actuarial review anti stats rant

[KSBurke]

Note the use of the ubiquitous call for "experienced actuarial and business judgment." This is equivalent to the scouts in Moneyball talking up 5-tool players in spite of their performance or underwriters bemoaning the loss of the "art of underwriting" when credit was introduced. It's an expression used by people that either don't want to accept or don't understand the need for more sophisticated actuarial models.

[crabber]

Originally Posted by KSBurke

Note the use of the ubiquitous call for "experienced actuarial and business judgment." This is equivalent to the scouts in Moneyball talking up 5-tool players in spite of their performance or underwriters bemoaning the loss of the "art of underwriting" when credit was introduced. It's an expression used by people that either don't want to accept or don't understand the need for more sophisticated actuarial models.

That's a little bit over the top, don't you think? It takes a bit of "experienced actuarial and business judgment" to build a useful actuarial model, and it takes even more to use the results of the model to add value to the business.

[KSBurke]

Maybe I'm misreading what he wrote but when he says,

An Associate member of PAA will be required to demonstrate an expert’s understanding of risk transfer and risk-sharing mechanisms, the legal and competitive environment in which U.S. insurers and self-insurers operate, and the analytical skills that are fundamental to accepted actuarial methods of projecting costs.(emphasis mine)

he's saying that an actuary should be defined by old-school skill sets. Like it or not, advances in risk classification, the projection of future costs (i.e. pricing and reserving) are being made by people with richer backgrounds in statistics than the typical CAS member. I would add to

For an increasing number of actuaries, probability and statistical formulae are now a substitute for enhance and extend experienced actuarial and business judgment.

There are many actuaries that think that their work consists of things like selecting development factors, keeping up with the latest accounting changes, and using sumproduct are the height of actuarial sophistication. Those attitudes, as they appear in this article, will result in a decline in opportunities for younger actuaries.

I do, however, agree with his assertion "Why any actuary chooses to be a member of the AAA is a puzzle."

[Harbinger]

There is a reason that every job posting you see these days requires knowledge of SAS/R, experience in predictive modeling or capital modeling, knowledge of Igloo or Emblem, etc. Employers value these skills so if you're under the age of 30 and are going to be a run of the mill Born-Ferg, Chain Ladder, Loss ratio method, exposure method, etc actuary than your career options are going to be limited.

[Wigmeister General]

Actuaries are on the verge of obsolescence

[Happy Skunk]

Memorization of statistical formulae now trumps real analysis. One need only review the syllabus of basic education and the topics that dominate the CAS sponsored seminars to understand that the CAS now mistakenly believes that the essence of actuarial science is the ongoing search for a more sophisticated mathematical model or statistical formula. For an increasing number of actuaries, probability and statistical formulae are now a substitute for experienced actuarial and business judgment.

So true. When an actuary doesn't know what to do he will fall back on adding minutiae and detail although its not needed.