Zen Actuary Installment 18: Getting Back in the Water
By Rich Lauria
The Stepping Stone, November 2021
Author’s note: This is the continuation of a series[1] adapted from the book Awake at Work by Michael Carroll, covering the application of Buddhist teachings to situations encountered in a modern corporate workplace setting. This series addresses challenges frequently encountered by practicing actuaries.
General Impact of the Pandemic
What a difference three months makes. I originally drafted this article in mid-June. There was a celebratory feeling all around.
The defeat of COVID was imminent. Case counts, hospitalizations, and deaths were dropping all around the country as well as in many parts of the developed world. Plans were being made for the return to life as we knew it before March 2020 in education, business, entertainment, and social gathering. The Centers for Disease Control had recently given the green light to all of the fully vaccinated to remove their masks and stop worrying. While there were reports of the Delta variant ripping through Israel and the U.K., several media outlets dismissed these concerns, referring to Delta and other mutations as “scariants.” The worst was clearly over.
It is now October and the mood could not be more different. Despite the vaccine, Delta found its way into the U.S., elevating case counts in all 50 states. Some states—mostly with lower vaccination rates—experienced record case counts, hospitalizations, and deaths. The Delta wave has overwhelmed hospitals in many of these states, sometimes even resulting in rationing of care. The media routinely reports on “breakthrough” cases of vaccinated people being infected, although most of these are considered mild and do not require hospitalization. The CDC reversed course on masking, recommending them indoors for everyone—even the vaccinated due to their ability to spread the disease.
Despite the spread of Delta, many aspects of American life have resumed using in-person modalities, albeit in many cases with restrictions or recommendations regarding vaccination and masking. Many businesses have repeatedly pushed back re-opening dates with the comfort that remote arrangements are continuing to provide satisfactory results. Sporting events, movie theaters, Broadway shows, and (mostly) outdoor concerts have brought the crowds back. And schools across the country are now open en masse, despite vaccines being unavailable for children under age 12 and higher cases of pediatric COVID being reported than at any other time in the pandemic.
There seems to be a collective determination in many parts of the world to encourage their citizenry to get back in the water and learn to live their lives with the ongoing threat of COVID using the tools and knowledge that have been gathered to date. Many leaders have determined that the cost of not doing so—both financially and from a quality of life standpoint—are far too great to ignore.
Navigating personal risk under these conditions is no small task. Each of us has our own personal risk appetite based on a number of factors that we have incorporated into our assessments. In my case, my employer has dragged me kicking and screaming back into the water (somewhat). Columbia University has moved back to mostly on campus instruction with a certain number of classes taught online. However, even “on campus” has an asterisk with many such classes converted to “Hy-flex” modality to accommodate international students with either health concerns or encountering visa issues.
These classes allow students to attend either on campus or online while faculty conduct classes on campus. I am teaching two such classes this fall while my third class is online. Since only about 20 out of the 45 to 50 students in each class have been showing up in the classroom, the number of breathing bodies I am exposed to each week is much less than it was pre-pandemic (about 160 per week in March 2020).
In addition, Columbia has instituted safety protocols that apply to students, faculty, and staff alike. These include a vaccine mandate and indoor mask mandate. (The latter is excepted for instructors who maintain 6 feet or more of distance from all class participants while lecturing. I choose to keep my mask on at all times even with this option.) This combination of factors has allowed me to be reasonably comfortable with conditions for lecturing this semester.
Impact of the Pandemic on Actuarial Practice
The actuarial profession has struggled with transitioning toward more in-person activities. Most of the correspondence I receive from the SOA are about webinars and other virtual events that they are sponsoring. Even the ImpACT Conference, which was originally planned as a hybrid conference, was converted to 100 percent virtual. In my circle of professional actuarial contacts, there is a range of working modalities, with most fully or partially remote. The one consistent theme I hear is the desire to connect with others in-person while being resigned to an assessment that “diving in” is neither wise nor necessary under current conditions.
Delta not only discouraged people from getting back in the water socially, but also led to a temporary flight of capital from markets and firms. Many customer-facing businesses (e.g., airlines, hotels, and restaurants) that were ready to embrace pent-up demand have experienced yet another slump in revenue as people like me continue to wait for the waters to get calm enough again.
Actuarial work continues to adapt and progress, thanks to the many dedicated professionals involved and the technology that allows them to do so at acceptable risk levels. Each practice area is grappling with evolving health and economic conditions.
Life and pension actuaries are dealing with mortality trends that most have never dealt with in their careers. After decades of steady increases in longevity, population life expectancy in the U.S. fell 1.5 years during 2020 largely due to COVID, according to the Centers for Disease Control. This brought life expectancy back to 2003 levels. Mortality assumptions, often considered stable and reasonably predictable, are suddenly front and center in the volatility space. Will vaccine and masking practices become part of the underwriting process?
Health actuaries are facing similar challenges, with experience being whipsawed by a combination of previously postponed procedures for non-COVID conditions with increases in COVID hospitalizations for working age adults. General insurance actuaries need to consider potential employer liability for COVID exposure in the workplace under Workers Compensation and other liability policies.
