May 2016

Interview with Ian Duncan

Ian DuncanBy The Independent Consultant

An interview with Ian Duncan, FSA, FIA, FCIA, FCA, MAAA, adjunct Professor of Actuarial Statistics at the University of California, Santa Barbara.

  1. Please tell us what made you decide to become an actuary?
    was interested because I heard about it at high school—my high school headmaster who taught us mathematics was intending to become an actuary and then the war intervened instead. But he did inform better students about the profession. I was recruited for an internship in my penultimate university year—I hated it. I had no clue what I was doing, messed up calculations (all done by hand in those days) and all the other students around me did was say how difficult the exams were. I decided to become an economist and did a graduate degree at Oxford. After graduation, academic life did not seem so appealing and there were jobs for actuaries, so I decided to try it again—this time I loved the work.
  2. Were there any subjects (as part of the exam system) that you found particularly useful or enjoyable?
    Well, all the subjects are useful in some way, aren’t they? What I find somewhat amusing is that (as a consultant, anyway) there will be times when I dig back through my memory for something that I read or studied years ago and can find applicable to a problem. The exams have changed significantly since I took them, though. Much more mathematical and theoretical now, I think. Actuarial education had begun to change when I was a student (though I majored in math), but now a significant proportion of students go through actuarial courses at universities. While this is a good thing if you are sure you want to be an actuary, what if you decide you don’t? Our department is part of Statistics and Financial Mathematics, so students have the opportunity to change majors. But students at non-actuarial program schools or students who want to read (say) classics (as one of my student colleagues in London had when I started) are at a major disadvantage.
  3. You are one of the relatively few actuaries that are involved in academia. What prompted you to follow this path?
    When I was graduating from Oxford, I was offered a research fellowship to do a Ph.D.; I turned it down because I really didn’t have anything I was burning to research, and I did want to try the actuarial profession. But I have always been interested in research and became involved in “serious” research in my first start-up because a client wanted to publish a peer-reviewed paper on some of their outcomes. Our head of marketing said: you will never get a peer-reviewed paper published. Well, I couldn’t turn down the challenge, got published and now have something like 60 peer-reviewed papers plus a few books. Since I retired I am also working on completing my Ph.D. (in Actuarial Math).
  4. What are the entry barriers that actuaries who would like to become involved in academia face? What can they do to overcome them?
    My role here is an unusual one because I am a “permanent” adjunct. I qualify for this (without a Ph.D., which is unusual) because I have a research track-record. In addition to teaching four classes a year, I also lead the actuarial research seminar (which has now expanded to three quarters a year). I also have a number of research assistants and research projects on the go at any time. I don’t know of any other actuaries in quite this position. There are many other actuaries (my wife is an example—also retired) who teach courses and help with programs but do not have the full-time role that I have. Then there are a number of actuaries who are directors of actuarial programs. They have the administrative tasks of running programs and teach, but (to my knowledge) do not do research. I cannot emphasize enough the importance of the role of industry actuaries in teaching: the SOA’s CAE program fosters the number of academic actuaries, which is fine, but I think it runs the risk of turning out a generation of students who have been taught by theoreticians rather than actuaries with practical experience. Universities are always on the look-out for industry actuaries for this type of role; it is very rewarding to work with students and I would encourage others to consider it.
  5. Is the actuarial profession gaining recognition among young people? What motivates students in your university to become actuaries?
    When I came here in 2010 (the first year of the Actuarial Major—before that we had had an actuarial program for 20 years teaching courses, but not a major) there were about 40 students. This year we have more than 260 and will graduate 50. Students with an interest in math are aware of the profession and don’t have a problem finding us. Last year for the first time we held a California Actuarial Student Conference (modeled after successful conferences at Purdue and Illinois) and had about 200 students from around California: many from Cal States, private universities and Community Colleges where they may be taking math classes, but have no exposure to the profession. The conference was sponsored by the SOA and CAS and we plan another next year (if any readers are interested in attending). There is a challenge for the profession, however: the number of students taking actuarial courses is growing rapidly and the number of traditional jobs is not. I was on an SOA task force looking at non-traditional job opportunities (this later turned into the Predictive Analytics campaign). We sponsored a survey done by the Economist Intelligence Unit. If you haven’t read it—get hold of it. It makes somewhat sobering reading in terms of the gap between supply and demand. California is an example of a state that has lost almost all of its major life and P&C companies, taking with them the jobs that students could have expected at graduation. We are beginning to see students take non-traditional jobs at Oracle and Google, but these opportunities need to increase much faster.
  6. What are the areas of actuarial practice that are popular among students?
    Any one that gets them a job! It may be a function of the decline of insurance in California, but the single largest area that our students go into is retirement. Students also seem to think that doing practical research is useful for their development and resumes and I have a number that I am partnered with for research.
  7. What do students at your university think about the health care system in the United States? Is there much discussion and interest about topics on public policy?
    One of the things we hear from employers is that students come out of university not understanding the insurance industry. Frankly, I have always thought that this was the employer’s job to train, not mine. But students get some introduction to life and health in my MLC class and to P&C in a class that my wife teaches. I talk about health from time-to-time although it isn’t a focus of anything I teach. I have given department seminars on the ACA. But students don’t have much exposure to health insurance, being covered either on their parents’ or a university policy. One lesson I do teach early on is that there is a fundamental actuarial principle of charging the rate for the risk, and that if you deviate from this principle (e.g., under the ACA) you will find yourself with a messy risk management problem.
  8. What do students at your university think about Social Security? Are they concerned that under the current pay-as-you go system they might end up contributing more (perhaps much more) than they will receive?
    They hear this from me as part of my lecture on principle No. 1 of actuarial science: charge the rate for the risk! They also hear that they had better not count on Social Security when they get to my age (although I do thank them for their continued contributions to my pension). Both Social Security and health care finance are really more advanced topics, appropriate for fellowship exams. We are teaching much more fundamental stuff: probability, life contingencies and now predictive modeling.
  9. Why do you think only a relatively small number of actuaries are active in public policy? It seems that our voice would be a valuable addition in important areas such as health care reform.
