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Actuarial Practice

Why Actuaries Need Non-Actuaries on Development Teams – And How to Communicate With Them


Actuarial development teams who are building anything new can find the process as difficult and time-consuming as it is rewarding to see the finished product. Whether that’s new or adapted models for IFRS-17 and GAAP LDTI, introduction of a never-before seen insurance product, or integrating new technologies, actuaries have a tendency to jump in and start figuring out how to do the thing to get the result. While this may be good for getting hands dirty and wire-framing a prototype, it rarely produces an end-product that is better than average.

In order to produce something that is truly first-rate, then, we believe that actuaries need to incorporate perspectives from multiple disciplines into designing, building, and implementing new solutions.

Photo by Hannah Busing on Unsplash

Here at Slope, for example, we have about as many software engineers as actuaries, and always have. This is because software professionals know the ins and outs of software design and programming much better than actuaries ever will. In order to build a quality product, then, it becomes essential to trust professionals who know their discipline and can produce at a high-level.

Why having non-actuaries on the team is a good thing

Working with non-actuaries forces you to stop and think about what you really want to do.

Most of the time, actuaries approaching a problem want to just do the thing they did before, but faster. Or they want to create the X-file report, but with additional columns. When you’re introducing this kind of goal to a non-actuary, one of the first questions is often, “Yeah, but why? That seems like a waste of time.”

Forcing you to think through what you really want to do. Not what you have done in the past, or what you inherited from the person sitting in your chair before you. For example, actuaries might say, “We need to project cost of insurance charges, so we need an account value.” And a group of actuaries would have a reasonable understanding of what that means, and might end up building a few components that would do just that.

However, account values actually require many different steps initial inforce amounts, mortality, lapses, those target cost of insurance charges, interest credited, and so on. Just because you know what you meant, doesn’t mean others outside your discipline will. When you have to explain it to someone else, you will quickly learn to be very clear on what outcomes you truly need, which ones are nice-to-have, and which ones are just wishes and dreams.

Until you can explain it simply, you’re not ready to make it.

Not only do you have to be very explicit, you often have to simplify. And the process of simplification will perform a second round of purification. You can be clear and precise (as above) and still be too complex with requests. This complexity reflects a high degree of advanced knowledge of a subject. Which is great! It shows you’ve advanced beyond just the basics. However, as Albert Einstein said, “If you can’t explain it simply, you don’t understand it well enough.”

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Unfortunately, those who work with you don’t have that same level of subject matter expertise as you do. Which means if you’re expecting them to think through problems in the same way you do, you’ll be leaving them behind, leading to inefficiencies or unmet expectations. You will have to simplify your message so that your audience can understand. Until you can make that simplification, you’re not as prepared as you thought you were.

Opening your mind to non-traditional solutions may result in great leaps forward

Actuaries tend to approach problems from an actuarial mindset – linear equations, multiple decrement tables, income statements and balance sheets. Professionals from other disciplines, however, think about problems differently. They are used to solving problems using such tools as distributed processing, effortless end-user design, or pipeline automation.

Could new tools and ways of thinking help actuaries solve their problems better, faster, cheaper? Absolutely.

This is like cross-pollinating, which is how we get make forward leaps in creating new plant varieties. It’s how the hottest pepper ever was created, through selective cross-breeding and forced integration of new genes into the mix. This video is a great explanation of how the process works:

introducing non-actuarial perspectives in your projects works the same way. Incorporating different kinds of ideas is a way to bring new, diverse perspectives to the problems at hand. Once the problems are clear and simple, many brains attacking the problem are likely to lead to even better solutions than any one discipline could achieve solo.

So how do you make sure those cross-discipline teams function at a high level and ensure you don’t get distracted? You will need excellent communication practices in order to achieve the benefits above.

How to communicate better with non-actuaries:

Avoid jargon

Translate all those super-specific words you know into terms that they would be familiar with. Don’t expect them to do the work to learn your language, because it would take too long. It will be far easier for you to bring the information to them, and avoid confusion and inefficient development from the outset.

Think like an instructor, not like a reporter

Instructors take you from one point to the next on a logical path. Reporters start with the most compelling elements because they’re trying to attract attention, and can therefore gloss over much of the important nuance. Often actuaries think like reporters: “Here’s what we want to do, because it’s the most critical thing to the company’s goals.” Yet you have a captive audience already. They want to help you produce the best output possible, and so you shouldn’t be afraid to go back to first principles where necessary and lead them step-by-step, not making any assumptions of understanding along the way.

Simplify, simplify

Think less “process” and more “outcome”. Many actuaries think in terms of “that’s what we do now” rather than “where we want to go”. Their communications and their work product reflect that mindset, when they try to rebuild an old process in a new way. But if you can focus on the future state, it will be easier to get there if you can redefine a process that gets you to the new order without having to waste time on unfruitful distractions .

Actively seek out other perspectives for your team

Building a new database? Ask the marketing team if they want in on the project. Looking for a new software for productivity? Ask the operations team which they recommend for project tracking. This is how small startups work – everyone is expected to be involved in many different elements and know what’s going on. That  is the kind of cross-pollination that sparks innovative thinking. Now, you won’t get 100% participation every time, and maybe not even the first few times you ask. But setting the expectation that you want those other perspectives will eventually result in partnerships and cross-department collaboration that lead to the improved results mentioned above.

Be willing to be wrong

It’s a bit of a challenge to actuaries who have been “right” for a long time, especially after a history of passing exams. That’s no longer true when you’re dealing with something that you don’t know but your partners do have expertise in. That’s okay. There is no one gatekeeper of all the important knowledge necessary for success. Many different disciplines can offer insights. Critically, it’s often that moment of an outsider asking you, “But why would you do it like that? That’s stupid,” which sparks the light bulb moment. When you’re forced to justify your actions, you can realize you’ve been missing out on opportunities for a long time because you’ve assumed you’re the only one who knows the right answer.

Conclusion

Actuaries can no longer just disappear into their back rooms and crunch the numbers. In order to prepare the next generation of software tools and financial risk management systems, they will need to work with others outside the actuarial world. This has great upside potential, as long as you can harness the benefits of such cross-discipline practices by: eliminating jargon, thinking along a teaching path, simplification, seeking out new perspectives, and practicing a little humility from time to time.