Actuaries also need to consider the longer-term effects of the pathogen. While there are hopes that Delta may indeed be the last wave of the pandemic, one lesson it has taught us is that COVID will likely be with us in some form for the foreseeable future, just as the flu and common cold have been for many years.
Some experts had assumed, perhaps wishfully, that the vaccines would turn the virus into an afterthought. The latest consensus is that COVID will transition over time from a pandemic to endemic state, which is constantly present in a region or population with relatively low spread. When and how are anyone’s guess, and adds another layer of uncertainty to actuarial modeling of future claims costs.
How to Deal With the Changes
How does one deal with ever-changing science around matters of life, health and prosperity? My first suggestion is to acknowledge that there is a lot we do not know, particularly as to future projections of virus activity. While that may sound defeatist, it is an acceptance of the reality that we are grappling with across professions.
Knowing what we do not know is a vital part of any risk management endeavor. I always remind my students that when building a model, it may be more important to understand its limitations and critical assumptions, rather than its strengths and supporting facts. The modeler can explore those model uncertainties and use them to provide ranges of possible outcomes, lending more insight and credibility to the work.
Review the performance of past modeling efforts during the pandemic, with a critical but forgiving mindset. There may well be previous sets of assumptions that now look like fantasies based on how reality ultimately turned out. The actuary should explore what can be learned about the nature of the virus, the various stages it has gone through, its interplay with human behavior and resulting impact on sundry forms of economic activity. The past 18 months have offered up a plethora of twists and turns to analyze.
In addition to substituting facts for prior impressions, it may be helpful for the actuary to take a step back and objectively assess the thinking that led to the inaccurate prior forecasts:
- Have cognitive biases played a role in prior forecasts?
- Has optimism bias led to unsubstantiated assumptions of vaccine uptake and efficacy and viral decline?
- Has narrative bias and confirmation bias led to assumptions chosen because they fit the prevailing story rather than the facts on the ground?
- Is there anchoring bias to recent history without sufficient adjustment to adequately capture the natural evolution of viral patterns through a population?
Such an investigation not only aids in improving projections incorporating COVID, but also other significant potential unexpected deviations from baseline conditions.
Mindfulness is Key
Beyond the models and mathematics, I find it helpful to check-in with my state of mind. This is not easy to do given that that our minds are continuously bombarded with thoughts. New research estimates the average person has over 6,000 thoughts per day, while previous estimates suggested ten times higher. Even at the lower number, this can appear overwhelming. How do we check-in with this wild elephant?
I have been more routinely monitoring my breath, especially since Delta arrived. The variant threw a wrench into my expectations of the future, and the resulting anxiety has repeatedly led to my taking shallow sips of air, depriving my organs of the nutrients needed to function at an optimal level. Just stopping to take three deep breaths has been very beneficial to staying focused and aware through all of my worries.
I have also adjusted my asana practice to focus primarily on the first three chakras, residing in the base of the spine, sacral, and solar plexus regions. Chakras are energy channels that connect to the physical and energetic body. The first chakra deals with stability, security, and our basic needs. The second chakra deals with creativity and our ability to adapt to unexpected change and to visualize possibilities. The third chakra deals with confidence and sense of self.
I’ve observed in myself a depletion of these qualities during this roller coaster ride, and have regularly turned to my daily yoga practice to recharge these energy sources. I’ve used standing poses such as warrior variations to become grounded and restore a sense of balance and stability. I’ve focused on squats and backbends to rekindle my creative juices. (As an example, I did one of my deepest wheel pose variations before completing this article.) And core work is now a daily ritual, with plank pose becoming a staple of my practice to reconnect with my ego and self-belief even with the acknowledgment that there is so much that I do not control.
I’ve also found it helpful to connect to inspirational writing. After Delta hit, I turned to more concrete advice and self-help. I’m currently reading “How to Stop Worrying and Start Living” by Dale Carnegie. The advice provided is practical and timeless, with many excellent ideas from people who thrived during two world wars, a flu pandemic, and the Great Depression. It has positively impacted my meditation practice by reminding me to stay present and not get caught up in things that have already occurred and cannot be changed, and to not obsess about the future.
One meditation that has again become a go-to is contemplating the nature of worry itself. The mantra goes as follows:
“There is no point to excessive worry. If I can do something about what I am worried about, then I should go ahead and do that activity. If there is nothing I can do, then worrying about it will not make it any better and will only make me feel worse.”
Getting back in the water will not be easy for many of us. The reality of the virus being part of our existence for the foreseeable future must be accepted and dealt with as we best see fit for our physical, mental, and emotional well-being. Each of us is in a different place about this due to variations in risk perception and cognitive biases. Being respectful of these differences while finding ways to collaborate and share our collective wisdom will provide benefit to all as both professionals and as part of the human family.
Continue to stay safe and well.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.
Rich Lauria, FSA, is associate director and lecturer in the Enterprise Risk Management program at Columbia University in New York City. He can be reached at rl2764@columbia.edu. LinkedIn: https://www.linkedin.com/in/rich-lauria-6555a425/