Category: General actuarial

Introducing the UK Covid-19 Crowd Forecasting Challenge

Mary Pat Campbell

Link: https://www.crowdforecastr.org/2021/05/11/uk-challenge/

Twitter thread of results: https://twitter.com/nikosbosse/status/1449043922794188807

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Excerpt:

Let’s start with the data. The UK Forecasting Challenge spanned a long period of exponential growth as well as a sudden drop in cases at the end of July 3

Especially this peak was hard to predict and no forecaster really saw it coming. Red: aggregated forecast from different weeks, grey: individual participants. The second picture shows the range for which participants were 50% and 95% confident they would cover the true value

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So what have we learned? – Human forecasts can be valuable to inform public health policy and can sometimes even beat computer models – Ensembles almost always perform better than individuals – Non-experts can be just as good as experts – recruiting participants is hard

Author(s): Nikos Bosse

Publication Date: Accessed 17 Oct 2021, twitter thread 15 Oct 21

Publication Site: Crowdforecastr

Here’s the Gender Pay Gap at 10,000 U.K. Employers

Mary Pat Campbell

Link:https://www.bloomberg.com/graphics/2021-uk-gender-pay-gap/

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Women in finance in the U.K. still make significantly less than men. While the gender pay gap at financial firms in the country narrowed slightly last year, overall the industry continues to have the biggest disparity.

Men working in finance and insurance made 25% more than women last year, down from 28% in 2019, a Bloomberg News analysis of government data shows. The pay gap is especially wide in investment banking, where some of the highest-paid employees work.

It is the fourth straight year that finance has led the industry rankings, showing that executives are finding it difficult to shrink the gap. Mining and quarrying had the second-biggest pay gap at 23% as the commodity boom boosted the income of workers, who are largely male.

Author(s): Neil Callahan

Publication Date: 6 Oct 2021

Publication Site: Bloomberg

Allstate to Sell Chicago-Area HQ in Embrace of Remote Work

Mary Pat Campbell

Link: https://www.bloomberg.com/news/articles/2021-10-08/allstate-to-sell-chicago-hq-as-insurer-embraces-remote-work

Excerpt:

Allstate Corp. plans to sell its headquarters building, marking the U.S. finance industry’s firmest endorsement yet of the desire to offer hybrid work after the pandemic. 

With many employees choosing to work remotely, the insurance giant will sell its offices in Northbrook, Illinois, according to an emailed statement Friday. The complex in a Chicago suburb has several buildings that total 1.9 million square feet on a 186-acre (75 hectares), Allstate has said in regulatory filings.

Author(s): May Reyes

Publication Date: 8 Oct 2021

Publication Site: Bloomberg

Annual Report on the Insurance Industry — 2021

Mary Pat Campbell

Link: https://home.treasury.gov/system/files/311/FIO-2021-Annual-Report-Insurance-Industry.pdf

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Figure 15 shows that the average risk-based capital ratio for the L&H sector declined slightly in

  1. Specifically, statutory capital and surplus was 4.26 times the level of minimum required
    regulatory capital on average in 2020 compared to 4.31 times the required level in 2019.

L&H sector net income of $22 billion in 2020 was less than one-half of 2019 levels, affecting the
potential for capital generation. The sector reported a nearly 10 percent increase in death and
annuity benefit expenses, which contributed to a ratio of total benefit expenses to premiums
earned of 50 percent in 2020, rising substantially from 44.4 percent in 2019. According to Fitch
Ratings, life insurer operating results in 2020 were largely impacted by higher claims paid,
primarily due to increased mortality from COVID-19.24


Certain leverage ratios indicate that L&H insurers faced balance sheet pressures in 2020. The
greater financial flexibility afforded by steady leverage ratios has enabled insurers to consistently
fulfill policyholder obligations by: (1) returning a profit by investing the premiums received
from underwriting activities; and (2) limiting the risk exposure from the policies underwritten.
Insurers also employ reinsurance in order to move some of the risks off their own balance sheets
and on to those of reinsurers. Figure 16 provides a view of the L&H sector’s general account
leverage for the last 10 years.

Author(s): Fderal Insurance Office

Publication Date: September 2021

Publication Site: U.S. Dept of the Treasury

Statistics with Zhuangzi

Mary Pat Campbell

Link: https://tsangchungshu.medium.com/statistics-with-zhuangzi-b75910c72e50

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The next section is another gratuitous dunk on Confucius, but it’s also a warning about the perils of seeing strict linear relationships where there are none. Not only will you continually be disappointed/frustrated, you won’t know why.

