Career Crossroads: Part 1

Reflections on the professional development of an actuary Benjamin Chen

Chinese Version

As a subdivided specialty, actuarial science can be defined as specific knowledge and skills that are concentrated to train a group of specialized professionals over a long period, enabling them to efficiently serve those who require their services.1 Therefore, from a results-oriented perspective, the value of a profession must inevitably come from whether the reliability, efficiency and popularity of these services are in demand. It’s interesting to delve into how actuarial science and its professional value are viewed from the perspective of those who utilize actuarial work.

This is a notion I have been pondering for a decade. Ten years ago, my wife, two friends and I (three of us are actuaries) drove the 80,000 miles from Taqin to Lhasa in China. I had just obtained my actuarial certification, was at a crossroads in my career development and took a one-year break. As a young actuary, I was excited but also anxious. Becoming an actuary is often seen as an important professional milestone due to the challenging exams. But what does obtaining actuarial certification mean? What could I do to return to work after my break? And what about the next 10 or even 20 years? What will the value be?

The Career Climb

It is common to see people compare career development and professional growth to a mountain ascent in which one constantly reaches new heights. Higher peaks may offer better views. Some people even categorize the varied mountains they climb. However, I once read a book that divided professional paths into three stages:

  1. Become an expert in a field
  2. Gradually lead a team in that field
  3. Combine service experience and professional skills to significantly improve and innovate in the field through new paradigms, concepts and tools

From this perspective, becoming an actuary only represents completing a series of exams. On the path of professional development, to borrow Winston Churchill’s famous words: “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”2

In the past decade, my career has undergone tremendous change. Ten years ago, I was an actuarial consultant at an accounting firm, implementing models and reviewing embedded values for clients. Now, I run an actuarial system company and serve many clients through cloud-based applications. But looking back on the moment when I first stepped onto the professional path, my “end of the beginning” stage, I feel that everyone’s subconscious perspective or approach to actuarial work has not changed much in the past decade.

Value of the Actuarial Profession

Ten years ago, when I was interacting with fellow actuaries at their companies, they would listen to our service proposals and realize, “you review embedded values” or “you do reserve models.” Now when we recommend our modeling platform or actuarial center to clients after our lengthy software introduction, the IT or procurement person might realize, “you do solvency systems” or “you do reserve systems.”

So, relevant departments intuitively define actuarial work as providing reserves, solvency or embedded services. Correspondingly, when we offer review services, we are “reviewing embedded values.” When we sell systems, we are “building solvency systems.” This matches the public’s first impression of actuarial professionals. When entering an economic realm, your professional definition is equivalent to the functional positioning of the service recipient’s consensus—that is, what does your work accomplish? In the insurance context, the actuarial profession provides reserves, solvency, value, and premium and profit analysis.

If the positioning of actuarial science is based solely on being a “results provider,” the value of actuarial science will be relatively limited. Efficiency could be higher and feedback could be faster, as it is best to be as instantaneous as possible. Results could be more reliable, and it is best to determine them at once. Docking (linking) could be more convenient based on the source data. Then self-processing the inputs and producing results according to the required format could lead to satisfaction of the business both upstream and downstream from the actuarial team.

Of course, it would be even better if the analysis could be more comprehensive. When we did projects in the past, we often said that we should break down the results into details to see what’s inside. This is the composition analysis (e.g., the profit source). Furthermore, to explain how the results came about, there is variance analysis. To explain how the future may change, sensitivity analysis can be used. Additionally, cost-benefit analysis is closely related to management and recently has been a prevalent concept.

With the increasing number of analysis methods and constantly evolving tools, actuarial software has become popular in the domestic market after more than 20 years. Microsoft Excel was the most essential tool in actuarial work, and many new tools needed to build on Excel processing. One CEO joked that the actuarial department would even use Excel to write reports if there were no special requirements. However, additional modern tools can free up actuaries’ time for more calculations.

