Actuaries Living Longer

Adapting and preparing for a century-long life and actuarial career Jay M. Jaffe February/March 2020

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Photo: Shutterstock.com/Triff

If nonactuaries are living to age 100, certainly actuaries also should look forward to and prepare for this same life expectancy.

The Society of Actuaries’ (SOA) Living to 100 Symposium inspired me to write this article, and so did attending a 100^th birthday party where the birthday boy was a very active centenarian whose list of current activities included studying Einstein’s Theory of Relativity.

The third and final event that inspired me to formally draft my thoughts occurred recently when I read an article titled “The Corporate Implications of Longer Lives” by Lynda Gratton and Andrew Scott, two professors from the London Business School.¹ This article explained the ongoing transformation of the work environment from a three-stage to a five-stage model, and the implications of this transformation for both employees and employers.

Gratton and Scott identified changes that will occur in our working lives. In particular, they presented a new five-stage working model that will likely significantly impact the type and content of continuing education (CE) for actuaries.

The Three-Stage Model

The work model in which most of us have grown up is described by Gratton and Scott as a three-stage model:

1. Education (in childhood through young adulthood)
2. Our work lives
3. Retirement

While these stages are not entirely self-contained, they broadly describe the logical and familiar compartments of 20^th century life stages.

The Five-Stage Model

Over the course of the past few decades, a new and more nuanced five-stage work life model has developed to reflect the realities and needs of 21^st century workers:

1. Education
2. Exploration
3. Employment
4. Transition
5. Retirement

In both the three- and five-stage models, the initial period pertains to education. While today’s core subjects and how they are presented to students have changed, for the most part, we still spend our early years becoming educated and preparing to move to the next phases of our lives.

Stage two (exploration) encompasses the period of time from teenage years to young adulthood. There is now time built into life’s stages for more people to “explore” their futures. A key reason for an exploration stage is the prospect of a much longer life expectancy as well as being better able to enjoy the longer life. For example, marriage and family commitments are occurring later, allowing us to “find ourselves” before we “settle down.”

Our employment years (stage three), while similar to that period of our parents’ and grandparents’ lives, have definitely changed. Gratton and Sutton explain that in the three-stage model, employers promised “tangible assets,” including a tiered earnings and tenured work structure, which was followed by planned employee termination supported by (usually defined benefit) retirement income plans. (An example of tiered earnings from our own profession is that actuarial students usually receive salary increases for passing exams.)

Gratton and Sutton observe that in the new five-stage employment model, we are more likely to exist in an employer-centered model that values and places the emphasis on intangible assets such as knowledge, skill acquisition and lifetime learning rather than following the previous and more programmed path that accompanied the tangible assets promised by employers.

Stage four of the model is a new phase called “transition.” Our longer life expectancy means that during this next phase of our lives, we have both more problems and opportunities while we are still healthy and able to function independently. Transition may even begin during stage three for many people, but it more than likely takes place when we:

• Begin to encounter life crises (e.g., when our parents face end-of-life issues and need our help).
• Make a change in our work life—either by choice or by being forced out (includes the option for self-employment).
• Out of necessity or opportunity become engaged in a mix of both paid and unpaid (volunteer) work to keep ourselves active, which is often without the need of income to provide for life responsibilities (e.g., college tuition for our children).

Retirement, or stage five, differs from what our parents and grandparents experienced and can be separated into two distinct sub-phases. For simplicity, retirement phase one refers to those years when we are free of serious health issues and can enjoy the many new freedoms of retirement. Retirement phase two is the end-of-life period that none of us is eager to face but knows is coming. Hopefully, for most of us, retirement phase one is long and enjoyable.

Implications of the Five-Stage Model for Actuaries

Professionals, including actuaries, must recognize that the new five-stage environment is the outgrowth of multiple factors. Any single factor may or may not impact the professional life and career of an individual actuary, but as we progress during our working years, we are likely to run into one or more of the following:

• Work life expectancy has increased beyond age 65, and many people continue actively working until age 75 or later.
• If an individual is financially and physically prepared and able, retirement may be optional rather than mandatory.
• An individual is likely to hold more positions during their career than in the past.
• Some skills acquired during a successful career may no longer be valued.
• Product and/or technical expertise can become obsolete.
• New technology skills will be required for continued employment.
• Loyalty by both employers and employees is likely to lessen.
• Personal flexibility and lifestyle choices may become driving forces.
• Employment self-dependence may be necessary (e.g., the gig economy).

This list means the actuarial profession and individual actuaries must prepare for the realities of the five-stage life model. Practicing as an actuary will require continual rather than point-in-time CE and personal reinvention. Successfully navigating the five-stage model will no longer be comprised of distinct periods of time for accreditation, working and retirement—it will be necessary to think about being prepared for the next phases of our lives prior to entering each new phase.

Harari’s Observations

In the book 21 Lessons for the 21^st Century, the historian Yuval Noah Harari identifies the “four C” skills that will be needed in the 21^st century:

1. Critical thinking
2. Communication
3. Collaboration
4. Creativity

Harari then provides his personal advice for what he predicts are the keys to living life in the 21^st century. First, he recommends downplaying technical skills and, instead, focusing on developing general purpose life skills. Next, he stresses being prepared to deal with change, learn new things and be able to preserve our mental balance in unfamiliar situations.