In this story, Laozi suggests that Confucius’ model of a world in which every additional unit of virtue accumulated will receive its corresponding unit of social recognition is clearly not applicable to the age in which they lived.

Moreover, this results in a temptation is to blame others for not living up to your model. Thus, in the years following the 2007 crash, Lehman brothers were apostrophised for their greed, but in reality all they had done was respond as best they could to the incentives that society gave them. If we wanted them to behave less irresponsibly, we should have pushed government to adjust their incentives. They did precisely what we paid them to. If we didn’t want this outcome, we should have anticipated it and paid for something else.

Author(s): Ts’ang Chung-shu

Publication Date: 20 Sept 2021

Publication Site: Medium

How persuasive chatbots might be used in insurance

Mary Pat Campbell
A Robot That Can Change Your Mind

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Individuals have a different kind of relationship with insurance than what they have with any other product or service. Though being the most effective risk mitigation tool, it still requires a hard push from insurers and regulators to make people purchase. The thought of insurance could evoke every other emotion except joy in an individual. The main reason for this is that insurance is a futuristic promise that assures compensation when a covered risk event happens. This operates exactly opposite to the strong impulse of scarcity and immediacy bias.

As in any other industry, the persuadable events in insurance could be based on reactive or proactive triggers to encourage positive or discourage negative events. Depending on the intelligence ingrained in the back-end systems and the extent customer data is consolidated, the proactive persuasion events could be personalized to a customer and not just limited to generalized promotion of a new product or program. It could be performed for other persuadable events of the same policy for which the chat is in progress or expand to include policy events from other policies of the customer.

An indicative list of the persuadable events in an insurance policy could be categorized as given in Table 2.

Author(s): Srivathsan Karanai Margan

Publication Date: September/October 2021

Publication Site: Contingencies

Can Actuaries Make It in Non-Actuarial Roles?

Mary Pat Campbell
Can Actuaries Make It in Non-Actuarial Roles?

Excerpt:

My advice for actuaries looking to succeed outside the traditional function:

Push yourself to speak up more. Actuarial leaders know how to get the best out of you. It may not be the same experience with leaders in different areas of the business. So take advantage and speak up.

Have an opinion. So often I’ve worked with young actuaries who can perform incredible analysis but will stop short of providing an opinion and often defer to their manager or a senior actuary. As you move up the corporate ladder, you’re going to have to get more comfortable with providing your input with less and less data to work with.

If you are still toying with the idea of moving outside of a traditional actuarial role, it never hurts to widen your circle. Get to know the people in different areas of your company. Sit with an underwriter while they process a policy, shadow a claims adjuster while they work to help a customer during a stressful time of their life or connect  with a member of your broker distribution team to find out what brokers or customers are saying. It will give you a whole new perspective on where the data you work with comes from.

Author(s): Gary Cummings

Publication Date: 10 August 2021

Publication Site: CAS

Intro to Financial Modelling – Part 19: Wrap-up

Mary Pat Campbell

Link: https://www.icaew.com/technical/technology/excel/excel-community/excel-community-articles/2021/intro-to-financial-modelling-part-19

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There has been significant disruption in how organisations conduct business and the way we work over the past year and a half. However, financial modellers and developers have had to continue to build, refine and test their models throughout these unprecedented times. Figure 1 below summarises the areas we have covered in the blog series and how they fit together to form the practical guidance of how to follow and implement the Financial Modelling Code.

Author(s): Andrew Paw

Publication Date: 19 August 2021

Publication Site: ICAEW

Julia for Actuaries

Mary Pat Campbell

Link: https://juliaactuary.org/blog/julia-actuaries/

Excerpt:

Looking at other great tools like R and Python, it can be difficult to summarize a single reason to motivate a switch to Julia, but hopefully this article piqued an interest to try it for your next project.

That said, Julia shouldn’t be the only tool in your tool-kit. SQL will remain an important way to interact with databases. R and Python aren’t going anywhere in the short term and will always offer a different perspective on things!

In an earlier article, I talked about becoming a 10x Actuary which meant being proficient in the language of computers so that you could build and implement great things. In a large way, the choice of tools and paradigms shape your focus. Productivity is one aspect, expressiveness is another, speed one more. There are many reasons to think about what tools you use and trying out different ones is probably the best way to find what works best for you.

It is said that you cannot fully conceptualize something unless your language has a word for it. Similar to spoken language, you may find that breaking out of spreadsheet coordinates (and even a dataframe-centric view of the world) reveals different questions to ask and enables innovated ways to solve problems. In this way, you reward your intellect while building more meaningful and relevant models and analysis.

