By Bob Beuerlein
Football season is upon us. Whether you are a football fan or not, you have probably noticed differences in people’s weekend habits in recent weeks. Whether it be neighbors wearing the colors of the local team, college alumni preparing to tailgate at a Saturday football game, or friends gathering around a big-screen TV on Sunday to watch the NFL, a new season of the American culture has arrived. And while the underlying rules of the game of football are the same for each team, no two teams use the same strategy to develop and execute their game plan. While it is a combination of offensive, defensive, and special team plays that determine the outcome of the game, the background and skills of the players and coaches determine how the game will be played.
When actuaries approach a new assignment, do we think about our game plan? We can think of ourselves as performing actuarial work within a set of accepted principles and rules. But how we perform this work may vary based on our own knowledge and experience. Whether we are analyzing new data, designing an actuarial model, or developing assumptions for a new calculation, we should think of ourselves as professional business people who are addressing new situations and not as mathematicians who are applying formulas. I like to say that good actuaries are typically excellent professional business people that are good with mathematics and not excellent mathematicians that are good with business.
We have a Code of Professional Conduct that governs how we perform actuarial services and actuarial standards of practice (ASOPs) that are intended to provide guidance for dealing with commonly encountered situations. But, we should also remember that actuaries should exercise professional judgment in providing actuarial services. We bring to our work not only highly specialized training, but also the broader knowledge and understanding that come from experience. In fact, the ASOPs frequently call upon actuaries to apply both training and experience to their professional assignments, recognizing that reasonable differences may arise when actuaries project the effect of uncertain events.
I have heard people speculate that the role of the actuary will be diminished as machines with artificial intelligence “learn” what we do as actuaries. I agree that there are rules and principles that need to be followed in working as an actuary. However, with that said, our ASOPs are principles-based and do not attempt to dictate every step and decision in an actuarial assignment. The value that actuaries bring to our employers, clients, and the public is our ability to use our knowledge and experience to adapt to situations and provide expert advice and professional work. Because of this, actuaries have earned and will continue to earn the trust of the public.
Just as a football team cannot be effective if it does not adapt its game plan to conditions that may occur during the game, actuaries cannot always address each new project or assignment in the same way. The ASOPs allow for the actuary to use professional judgment when selecting methods and assumptions, conducting an analysis, and reaching a conclusion, and recognize that actuaries can reasonably reach different conclusions when faced with the same facts.
In applying professional judgment, actuaries call upon their knowledge and understanding that comes from their experience. Having diverse backgrounds in a team of actuaries broadens this knowledge and understanding when applied to a new assignment. Just as a football team uses different combinations of running and passing plays depending on their skills and experience, so also the techniques and analyses that actuaries might utilize may vary depending on the situation, team members, environment, and the continued evolution of tools.
So what’s your game plan? Does all of this mean that we should throw away established actuarial practices and revolutionize the practice of actuarial science? Of course not. Just as a football team works on the fundamentals of blocking and tackling, we need to continue to hone our basic actuarial skills. However, when situations arise, we should not be afraid to apply our knowledge, experience, and professional judgment to develop our game plan for the assignment. In fact, it is possible that combining this game plan with the skills of a professional business person will lead us to a Super Bowl-caliber performance.