Finally, Harari presents one further piece of advice if you intend to be around in the year 2050. Simply put, he makes it clear that it is now necessary to reinvent yourself again and again to be a part of our new world. This means that today’s actuary is not going to be tomorrow’s actuary.

To help remember Harari’s tidbit of advice with a real-life example, recall that years ago venerable General Motors was faced with reinventing its Oldsmobile line of cars. Its approach was to create a new image for its products using the short message that it was no longer selling “your father’s Oldsmobile.” Postscript, after more than a century of production and even recognizing that it needed a new image for the Oldsmobile, General Motors faced reality and stopped Oldsmobile production in 2004 because the public no longer valued this car. Actuaries, too, are potentially vulnerable to being left behind if they do not possess the skills that future markets will demand.

CE > 2020

The actuarial profession’s formal CE programs are relatively recent additions to our profession. However, these requirements now need to be re-examined to be certain they provide both the needed and maximum value in a five-stage environment.

To be relevant in the five-stage environment, CE must:

• Begin early during an individual’s actuarial career.
• Become deeply embedded into the actuarial culture.
• Encourage actuaries to exceed any minimum CE requirements.
• Be recognized by the public as being credible and valuable.
• Accommodate both personal and employer interests.
• Make the study of “bleeding-edge” topics qualify for CE credit.
• Stress knowledge growth as a basic element of CE.
• Be knowledge-based rather than an hourly-based education standard.

A CE > 2020 program for a five-stage world that increases professional competency, adds skills that will ensure the prominence of the actuarial profession, provides individual actuaries with a lifetime of enjoyable employment, and even extends beyond formal retirement, will need to:

• Emphasize the core education areas and skills that are likely to be needed by a practicing actuary in the future (including Harari’s four Cs).
• Extend the CE qualification cycle to two or even three years so actuaries can participate in activities that build technical skills that will be needed in the future rather than elect programs to meet a specific number of hours of activity during each calendar year.
• Encourage and allow CE credit for activities that greatly expand an individual’s skills and professional competencies beyond an actuary’s current career needs and responsibilities.

The current CE program for actuaries cannot and should not be scrapped, but there should be a commitment by our professional organizations to begin enlarging the scope of our present system to permit an alternative path that aligns with the five-stage work model in which we now and will in the foreseeable future live, work and play.

A Custom Future

In a five-stage world that places more value on intangible rather than tangible employee assets, CE cannot resemble a pair of socks that is one-size fits all. CE will need to become customized to accommodate the needs and interests of individual actuaries. To meet the multiple needs of actuaries, actuarial CE will need to be constructed to correspond directly to these four actuarial career stages:

1. The period following professional accreditation
2. The “working years”
3. The “winding down” years
4. Retirement

One suggestion is that any actuarial CE > 2020 be clearly aimed at each of these work life stages. The description of any qualifying CE activities offered should begin with a short explanation as to why an offering is intended for a specific career-stage participant (in the same manner that announcements now indicate the recommended level of expertise and/or experience assumed for a participant in an activity).

To provide optimal high-quality CE options for individual actuaries, the profession should consider working with a select group of academic institutions to create special programs tailored to the four identified actuarial career stages. The selected institutions may or may not be schools that are currently designated as Centers of Actuarial Excellence. These CE programs would include “bleeding-edge” curricula that require lengthy study periods by the participants. Academic bodies are “idea factories” that will expose actuaries to skills and knowledge that will become de rigueur during the coming years and minimize the need for an individual actuary to play educational “catch up” in order to remain competitive with recently qualified actuaries and other professionals.

Living in a five-stage work life world will present challenges for both individual actuaries and actuarial educational organizations to remain professionally relevant and develop more of the intangible skills that will be necessary in the future. The actuarial profession must provide its members with a structure for CE > 2020 that not only will be available to actuaries starting careers in the near future, but also will address the needs of more “mature” actuaries. CE > 2020 must satisfy the needs of individual actuaries and ensure that practicing actuaries meet the expectations of the public and our employers that depend on and use our professional services.

Continuing education is a basic ingredient of any profession. Not only must a profession have a CE requirement, but, additionally, it must incorporate an implicit—if not an explicit—obligation to guide its members to CE programs that add professional skills rather than those that simply meet the CE requirement based on hours of participation.

An expanded CE system—such as proposed in this article—will facilitate SOA members to actively and meaningfully contribute to the actuarial profession and our communities far beyond any historical normal retirement age and give a new meaning to the term “whole life insurance.” As is the case with the general population, centenarian actuaries will be the actuarial profession’s fastest growing group percentage-wise. The profession should plan for the reality that in the not too distant future, there will be at least a few—if not several—100+-year old FSAs still practicing their profession. Eventually, there might even be a new SOA section to serve the interests of these members. It will be called the “We’ve Lived to 100” section.

Copyright © 2020 by the Society of Actuaries, Chicago, Illinois.