Presidential address: The New Normal
Letter from the President
The New Normal
By Cecil Bykerk
THESE ARE CHALLENGING TIMES as all eyes continue to focus on the state of the economy. While some use descriptions like "chaotic," "collapse," "turmoil" and "failed" to describe the current economic environment, others prefer to use descriptors such as "impact," "lessons," "decisions" and "change."
However you choose to view our economic state, it's safe to say that it affects us all in a myriad of ways. I'd like to focus on the direct impact it has on the jobs we have as actuaries.
LIFE ACTUARIES–OUR WORLD IS CHANGING
As actuaries in the life insurance field, your world has never changed as much as it has in the past year. You are being called upon in new ways. And, like many others the world over, you are being asked to do more with less.
Earlier this year, National Public Radio (NPR) ran a story on "the new normal." The gist of the story was that great crises change the way we live, and, for us in particular, the way we work. In short, this means we won't be going back to the way things were. How we do business has changed dramatically and we have to do our part to address these dynamic changes.
You know that capital is a scarce resource. Management requires more analysis and scrutiny of how capital is used. In addition, more consumers are looking for products that offer guarantees, yet it has become much more expensive to provide those guarantees.
Some of the approaches you may have used to offer these products are no longer available. Consumers are also trending toward term insurance and fixed annuities products. We don't yet know if this is temporary or here to stay.
BIG CHANGES AHEAD IN THE WORLD OF FINANCIAL REPORTING
Principle-based approaches are impacting statutory accounting. International Financial Reporting Standards are on the horizon and will have a major impact on how companies are doing their accounting. These are substantial changes, but with great change we have the opportunity to innovate. Now is the time to reassess how we do business, the products we offer and the improvements needed in order to grow.
ACTUARIES–THE IDEAL PROFESSIONALS TO SERVE AS ENTERPRISE RISK LEADERS
There's been a great deal of talk about enterprise risk management (ERM), and with good reason. As a profession, and as part of the financial services industry, the new normal is all about risk. We've been at the forefront by solidifying the position of actuaries as the leaders in risk management, both through enterprise risk management and the CERA credential.
The CERA credential is a great opportunity for actuaries. It reflects the evolution of the actuary–from helping the world understand risk, to today's broader risk management approach. Our goal is to ensure the public views the CERA as the world's preeminent ERM qualification.
One step in that direction includes the negotiations underway in making the CERA the world's preeminent global credential. This is a historic, profession-wide collaboration. As of the writing of this column at the end of June, there are 17 actuarial organizations in active, collaborative discussions, and the consortium is growing. This effort shows how the CERA can evolve to cover all practice areas and gives it a greater competitive advantage over other risk management credentials. More information on this will be announced over the course of this year.
HEALTH CARE REFORM–GREAT OPPORTUNITIES FOR US
We must anticipate what will be needed from the health actuaries of the future. That means seeing beyond where we practice today.
Health IT, quality, comparative effectiveness, provider reimbursement and risk, and chronic disease and wellness management are a few of the many emerging areas. Each will benefit from the skills actuaries bring to the marketplace, not just in the United States, but in Canada and outside North America.
The health care industry is changing quickly and we have a tremendous opportunity to evolve with the market. As new health care policy is shaped, it is up to us to ensure that this policy is built upon a solid foundation of actuarial principles.
THE SOA AND THE NEW NORMAL
The SOA must ensure the entire profession is prepared for the future. We have a vision for actuaries to be the leading professionals in the measurement and management of risk. We have a Strategic Plan to support this vision. However, a vision is just words on paper unless action is taken. This is why we have initiatives and goals to help us realize our vision and help actuaries not just thrive, but succeed in the new normal.
To establish a dialogue with employers, and emphasize these strengths, we have formed an Employers Council. The council won't set policy, but it will provide us with employer insight on:
- Issues and challenges facing insurance, benefits consulting, and broader financial services firms.
- Business needs for research and development in risk-related areas.
- Hiring and staff development needs in their organizations.
In building the council, we sought a broad combination of expertise–including large actuarial firms, ERM and those involved in executive search and recruitment. The results of these conversations will give us a direct line of communication with employers and allow us to demonstrate that actuaries have the skill sets to help businesses succeed in the new normal.
HIGH PROFESSIONAL STANDARDS
Other professionals may have strong analytical skills and risk expertise. However, only actuaries can claim a heritage rooted in the highest professional standards and the most difficult professional exams in the world. It is important to view your education as a continuum–especially in the new normal.
Actuaries maintain our value to employers by staying at the forefront of current developments, which is why our professional development is so important. To ensure that our educational offerings are timely, relevant and of value to employers, we are completing a comprehensive review of our Professional Development program.
We are doing this using a competency framework which identifies the skills actuaries need to continue to be valued for their professionalism, technical expertise and business acumen.
We know that time–and money–are limited, which is why we are making more Professional Development opportunities available, through a variety of technologies. We are offering more webinars and e-learning opportunities–or, as we like to call it, Professional Development On Demand, that you can access 24/7. We are also rolling out online functions that allow members to interact and collaborate with each other on a more interactive level. This will include social networking, forums, wikis and other tools that offer the convenience of contributing when and where you want.
VOLUNTEERING AND THE NEW NORMAL
I can't write a column or give a speech without bringing up a subject of paramount importance to me–volunteering.
When it comes to contributing, you may feel like volunteering will not fit into your schedule–especially in the new normal. Speaking from my own experience, volunteering has taught me how to be a leader, both in the profession as well as in the workplace. It helped me meet the challenges of being chief actuary at Mutual of Omaha and now in my own practice.
There are many areas in which actuaries can get involved in the profession. You can participate in Section activities, serve on an Education Committee, speak at a meeting or contribute to our publications–just to name a few. I hope that you will choose, if you haven't already, to become involved–either within the profession or in another area of interest to you. Your involvement will benefit your career, your future and your profession.
WHAT DOES THE FUTURE HOLD?
Peter Drucker once said, "The only thing we know about the future is that it will be different." A truer statement was never spoken. It all ties back to the new normal and the way we do business today. The future will be different. As actuaries, we face unprecedented changes, and so do our employers. As employers move to cut costs, we must ensure they realize the value actuaries bring to the business world.
We will face many challenges. Rigorous training, high professional standards, and a deep understanding of the relationship between risk and opportunity have prepared us well. We are ready for the new normal.
Cecil Bykerk, FSA, MAAA, FCA, Hon FIA, is president of the SOA. He can be contacted at cbykerk@soa.org.