Overall, demand for actuaries in China is high, and the field will likely continue to grow in the foreseeable future. Actuaries not only need to work hard in the actuarial science discipline but also think outside the box and create long-term career development blueprints. For help with this, the following dialogue with Pramerica Fosun Life Insurance’s Tian Hongzhen, FCAA, was excerpted from the 2023 Society of Actuaries (SOA) China Symposium, held in May 2023 in Shanghai.
Becoming an actuary holds career promise, with broad prospects and development opportunities. Can you tell us why actuaries are needed?
Currently, there are about 5,000 actuaries in China, of which about one-fourth are certified actuaries (fellows). About 90% of actuaries work in the insurance industry, of which about 50% work in life insurance; 40% in property insurance, reinsurance or groups; and the remaining 10% in government, regulatory, consulting or education institutions.
So why do these industries need actuaries?
First of all, after receiving comprehensive actuarial education and professional training, actuaries master the core technologies and underlying logic of insurance operations. This means they can analyze the company’s profit model, such as spread, expenses, mortality and so on. Compared with practitioners in other industries, actuaries have a more comprehensive understanding of insurance companies and think strategically.
Second, the underlying logic of the financial industry is risk management. From the customer perspective, actuaries can have a deep understanding of risks throughout the customer’s life cycle. Therefore, actuaries bring great value to their company—how to manage risks in a prudent way and turn them into opportunities.
Third, after the company’s profit model is determined, the next step is to consider how to operate the company. There are many possible configurations, and if effective guidance is lacking, it is likely to result in a “blind man touching the elephant” situation. The life insurance industry has long-term liabilities, risk measurement, evaluation and management—all of which are highly difficult—so actuaries must look at a comprehensive list of considerations. Examples may include whether the company is compliant, whether all risks have regularities, whether the products have high value rates, how to view the booming development of the intermediary market in recent years, why to adopt these strategies and so on. Each actuary has their own answer to these questions and a macro perspective to plan clear operational management paths for their company.
Overall, why do we need actuaries? Because actuaries have received long-term professional training for more than 10 years and can consider all known and unknown issues comprehensively. They know how to plan from the customer’s perspective and the entire life cycle. They also know all aspects of risk planning, whether it is in the stage of studying, establishing a family and career, retirement or trust fund inheritance for the next generation.
Thanks to long-term professional training, the career growth path of actuaries can be divided into four paths:
- Technical personnel
There is no doubt that the technical personnel growth path is a necessary path for everyone. Everyone who enters the workplace is a beginner, so the first thing to do is hone technical skills to make all aspects of their actuarial knowledge—such as modeling capabilities, accounting standards or research in other fields—solid enough to proceed to the next path.
When it comes to becoming experts, many actuaries will face a fork in the road of their career: whether to continue the technical expert path or turn to the management path. If you like to study models and data, then the expert path is a good choice. If you are good at communication and want to find a larger space to showcase your abilities, then the management path will be more suitable. The most important thing is to make different choices based on your own talents and have a clear understanding of your position.
However, whether you go down the expert or management path, the ideology of actuaries comes before technology. Actuarial technology must be combined with business insights. Especially later on in the growth path, two points should be noted:
- Fuzzy correctness outweighs accuracy errors. The ideal model of many companies is that at least 60% of assets are fixed-income bonds or financial products and some of them are equities. But the actual asset allocation situation is not like this. If the duration gap of assets and liabilities must be reduced according to expectations, the final result will be distorted and meaningless and mislead management behavior.
- Focus on effectively solving problems, balancing the pursuit of model accuracy and grasping the overall situation. For junior actuaries who recently joined the industry, it is crucial to develop models with precision and accuracy. However, we also must understand that for senior actuaries, in addition to ensuring accurate results, we must pay attention to overall control. Therefore, we should not only strengthen our basic skills but also understand the importance of controlling the operational direction of the company overall.
Please explain how actuarial science works in its more extensive stage (higher requirements) and the importance of this.
Although many actuaries have felt anxious about their career development throughout the past two years, overall the development path of actuaries is becoming wider, and cross-border appointments are on the rise with more insurance executives coming from an actuarial background.
