Actuarial Creativity

It is not an oxymoron Ronald Poon-Affat

When I was invited to contribute an article about creativity to The Actuary this month, I was both honored and taken aback. While I have achieved a modicum of creative success with my “Actuary out of the Box” blog, I don’t consider myself to be the poster child for actuarial creativity. Nevertheless, a fundamental ingredient of creativity is risk-taking, so here goes nothing!

Comedian John Cleese’s creativity presentation at NudgeStock, a behavioral science conference, inspires me. (This 12-hour annual event is the world’s largest festival of creativity and behavioral science, and the content is free on YouTube.) You may be wondering how actuaries can learn tips on being creative from one of the world’s funniest comedians. Cleese explains what he learned during his creative journey to write comedy, and it turns out he studied the sciences in senior high school and then read law at Cambridge—he did not have a creative educational background. Cleese also wrote Creativity: A Short and Cheerful Guide, which details how he coaxes his comic creativity. I will borrow liberally from his teachings in this article.

While I highly recommend Cleese’s book, there is a limit regarding how much actuaries can learn from a comic’s creativity tips. The fundamental feedback mechanism of comedy is instantaneous—when the audience laughs. Laughter validates creativity in presenting a joke in a novel way. If actuarial clients or employers start guffawing during your PowerPoint presentation—then, Houston, we may have a problem.

What Holds Actuaries Back From Being Creative?

To achieve a breakthrough in any new endeavor, it’s useful to ponder, “What’s holding us back?” It’s natural for actuaries to be risk averse. Our profession is like a magnet for this personality type. But any form of genuine creativity requires taking risk. Herein lies the conundrum.

Our intensive math education before we embark on actuarial exams and, of course, the actuarial qualification process, emphasizes both speed and accuracy. This is not the optimal breeding ground for promoting creative thinking. Actuaries study long and hard hours, make immense personal sacrifices and find themselves in an exclusive, well-paid club—why rock the boat? The answer is simple as to why we must rock the boat.

Upon qualifying as actuaries, we have surpassed an impossibly high bar that leaves lots of disappointed aspirants on the other side. As the proud owner of this gleaming shingle, actuaries then discover it’s not so easy to stand out from their actuarial cohorts. Yes, you have demonstrated superior technical expertise and discipline, but the majority of actuaries possess these qualities, and there are some smart cookies out there. May I suggest that nurturing creativity could be a way to leapfrog up the corporate ladder.

Having established that our formal education does not prepare actuaries to be creative, extracurricular activities are a great way to spark the creative juices. Cleese joined a theater group during his time at university, and the rest is history.

Examples of Actuarial/Financial Creativity

For actuarial pursuits, creativity will be in the eye of the beholder, and as such, the outcome is likely unpredictable. You might get promoted or be shown the door. Your work environment might not be compatible with a creative upstart. But remember, even regimented armies include elite fighting units that are required to be creative while tackling impossible missions.

An example of a holistically creative Fortune 500 company is 3M. 3M supports its 15% culture—where it encourages employees to set aside a portion of their work time to proactively cultivate and pursue innovative ideas that excite them. 3M employees get the space to try something new and different, think creatively and challenge the status quo.

What does creativity mean to me? There is no neat answer to this question, but I want to share my top three actuarial creative milestones that personally wowed me during my 36-year career.

  1. James Anderson is credited with developing the concept of discounted cash-flow testing for pricing life insurance and determining the value of life insurance companies. Around that time, I was an actuarial student in London, and our consultancy was the leading firm executing his groundbreaking methodology. Prior to cash-flow projections, commutation functions were the only game in town. The development of discounted cash-flow testing was a giant leap for actuarial-kind. I shudder to imagine the lengthy calculations the analysts at the first recorded life insurer, the U.K.’s Equitable Life, had to do back in 1762.
  2. An Asian insurer modified its health claims reimbursement form to request data commonly found on an underwriting application form for life insurance (height, weight, medications taken, etc.). Then with its clients’ updated health records, the company uses artificial intelligence (AI) to decide if the claimant could receive their health claim reimbursement together with an offer for guaranteed issued life insurance or a simplified accelerated underwriting process to secure life coverage. This “claims as a business” objective is twofold: increase life sales and give the claims manager a sales target that ensures they deliver the best claims payment service to close the sale for a happy customer.
  3. I was at the head office of my reinsurance employer, and the financial director was presenting the quarterly results. I was prepared to settle in for a run-of-the-mill presentation, and lo and behold I was treated to an out-of-the-box presentation that did not include any numbers. At first, I thought the initial nonnumerical slides were defective, but then I slowly began to understand the greatness of his endeavor. He creatively selected graphs and visualizations to highlight the important features of the financial data without any numbers. I was blown away.

