Consulting

By: Katrina Redelsheimer, ACAS, Candidate Liaison Committee

This is the first in a series of “This Actuarial Life” articles that will illustrate the day-to-day life of the actuary in different fields.

When choosing a career, it’s important to understand what your job will involve on a daily basis. The world is full of people who loved what they majored in but don’t end up loving the day-to-day reality of their jobs. Actuaries are known for loving their jobs. What drives this high level of job satisfaction is not just the interesting and challenging subject matter but also the everyday experience of the actuary’s job.

What your typical day looks like depends on the kind of actuary you are. It’s not so much about the line of business you work in but the type of firm you work for. Insurance companies, consulting firms, rating bureaus, audit firms, regulatory agencies, reinsurers, brokerage firms, and others hire actuaries—and the life of the actuary is different at each.

When you think “actuary,” you probably think “insurance company,” but the largest single employer of actuaries in the United States is actually a consulting firm. Some 16% of active CAS members are employed as actuarial consultants. Consulting firms range in size from global companies with tens of thousands of employees to lone actuaries setting up their own shops. So what do these actuaries do all day?

Projects! Projects! Projects!

The work of a consultant is project-based. Projects tend to take four to eight weeks from start to finish. Consultants manage multiple projects simultaneously, continuously moving each one forward. Strong time and workflow management skills are therefore crucial.

The majority of the typical consulting actuary’s work is annuity work, that is, repeat projects that are updated annually or more frequently. Reserving projects are the most common, but other common work includes forecasts (calculating the amount to be paid in the upcoming calendar year), rate reviews, rate filings, predictive modeling, enterprise risk management, and catastrophe/reinsurance modeling.

Projects are done for clients. Clients may be insurance companies, large corporations with self-insured liabilities, public entities, captives (an insurer created to sell insurance to the company that owns it), or others. All lines of business use consulting services, and consultants often work across multiple lines of business. Consultants also sometimes specialize by type of work (e.g., reserving or enterprise risk management), type of client, or line of business.

The work of a consulting actuary results in a deliverable, i.e., a report or presentation, for the client. Most deliverables have two parts: a written explanation of the work and its results and exhibits showing the calculations supporting those results. Both parts are essential both for the client’s understanding and to abide by the standards of the profession.

Documenting and Developing

Projects typically begin with data provided by the client. Manipulating the data into a usable form is sometimes the most time-consuming part of a project. Data must be reviewed for internal consistency and compared to any prior data available. Any discrepancies must be explained, addressed with the client, and documented appropriately.

The cleaned-up data is then fed into the exhibits. Many companies develop proprietary software, often built on top of Microsoft Excel (VBA) or Access (SQL), for this purpose. This software organizes the data into the triangles and ultimate projection methods with which Exam 5 takers are familiar. Most commonly, however, exhibits are built in Excel using a simple template.

Spreadsheet complexity varies depending on the size of the liabilities, the line of business, the reinsurance structure, the state of the data, and other factors. Regardless, the consulting actuary can expect to spend a great deal of time in Excel.

After the actuary completes the technical work (selecting loss development factors, applying actuarial methods, and developing ultimate losses in the case of reserving work), the results are summarized in the written report. While much of the report will consist of standardized language, portions must be customized for the particular client. Business writing skills are therefore highly important to the consulting actuary as well.

Go Team!

Projects are typically worked on in teams, with analysts (typically actuarial students) and consultants (typically credentialed actuaries) working together with a consultant as the project lead. At least one credentialed actuary must sign each report. Some form of review process is usually involved as well, both to verify the accuracy of the calculations and the actuarial soundness of the work.

Aside from providing the report, consulting actuaries will meet with the client to review results, often working back and forth on various drafts before producing a final version. They make formal presentations to senior management and boards of directors. Overall they serve as trusted advisors to clients, often working with them for decades and contributing valuable insights and support to the clients’ business.

On the Road

Consulting work has a reputation for being demanding when it comes to travel and hours. Unlike their insurance company counterparts, consultants must account for every hour of their time and meet goals for time spent on client work (billable hours.) They also face travel demands. In some cases, projects require them to work on-site for weeks at a time. International travel may also be required. Many see this as a perk rather than a burden.

Other Duties As Assigned

Peppered in amongst the project work are various other responsibilities, chief among them being sales. Consulting actuaries must seek out new opportunities by responding to requests for proposals or RFPs as well as by developing and pitching unique project ideas to existing and potential clients. As consultants advance in their careers, they may take on management responsibilities as well. Others take the research and development path, focusing their efforts on producing specialized solutions and innovations.

Of course, like any career, there are many variations, but this brief overview should give you a better understanding of what it means to be an actuarial consultant day in and day out.

Published in the March 2014 issue of Future Fellows.