Looking back to the early days of the Chinese insurance industry, sales and channels were kings, and most of the top managers had a sales background. But today, understanding only the sales process is no longer enough to meet a company’s development needs. Today’s corporate executives need to understand how the company’s profit and loss statement is generated, the need for solvency and business growth, the balance of interest orientation of various channels, conflicts of interests among various channels and so on. Therefore, many sales executives who have grown up in the mode of the population dividend will find it increasingly difficult to manage a company. In this case, actuaries who demonstrate professionalism, openness and comprehensive thinking increasingly will move toward a higher level of management with more opportunity to develop.
Due to the development of the actuarial industry, the stage is now wider, the role is more important and the requirements are higher and stretch further. Actuaries are moving toward a broader stage, and the market has higher expectations for each actuary: continuous self-breakthrough, stepping out of one’s comfort zone and embracing new challenges. Many veterans in the traditional insurance industry marketing circles tend to rely more on their past experiences and successes in the face of new challenges. It can be difficult to step out of their original growth path and comfort zone to solve new problems, but that is what’s needed—a real problem-solving mindset to reanalyze and solve new challenges. Therefore, only by breaking self-imposed barriers and stepping out of their comfort zone can actuaries achieve real growth.
In summary, the system’s framework of applying quantitative models to solve practical problems under actuarial thinking provides actuaries with diverse development paths. Actuaries can do financial management, mergers and acquisitions (M&A) work, capital management and regulation. In a career with such broad development prospects, actuaries need to pay attention to the following points:
- Effort is important, but choosing the right direction is crucial. Always choose the path that suits you based on personal abilities.
- Be brave. Step out of your comfort zone and embrace challenging opportunities.
- Start career planning early with a focus on continuous advancement.
- Personal growth is more important than a job promotion.
In the current market and regulatory environment, the life insurance industry is in a period of transformation and upgrade. What career qualities and professional abilities should insurance company actuaries possess, and how can they play a greater role in promoting the transformation and growth of the insurance industry?
The five core competencies that qualified actuaries must have are:
- Data analysis—strong risk quantification analysis and evaluation ability
- Professional financial knowledge—a broad and profound understanding of the Chinese financial market and insurance industry
- Business understanding—participation in business planning and rulemaking, responsible for evaluating business operations
- Innovation—not only doing micro-innovation in traditional insurance but also having the ability to innovate and broaden insurance services
- Communication—transforming analysis and insight into the company’s initiatives and business behavior requires strong communication ability and influence
The greater the ability, the greater the responsibility. The transformation and development of the industry yielded higher requirements and more expectations for actuaries. From the perspective of management, we hope actuaries can become the leaders of industry development and go out into the market and solve problems. We also hope that actuaries can become value adherents, respect rules and regulations, and promote the sustainable long-term growth of companies.
Another important aspect is to be continuous learners. Actuaries need to keep up with the times, embrace change, broaden their horizons, continuously accumulate professional knowledge and broaden their abilities. Because professionals need to respect common sense and the market, they must be versatile and become experts who have knowledge beyond the basics.
What can you tell us about artificial intelligence (AI) in relation to actuarial work?
AI technology primarily will affect two aspects of actuarial careers: data and modeling. AI will greatly enhance the ability to collect data, including the scope and speed of data collection. This will gradually promote the application of big data in the insurance industry, which will result in disruptive changes. AI technology also will improve the ability of actuarial modeling significantly, making it possible for actuarial models to develop from static models to dynamic nonlinear models. The models will have more predictable variables, faster run speeds and more accurate results.
But actuaries will not be replaced by AI. The impact of AI on actuaries is to strengthen their abilities, not replace them. Decision-making is never just a technical issue. The decision on the relative competitive advantage of a company increasingly will rely on the business understanding, industry experience and broader vision and perspective of actuaries. Objectively speaking, AI is a tool that can help actuaries strengthen their risk prediction and problem-solving capabilities. In the future, human-machine collaboration gradually will become the mainstream working mode of actuaries, and AI ultimately will promote further optimization of actuarial tools, helping actuaries break through the boundaries of individual brain, physical and calculating power.
Insightful actuaries who continue to grow their technological prowess will form a new paradigm of actuarial work and have broader career development prospects. They will seize new opportunities and bravely undertake the responsibilities of the times. The next era of China’s life insurance industry will be supported by responsible and capable actuaries. We will become witnesses and creators of the times.
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, Schaumburg, Illinois.