” has helped many enterprises achieve success in their business models. On the contrary, life insurance companies have fallen behind on this point. I once met a very “difficult” customer on General Manager Accessing Day. As soon as we met, the atmosphere dropped to the freezing point. But after chatting for 50 minutes, I helped the customer find a reasonable solution to the problem, and the customer left satisfied.
I, myself, am also a customer of insurance companies. From sales to call back, from daily inquiry to consultation over the phone (I have not yet claimed settlement), there are many places for improvement in the whole process of customer experience. In fact, insurance companies are not just competing with other insurance carriers, but also with customers’ experiences in other industries.
Companies need to use various means to make customers feel like they want what the company offers. “Focus on customers” should not only be a slogan. It should be embedded in the daily operation and management of the company—to become the center of a customer’s purchasing journey.
To test whether an organization is truly customer-centered, we should first look at its organizational structure. There should first be functions, and then there will be processes and execution details. If there is no function of “customer” in the organizational structure and no indicator of “customer” in the key performance indicator (KPI) system, it is difficult to truly achieve a customer-centered organization. From the perspective of the life insurance industry, we should be spending more time on the customer experience, researching ways to improve the customer experience and focusing on the customer-centered principle at the management level. Then, probably, we will get different results.
Most of the aspects I discussed in this article are small things and details in my career. Whether we stick to the “1” path to the end, or make a choice among the “N” possibilities, whether we are advanced in actuarial technology, sales management research or business strategy, we cannot break away from the basic laws of the life insurance industry.
Actuaries, as some of the most profoundly trained and intelligent people in life insurance companies, should play a mainstay role in the development of the whole industry. Although the development of the industry will inevitably hit plateaus, and actuaries are naturally highly sensitive to risks, we still need to see the broad prospects of the industry, strive to be “optimistic pessimists” and make greater contributions to the development of the life insurance industry.
Copyright © 2021 by the Society of Actuaries, Schaumburg, Illinois.