My “wow” actuarial moments ranged from admiring the departure from commutation functions, to learning about a hybrid life and health product that both increases sales and motivates the claims unit to deliver an enhanced client experience, to witnessing how a financial presentation can be nonnumerical. Creativity is diverse.

Tips on How to Be Creative

Creativity is a combination of having external stimuli and the time to reflect upon them. You must also have a deep desire to develop your creative side and the willingness to elicit and listen to feedback. Here are some of the ideas I gleaned from Cleese and others:

  • Undertake extracurricular activities that have nothing to do with actuarial science, math or anything that you consider to be within your comfort zone.
  • Have a circle of friends that embodies diversity. Hanging out with people who have opposing ideas or different cultures can expand your horizons.
  • Test out new ideas on a variety of colleagues. If their feedback helps you modify your original ideas, test your revised ideas again on a different set of colleagues to get fresh viewpoints.
  • Regularly schedule quiet time and ensure there are no interruptions. Cleese opines that an open floor plan office is anathema to the creative process. Quiet time should emulate how a kid treats their play time—no agenda, no objective, no stress. For a child, there is no such thing as unproductive play.
  • When you attempt to modify an idea but are having a mental block, go and sleep on it—literally. In the morning, you generally will see your idea in a different light.
  • My favorite lesson is: Don’t deliver your project a minute before the deadline. Prepare the work well in advance, but don’t hand it in right away when you complete it. It’s likely you subconsciously will think of ways to improve your assignment during this extra time.

101 Actuarial Creativity Project

For readers who have reached this far and are chomping at the bit to find a new project upon which to unleash their creativity—where do you start? International Financial Reporting Standard (IFRS) 17, underwriting using AI, developing intermittent insurance, leveraging blockchain—the list is limitless.

First, however, I propose a less heady but still challenging endeavor. For future reports, try to write a readable executive summary that even a teenager could understand. The inclusion of graphs and images would be most welcome, and the introduction should address the problem you are trying to solve and advantages and disadvantages of your solution. It’s only the executive summary, so downside is limited. And think about the upside—the C-suite might actually start understanding the importance of your work.

Don’t Sweat the Small Stuff

Of course, the key to being creative is being less risk adverse. This will help you stop focusing on the downside risk at the expense of overlooking the upside potential and will make you feel more comfortable standing out from the crowd. But be warned that making this mindset transformation might entail a considerable amount of therapy.

As a starter, I recommend viewing the 2004 film, Along Came Polly, which has risk transformation as its plot. Rueben, a risk-adverse life insurance analyst, meets Polly, a free-spirited wanderer who helps him confound his paranoid neuroses. They go on to live happily, albeit in a more uncertain future.

In conclusion, to foster creativity in the workplace, we need to encourage more uncertainty and boldness. Instead of an environment that rewards certainty and cowardice, the one who dares wins.

Ronald Poon-Affat, FSA, FIA, CFA, MAAA, is life and health director at the IRB Re, based in Rio de Janeiro, Brazil. Ronald is co-editor of SOA Reinsurance News. A past SOA Board Director, he was recognized as an SOA Outstanding Volunteer and is recipient of the SOA Presidential Award.

This article tried to creatively make the lessons from John Cleese’s presentation relevant to actuaries. Feedback regarding if I came close to meeting this objective would be most welcome.

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.

Copyright © 2022 by the Society of Actuaries, Schaumburg, Illinois.