    This is something I hear frequently. However, we are a business-focused profession, and public policy people are generally opposed to business (except for contributions). I have done work in public policy through my board position on the Massachusetts Connector board; I found it interesting but ultimately the political appointees made the decisions. If we really wanted a role we would need several things: a lot of published research relevant to public policy (different to the kind of theoretical research we publish) and much larger numbers. We are outnumbered multiple times by other professions in health care, plus what we have to say isn’t generally what the public policy people want to hear. Still, when it comes to taking risk, all the other professions have to come to us.
  10. What do you think about the actuarial education system? If you could make changes, in what areas would you focus?
    One of the things that I think is a strength of the actuarial profession is its professional exam system. There is strong pressure as a result of the growth of programs to go the way that the United Kingdom, Australia and now Canada have gone and give credit for university courses. I am opposed to this (for the United States) for a few reasons: one is that there are so many universities teaching courses in the United States that managing and ensuring quality would, I think, be impossible. The second is that I think that our professional exam system instils a certain application in students: they learn how to master large volumes of material in a short space of time. This is not to say that I don’t think that there is an important role for universities, and one that we need to address. The third reason is that I think the whole U.S. post-secondary education system is close to a major reformation: we cannot continue to allow students to rack up sometimes six-figure debts with often dubious chances of repayment (student loans now constitute one-third of U.S. government assets, and there are growing calls for forgiveness or modification). We have tried alternative methods of instruction, using the Internet, with mixed success. My own view is that a student who seriously wanted to be an actuary could do so with a community college education plus the actuarial exams. When I started in the profession in the mid-70s there were still a number of actuaries who had entered the profession directly from high school.
    Since I have been here at the university I have spent some time trying to understand the university’s financial model: we obviously take in a significant amount of revenue (including from an increasing percentage of foreign students who pay full fees). Where the money goes is a mystery that I have not been able to solve. It certainly doesn’t find its way to our department or program (other than for academic salaries, which are not particularly generous). I think the focus in this election campaign on the cost of university education is correct but misplaced: we really need to understand better where the money goes, and whether the marginal expenditures are providing a positive or negative return, before we start talking about making college “free” and forgiving student loans.
  11. It seems that a small but growing number of actuaries are supplementing their actuarial education with other credentials (e.g., CFA) or academic degrees (e.g., MBA). Do you think there is value in pursuing these credentials and degrees? If so, why? Are there certain credentials or degree that you feel would be well suited for actuaries?
    Above I said that one of the benefits of actuarial education was that it prepared you for lifetime education, so it goes with the (actuarial) territory to be interested in other learning and credentials. (By the way, I am adamantly opposed, though a lone voice in the wilderness on this, to mandatory CPE. Actuaries are professionals and know what they need to know, and how to get the necessary education.) The MBA seems like an appropriate additional qualification for an actuary since it seems to include some of the topics that round out our “hard” subjects, such as marketing and people management. My view on this is that we are missing an opportunity, both as actuaries and as a profession, by not providing for some form of sabbatical or research internship for qualified actuaries. I have found research to be both a valuable learning and business opportunity: practicing actuaries could learn a lot from spending more time in the university setting (and contribute a lot to our courses). This needn’t be a formal qualification and it also need not be residential. Interestingly our students are very aware of the value of research in learning practical skills and I have a constant stream coming to me for research projects. Qualified actuaries could do the same.
  12. Do you see actuaries expanding their professional roles in fields such as risk management or do you see other professions entering areas that have traditionally been the domain of actuaries?
    I will confess to not knowing what risk management is. I understand that it is more than what I learned lo those many years ago to become a fellow, but not specifically. Plus I haven’t had time to dip into the topic. Internationally, we started the CERA qualification (which just got its 3,000th member), but that qualification hasn’t taken off (and I would say that we don’t really understand why, although my observation is that students interested in the subject learn it at university and don’t see the need for a credential). The SOA, after much deliberation (and input from me), has decided that actuaries should learn predictive analytics and seek out jobs that apply their new skillset. The data are there to show that this is a growing area and that actuaries are well-positioned to take a (leadership) role, at least in insurance applications. It is always hard for us to get much beyond insurance, however, I think for good reasons: our skill set, and what differentiates us is risk—the assessment, underwriting, pricing and management of risk. No other competing profession really understands risk the way we do, so we will always have a role. But see next question for a big caution.
  13. What are your views about the future of the profession? Job satisfaction, employment opportunities and monetary rewards, to mention a few, are surely important considerations for young candidates.
    The profession continues to offer high satisfaction, opportunities (both job and personal growth) and financial rewards. Plus, it offers superior stability compared with other industries. So we are not short of candidates. My concern long term is the trend in the United States (at least) towards the socialization and regulation of risk. You asked earlier about health insurance: when I was younger and working in health insurance there were plenty of actuarial applications and you could apply your skill set. Now, the heavy regulation of health insurance (thanks to the ACA and other developments) means that the health actuary’s job has become in a way the interpreter and follower of someone else’s regulations. There are obviously still opportunities for differentiation and entrepreneurship, but I think that these are slowly becoming more limited. The general trend is towards socialization of risk in all aspects (the federalization of student loans being a major example). Ultimately, if these trends continue they may have a negative effect on the profession, because we depend (like the pilot fish on the shark) on a vibrant insurance industry. Simply put: socialized industries offer fewer opportunities for actuaries.
  14. Can you think of a non-actuarial discipline (literature, psychology, etc.) that would be useful in the career of young and not-so-young actuaries?
    I am more and more intrigued by behavioral economics (not something I ever studied at university). People like to criticize actuaries as not being good communicators (although I don’t think it’s the communication they dislike as much as what is being communicated: we invariably bring bad news). There are certainly books on communication that one could read, but my suggestion is simply to write and write and write. There are plenty of outlets looking for copy and the practice will be invaluable.
  15. Is there a non-actuarial book that you would recommend?
    Prof. Kahneman’s recent book “Thinking Fast and Slow” has some elements of behavioral economics that may be useful. From time-to-time I still dip into George Eliot’s Middlemarch (greatest book in the English language!) and, less frequently than I would like, Martin Gilbert’s eight-volume life of Churchill. The issues and problems that Churchill had to address in his lifetime make ours look rather simple.

Mr. Duncan is Adjunct Professor of Actuarial Statistics at the University of California Santa Barbara and president of Santa Barbara Actuaries Inc.  From 2010 to 2014 he served as Vice President, Clinical Outcomes, Analytics and Reporting at the Walgreens Company.  He founded Solucia Consulting (now SCIO Health Analytics), a provider of analytical and consulting services to the healthcare financing industry in 1998.  He is active in public policy and health care reform, and served on the board of directors of the Commonwealth of Massachusetts Health Insurance Connector Authority from 2007-2014.

Actuarial Program – University of California, Santa Barbara

By Ian Duncan

Actuarial Science at UCSB dates from the late ‘80s when courses were taught as a concentration within the Statistics Degree. Beginning in 2010, Actuarial Science has been one of three majors offered in the department of Statistics and Applied Probability, the other two majors being Financial Mathematics and Statistics. Actuarial Students may major in any of these three subjects, and many actuaries do so. Currently there are approximately 280 students enrolled, with about 50 graduating annually. We are one of two universities within the (10 Campus) University of California system with actuarial majors (the other being UCLA), while some other campuses also teach courses. Our course includes several unique features, one of which is the undergraduate/graduate research seminar that trains students in actuarial research. Students have won several prizes for their work at the Actuarial Research Conference and three peer-reviewed publications have so far been completed based on this seminar. Another unique program is the combined BS/MS degree. Our MS is unique in that only UCSB actuarial undergraduates may apply; many students are able to complete both BS and MS within four years. A third unique feature is the exam fee reimbursement that successful students are eligible for after passing their second and higher actuarial exams (as long as they are members of the Actuarial Association). The Actuarial Association, with 150 members, hosts regular industry speakers as well as social events such as basketball, game night, and bowling.

Assisting students with employment opportunities is becoming increasingly important and we host an annual employer fair at which employers interview a number of students. Students may also participate in a unique course, “From College to Career,” that focuses on professionalism, ethics, presentations and professional behavior (including how to behave at a business dinner!).

In addition to teaching all the subjects required for the associateship examinations of the SOA and CAS, the department also maintains a significant research portfolio, including a Center for Financial Mathematics & Actuarial Research. Prof. J-P Fouque, a leading financial mathematician is the Center director. Although our actuarial major is relatively new, our substantial program was successful in gaining the coveted Center of Actuarial Excellence (CAE) award from the SOA in 2014, making us one of 28 (internationally) and the only CAE on the U.S. west coast.

We are fortunate to have a unique program in a unique setting. We will always welcome actuaries who are interested in visiting and speaking to our students about the profession—just email me if you are interested.

Ian Duncan, FSA, FIA, FCIA, FCA, MAAA, is adjunct Professor of Actuarial Statistics at the University of California Santa Barbara and president of Santa Barbara Actuaries Inc. He can be contacted at Duncan@pstat.ucsb.edu.