Author(s): Alec Loudenback

Publication Date: 9 July 2020

Publication Site: JuliaActuary

Littlewood’s Law and the Global Media

Mary Pat Campbell

Link: https://www.gwern.net/Littlewood

Excerpt:

This is an interesting one because it illustrates a version of “Littlewood’s Law of Miracles”: in a world with ~8 billion people, one which is increasingly networked and mobile and wealthy at that, a one-in-billion event will happen 8 times a month. Littlewood’s law is itself a special-case of Diaconis & Mosteller 1989’s “the Law of Truly Large Numbers”:

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Nevertheless, “it all adds up to normality”!

Because weirdness, however weird or often reported, increasingly tells us nothing about the world at large. If you lived in a small village of 100 people and you heard 10 anecdotes about bad behavior, the extremes are not that extreme, and you can learn from them (they may even give a good idea of what humans in general are like); if you live in a ‘global village’ of 10 billion people and hear 10 anecdotes, you learn… nothing, really, because those few extreme anecdotes represent extraordinary flukes which are the confluence of countless individual flukes, which will never happen again in precisely that way (an expat Iranian fitness instructor is never going to shoot up YouTube HQ again, we can safely say), and offer no lessons applicable to the billions of other people. One could live a thousand lifetimes without encountering such extremes first-hand, rather than vicariously.

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More immediately, you should keep your eye on the ball: ask yourself regularly how useful news consumption has really been, and if you justify it as entertainment, how it makes you feel (do you feel entertained or refreshed afterwards?), and if you should spend as much time on it as you do; take Dobelli’s advice try to cut back or ignore recent news (perhaps replace a daily newspaper subscription with a weekly periodical like The Economist and especially stop watching cable news!); shift focus to topics of long-term importance rather than high-frequency noise (eg scientific rather than polling or stock market articles); don’t rely on self-selected convenience samples of news/opinions/responses/anecdotes brought to you by other people, but make your own convenience sample which will at least have different biases and be less extreme (ie don’t go off 10 comments online, ask 10 of your followers instead, or read 10 random stories instead of the top 10 trending stories); don’t have an opinion until you have a fulltext—insist on following back & getting fulltext sources (if you don’t have time to trace something back to its source, then your followers collectively don’t have time to spend reading it)7⁠; read articles to the end (many newspapers, like the New York Times, have a nasty habit of including critical caveats—at the end, where most readers won’t bother to read to); discount things which are “too good to be true”; focus on immediate utility; try to reduce reliance on anecdotes & stories; consider epistemological analogues of robust statistics like simply throwing out the top and bottom percentiles of data; and pay attention to the trends, the big picture, the central tendency, not outliers.

The world is only getting bigger.

Author(s): Gwern

Publication Date: 18 February 2019 (last edited, visited 19 August 2021)

Publication Site: gwern.net

Ten Pearls of Wisdom for Navigating the Changes to the SOA’s Associate Level Exams

Mary Pat Campbell

Link: https://blog.actexmadriver.com/ten-pearls-of-wisdom

Excerpt:

Do not put your career on hold. Continue to take (and hopefully pass) exams during the transition period.

Remember why you started taking actuarial exams in the first place. It was probably because you wanted to become an actuary or open doors to a variety of rewarding careers that combine business and the mathematical sciences. Unless your goals have changed, you should continue to take exams during the transition period. The SOA’s transition rules are usually very generous, so unless you repeatedly fail an exam that is being discontinued, you should not worry that the time spent studying for exams will be wasted.

Publication Date: 28 July 2021

Publication Site: Actex

12 strategies to uncover any wrongs inside

Mary Pat Campbell
How to Determine If Your Actuarial Model is Right

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Look for nonlinearities

Not all 10% increases are created equal. And by that we mean, assumption effects are often more impactful in one direction than in the other. Especially when it comes to truncation models or those which use a CTE measure (conditional tail expectation).

Principles-based reserves, for example, use a CTE70 measure. [Take the average of the (100% – 70% = 30%) of the scenarios.] If your model increases expense 3% across the board, sure, on average, your asset funding need might increase by exactly that amount. However, because your final measurement isn’t the average across all the scenarios, but only the worst ones, it’s likely that your reserve amounts are going to increase by significantly more than the average. You might need to run a few different tests, at various magnitudes of change, to determine how your various outputs change as a function of the volatility of your inputs.

Publication Date: 14 July 2021

Publication Site: SLOPE – Actuarial Modeling Software