The Actuary as Strategic Partner
Aaron Hillebrandt

The Actuary as Strategic Partner

Aaron Hillebrandt September 01, 2016 Posted in: Blog Posts, General

As a United States Marine veteran, I enjoy physical training and practicing martial arts at the end of a long day. They help me unwind, keep my mind sharp and my body fit. I also enjoy practicing my pistol marksmanship, as it requires focus and concentration, and, much like in actuarial analyses, a slight error in my setup can have a magnified impact on the accuracy of my results. 

I was fortunate to have trained with expert Marine Corps instructors, and I apply the lessons I learned during my time in the military daily in my career as an actuary: the ability to listen, drill down to the most detailed elements of a task and ensure that it is successfully completed while also anticipating what might happen next. When you’re in the Marines, you need to be both detail-oriented and able to see the big picture, as often times your life and the lives of your fellow Marines depend on it. This dual task-oriented/strategic thinking mindset is also an asset to the professional actuary.

I commonly run into situations where the actuary is viewed simply as the supplier of a commoditized product. Calculate the loss reserves. Calculate a funding estimate for the upcoming policy period. Calculate a rate indication. Perhaps this has some relation to the ill-conceived notion that actuaries are just detail-driven human calculators.

I would submit that the actuary’s role has been expanding and evolving in recent years, and this trend will continue – as it should. There are so many more areas in which an actuary can contribute his or her expertise. I like to urge clients to see our engagement as a long-term partnership rather than a contract to supply a product. Regular communication is the catalyst for both the client and the actuary to better identify opportunities for the actuary to add more value. The idea is not for clients to delegate their decisions to the actuary, but to capitalize on the point of view and input of a trusted advisor who can assist them in making better business decisions.

For example, when it comes to new captive feasibility studies or even re-feasibility studies for captives that have some history, the actuary can assist with many types of analyses outside of the typical funding and reserving studies:

  • Program design – How might different coverages, retentions, limits, reinsurance programs, etc. (or changes in these items) affect not only the expected losses but the “tail” of the loss distribution?
  • Legislative costing – How could proposed legislative changes affect the program?
  • Benchmarking – How is the program performing compared to other similar programs?
  • Collateral – How could an independent analysis change the indicated collateral needed for the program and impact collateral negotiations?
  • Diagnostics – How are the program’s claims trending at a detailed level?

The opportunities to enlist and reap the benefits of the actuary’s strategic analytical skills are vast. Additionally, as more mature programs amass greater volumes of data, opportunities for predictive analytics flourish. These modeling approaches can examine patterns in historical claims to help identify and flag future claims as they are reported for things such as fraud and potential for higher severity.

Yes, we actuaries are superb with numbers, and we are always very happy to provide our clients with the highest-quality standard actuarial services. But what makes Pinnacle different is our ability to also look beyond the details to help our clients anticipate what might be coming down the road. I recently spoke with A.M. Best TV about the expanding role of the actuary at the Vermont Captive Insurance Association (VCIA) Annual Conference. You can see the interview here.

Aaron Hillebrandt, FCAS, MAAA, CPCU, FFSI, FLMI, LPCS, AINS, is a Consulting Actuary with Pinnacle Actuarial Resources, Inc. in the Bloomington, Illinois office. He holds a Bachelor’s Degree in Mathematics from Illinois State University, where he is now involved as a mathematics lecturer.  Aaron is an honorably discharged Sergeant and combat veteran of the United States Marine Corps. He has over eight years of actuarial experience in the property/casualty insurance industry, including considerable experience in assignments involving loss reserving, funding studies, loss cost projections, captive feasibility studies, and personal and commercial lines ratemaking.

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