As actuaries’ skills become stronger and they master various tools, it will be more feasible to obtain more immediate analysis results. At this point, a paradox arises: more results become part of the default results of the actuary. Although actuarial functions have expanded, the nature of being “calculative” has not changed.

The Expanding Role of the Actuary

As an actuary, I often reflect on when I entered the industry 18 years ago and my mentors warned me not to become a calculator. I think this is the actuarial profession’s requirement for itself. As a project consultant, I explain to audiences with different backgrounds that actuarial science is not just about calculation. But I think this is the expectation of stakeholders, and how others position us is something we can control by demonstrating our additional value.

When we are always asked, “What is the value of new business?” or “Can premiums be calculated?” then our position is still about calculating these results. We are calculators, the providers of results. When more people start asking us, “As an actuary, how do you see it?” it shows that people’s expectations of us are not just about specific numbers. We are beginning to move to the next step and provide a combination of business and probability analysis capabilities, which is important for insurance companies.

Insurance has two unique characteristics that determine its reliance on analytical capabilities for survival and development. First, insurance is one of the few industries that generates income before generating costs. Unlike many other products, such as computers, most costs are incurred before the sale. Second, the main revenue each insurance contract generates, especially in traditional insurance, is relatively certain, while the expenditures are somewhat uncertain. Therefore, the conversion of income to profit is complicated. It involves balancing consumer interests, operating costs, shareholder returns and expectations.

These features correspond to the well-known pricing and evaluation work of actuaries. My company’s platform software also was developed around these two actuarial foundations. In the early days, we explained the company’s business value and positioning to angel investors based on these two common features. Although investors did not understand actuarial science—not to mention evaluation and pricing—they immediately understood the importance of actuarial science after knowing these characteristics of insurance. Because the answer requires professional calculation and analytical abilities, which actuarial science represents, it naturally becomes the digital brain of insurance companies. Therefore, actuarial tools and software’s business value were recognized.

Then they have more questions: “I don’t know many actuaries, and I happen to meet you. My family is like this. Which is better, return to capital critical illness insurance or high-end medical insurance?” Or “Will the stock market affect insurance companies this month?” The scenarios and parameters behind these questions are about pricing, profit sources or sensitivity. Still, the questioner puts them into context based on their unique scenario, combines them with their parameters and expects me to provide a quantifiable answer that is easy to understand. The specific calculation method is unimportant—I am the provider of this analytical capability.

Actuaries as Problem Solvers

In the second stage of professional development, actuaries will become problem solvers. The scenarios and parameters behind the problems are personalized and unpredictable. We can provide timely, reliable and convenient feedback to support decision-making for a variety of situations. Once such an ability is developed, more problems will emerge. Once the demand is stimulated, it will increase exponentially, and new personal limits will be reached quickly. It will not be enough even if we continuously train ourselves and arm ourselves with professional tools. We can only handle one thing at a time, even if we are experts in various skills.

The effective solution is to turn personal abilities into team capabilities. With a team, there is division of labor. Professionalism is also the product of dividing labor among a group. Economic history tells us that division of labor and cooperation are the fastest ways to improve efficiency: decompose the work into operational units; standardize input, output and operational actions; and enhance proficiency through repeated on-the-job training to improve efficiency. In turn, personal dependence and personalization are significantly reduced, and objective process reliability replaces subjective individual achievement and multiple parallel processing can further enhance efficiency. Capitalism even regards this as the basis of industrialization.

To grow from simply being a professional to a team leader, an important shift in mindset is necessary: breaking down one’s skills and characteristics into smaller pieces. One should not just try to replicate oneself when looking for team members. Instead, one should break down the abilities that make them the only one who can do the job into smaller, executable actions so that individual members of the team can take on those responsibilities more efficiently. Only then can one manage the team effectively, handle more problems and guard more areas through replication.

Read Part 2 of this article series for insights on streamlining processes and creating digital tools as demand for actuarial work increases.

Benjamin Chen, FSA, is founder and CEO of DeepLight Technology Ltd. in Shanghai.

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 © 2023 by the Society of Actuaries, Chicago, Illinois.