Actuarial Apprenticeship

It takes both exams and mentorship to form actuaries Tony Pistilli June 2022

Photo: iStock.com/Sezeryadigar

A colleague recently shared that he refers to himself as a “health care consultant” in unfamiliar company rather than an “actuary.” I was surprised because I recently, independently, tried the same. I am proud of being an actuary—I count this career that I stumbled into one of the greatest privileges in my life—but it is not an easy career to show off at dinner parties.

Many do not know what an actuary is. I also recently introduced myself as an “actuary,” and my new acquaintance responded with “whatever that is.” Among those who do know what an actuary is, it often seems that their entire view of actuaries is based solely on a perception of actuaries as well-educated agents of the Grim Reaper. Rarely do I encounter people who have a mostly healthy image of actuaries. But even then, the story is usually: “My sister is an actuary … those exams are so tough … you must be so smart!” A recent Wall Street Journal article may gain market share for this third camp who at least knows who we are, which is good, I guess.

But if as a profession we envision a positive contribution to society, we must hope for a more accurate public image than being “really smart,” a member of the 10% that pass all of the tests. At the core of an actuary’s public image is a poorly defined self-image. As a profession, we are not clear on what makes us unique.

Actuarial Thinking

Young actuaries easily can be confused into thinking the exam process will make them into an actuary. They are encouraged in that view by the raises, bonuses and promotions that solidify their status in the actuarial department and earn them actuarial credentials. The truth is, the last email I sent as “Tony Pistilli” and the first email I sent as “Tony Pistilli, ASA, MAAA” were not all that different.

The actuarial profession is as much an apprenticeship profession as it is a credentialed profession. Well-developed actuaries not only pass exams, but they work alongside actuaries who mentor them. They learn how their mentor thinks and how to apply that thinking to the real world. The actuarial exams are (in part, not entirely) a way to find people who have the capacity to think like an actuary. That is not the same as general intelligence. The unique skill of thinking like an actuary is the ability to translate abstract problems that do not have solutions into concrete simplifications of that problem that do lead way to a solution. Actuarial thinking is problem-solving.

I recently helped someone study for Exam P. One of the problems we worked on together required that we rewrite a sum of a function from 3 to infinity as the sum of the function from 0 to infinity minus the function at 0, 1 and 2. After I pointed out this key to solving the problem, my student asked me: “How do you know to do this?” I responded: “You look at what tools you have available and try to transform the problem so you can use your tools. You have a nice formula for the 0 to infinity sum in your toolbox, so try to turn the 3 to infinity sum into that.” My calculus is too rusty to pass Exam P myself, but in some ways, I think I remembered the most valuable lesson from Exam P—actuarial thinking.

I do not endeavor to make any bold statements about the actuarial exam process other than that actuaries young and old should remind themselves that their credentials alone do not make them valuable in their professional roles. Our most useful contributions to our companies are not in producing monthly reserves that tie out to the penny or in recoding a model to run in a fraction of the time it previously took. Those skills are necessary, but only as mechanisms for implementing the more valuable and unique skill of actuarial thinking. They are means to an end.

The Apprenticeship Model

Young actuaries grow and develop their actuarial thinking through application, and the career path of a well-developed actuary is described more by their mentors than their credentials. The best actuaries with whom I have worked—the elite experts in actuarial thinking—can name their mentors throughout the years. These are not formal mentoring relationships, but rather on-the-job guidance and direction that produce actuarial judgment and expertise.

Actuaries who miss out on the apprenticeship model and instead grow into the career simply through earning credentials and improving their technical skills often reach the apex of their career growth shortly after finishing exams, and their technical prowess is their chief asset as their career progresses. Technical skills are not unique or impressive in today’s technology-driven workplace. Actuaries should observe with concern that many organizations have cut information technology (IT) budgets and commoditized their IT departments over the last decade. Actuaries whose only claim is technical expertise may meet a similar fate.

The mentorship model of the actuarial profession and how actuarial thinking develops is the public image I wish actuaries had. I wish I could introduce myself as an actuary and hear, “Wow, you must be good at problem-solving,” and be told that I must be “well-trained” rather than “really smart.”

This fundamental reorienting of our self-image would resolve many of the profession’s current difficulties. The actuary’s role in an increasingly data-driven world, for example, becomes clear when actuaries are comfortable dispossessing their technical skills and asserting the value of their judgment honed by years of apprenticeship—something data scientists cannot claim. Actuaries gain a place in the C-suite when they are problem-solvers rather than math wizards, when they can engage with ambiguities that do not fit nicely into standards of practice. In the manner that writers such as Malcom Gladwell and Tyler Cowen stake their careers on the unique ways they think and comment with authority on a broad range of social issues, actuaries should endeavor to be sought out for the way they think—before any other expertise they possess—if they wish to speak authoritatively on social issues.

Impact of Actuarial Self-Image

To take advantage of this apprenticeship model, actuaries must manage their departments differently. Staffing ratios may be top-heavy compared to other departments—both because the skills most valuable to an actuarial department are gained only through work experience and because more experienced actuaries have two jobs: doing their own work and mentoring the younger actuaries who will replace them one day. In some ways, the main job of the junior actuarial analysts in an actuarial department is to learn to be a more experienced analyst, not to do anything particularly useful. The technical work that keeps junior actuarial analysts busy could be done by less-skilled and lower-paid professionals, but an actuarial department that focuses on optimizing today’s salary budget deprives itself of the distinct value of experienced actuaries who “grew up” in the apprenticeship model an actuarial department can foster. Actuarial executives who can demonstrate the value of actuarial thinking more than technical or regulatory expertise will be able to convince their organizations to financially support this more expensive staffing model.

Within actuarial departments, we can reevaluate the impact of the raise/bonus/promotion schedules that are attached to exams, which can at times serve to solidify in the profession young actuaries who have not yet developed (and potentially may never develop) actuarial thinking. The American Academy of Actuaries (the Academy) at one time required a credentialed actuary to sponsor new actuaries into the profession in addition to the examination requirements. I do not have strongly held opinions on the merit of the sponsorship requirement, but I recognize in it a more realistic self-image that it takes both exams and mentorship to form actuaries. An experience requirement still exists in the U.S. Qualification Standards. For example, I was unable to sign the rate filings I was working on when I became a member of the Academy—even though I was an ASA—because I had not yet worked as an actuary for three years.

Finally, more experienced actuaries should feel an obligation to provide the same types of mentorship that developed them to younger actuaries. It may be as simple as some key phrases that you share. For example, young actuaries who have worked with me know the “401k rule of materiality,” that “people trust pretty numbers,” and that in checking their work, they should at a minimum check the first thing a reviewer or consumer will look at.

Mentorship in its best form is solving tough problems together. I can think of specific projects I worked on with mentors that formed me. More experienced actuaries should try to invite less experienced actuaries to tag along for some of the tough projects. Mentorship may take the form of formal training—for example, I wrote a bullet-point list for how to pass an FSA exam that I have shared throughout the years—but I think more often than not, it is real work that produces the most benefits.

Tomorrow’s Actuaries

I have not talked to my “health care consultant” colleague about any of this, and I suspect he never meant that off-hand comment to turn into 1,500 words. But I think the lack of public recognition of actuarial thinking is exactly what he is responding to. “Health care consultant” zeros in on what he wants to be known for—helping people solve tough problems. I look forward to a day when we can call ourselves “actuaries” and be known for the same thing.

Tony Pistilli, FSA, CERA, MAAA, is a consulting actuary at Axene Health Partners.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers.