Getting Schooled

Educators explore various ways to teach the future actuary and push the boundaries of the profession DANIEL BAUER, RICHARD CRABB, GORDON ENDERLE, EDWARD (JED) FREES, PAUL JOHNSON, KIRK PETER, MARJORIE ROSENBERG AND PENG SHI

With the availability of big data and advances in analytics, the actuarial profession is evolving. Simultaneously, colleges and universities are evaluating and implementing changes to their curricula and co-curricular activities to best educate future actuaries. While the Society of Actuaries (SOA), the Casualty Actuarial Society (CAS) and other actuarial organizations provide education for analytic methodologies through the exam process, technology-related skills and soft skills are part of university activities.

Using the University of Wisconsin–Madison (UW–Madison) actuarial science program as a case study, this article considers different aspects of educating the future actuary, implications for the profession, and how colleges and universities can best help students prepare for a rapidly changing job market.

Not all actuarial programs follow the same fundamental curriculum. Actuarial science programs can be housed in different areas of a university, and this can greatly influence the courses offered. For example, the actuarial program at UW–Madison is housed in the School of Business, while many other actuarial science programs are based in mathematics or statistics departments. Also, many successful actuaries graduate from colleges and universities that have no formal actuarial program.

Goals of an Actuarial Program

While each program may be structured differently, actuarial science programs in general can cultivate and disseminate ideas related to strategic risk management, decision-making under uncertainty, business analytics and actuarial science.

The stated goals of the UW–Madison program are:

  1. Recognize and explain the concept of risk, and apply the knowledge to the development of insurance products that are used to manage risk for the consumer as well as the risk of those products on the insurance organization.
  2. Be familiar with the actuarial profession, including the major professional organizations, the professional obligations of being an actuary, and the requirements to obtain and maintain a professional actuarial designation.
  3. Demonstrate skills in critical thinking, quantitative analysis and communication, as well as develop an appreciation for actuarial theory, research and the link to practical application.
  4. Practice the soft skills of being a business professional.
  5. Communicate student experiences and inspire others across the school.

These goals in aggregate help shape the educational core of the future actuary and help students deal with a diverse and ever-evolving landscape of actuarial job opportunities. Achieving these goals can be accomplished through different mechanisms, including directly in the classroom, through actuarial club activities and through other activities outside of the classroom.

Education Inside the Classroom

To successfully educate the future actuary, classes can focus on more than just the core exam material. Successful courses allow students to achieve the higher order of thinking skills of Bloom’s taxonomy for educational outcomes, which involves evaluation, synthesis and analysis.1,2 Passing actuarial exams is a secondary outcome of classes. The primary goal of learning in the actuarial science courses is to engage students to develop their critical-thinking and problem‐solving skills. The combined knowledge of the material itself, along with critical-thinking and problem-solving skills, allow students to pass actuarial exams. The higher order thinking skills are a critical aspect of educating the future actuary, as actuaries are expected to be strategic and critical thinkers at their companies. Teaching only to the exam material may not provide students with the creative and adaptive real-world abilities that will be most helpful to them over the course of their careers.

To assist with this goal, actuarial science programs can use unique methods to teach course material and expose actuaries to relevant aspects of their future career while still learning core actuarial concepts.

Using Relevant Actuarial Software
At UW–Madison, classes use Excel assignments in interest theory, life contingencies and loss models to help solve problems. Knowing Excel allows the student to “picture” concepts through graphs, such as by changing interest rates or mortality rates to see the impact on the accumulation of funds or the price of a product. Additionally, every class from interest theory to analytics uses the software R to perform some aspect of the coursework. In the interest theory classes, R can be introduced so students can compare results from R to those from Excel. The repetition of using R across classes breeds a familiarity so that when students arrive at a class that really needs to use R, such as regression, they are better prepared and not as overwhelmed. Using multiple software programs to approach the same problem also teaches valuable lessons with regard to real-world model validation techniques.

Learning regression or other machine learning techniques requires hands‐on work—integrating the use of programming languages to connect to the course material. Without the hands‐on portion, the concepts are often not well understood. For example, the UW–Madison regression class incorporates a hybrid learning environment where there is some lecture and some R work done in class to reinforce the concepts presented. Also, the health analytics class is designed in an interactive way with tutorials that guide students through the material. These interactive classes allow for teaching R in context rather than having a separate course that only teaches how R works. These tutorials and supporting homework assignments enable students to use coding as a tool to get results—rather than be the result itself.

Communicating Technical Material
Both the regression and health analytics classes at UW–Madison stress the communication of the results to help reinforce learning. The classes are held in a collaborative learning classroom, where six students sit at each table. The group discusses R tutorials, which the instructor then reinforces to ensure comprehension of the material. The additional benefit of this approach is teaching students how to communicate technical material. Being able to explain a concept to one’s technical peer is one thing, but being able to explain and justify the appropriateness of results from a regression model, or why the particular approach taken is appropriate, to a person not knowledgeable in the analytics material demonstrates clear knowledge of the material.

Presentation and Business Writing Skills
Both of these analytics classes also require a project that reflects the course material. The final deliverables for the project include a written report and a presentation to the class. Thus, in addition to defining the problem, collecting data, considering possible solutions and determining the best solution, students need to communicate—both in writing and verbally—their decisions to those who may not be as knowledgeable as they are in the subject matter. These reports represent the essence of the actuarial control cycle.

Research and Industry Trends
Classes can incorporate research and industry experience. The UW–Madison health analytics course is built around research in the health and health policy arena, and the regression class is taught by faculty who do research using these tools and can talk about their research to reinforce concepts. Interest theory and life contingency classes have been taught by faculty who have worked in the life and pension area, while the loss model courses incorporate practice and research in property and casualty (short‐term) insurance into the syllabus.

Students learn to communicate technical material not just to their peers, but also to people not familiar with analytics. This helps demonstrate clear knowledge of
the concepts.

Education Outside of the Classroom

While many aspects of an actuarial science program’s goals can be accomplished through coursework, other activities, such as student‐administered activities and employer activities, provide added substance to achieving these goals.

Actuarial Club Involvement
Leaders and members of an actuarial science club can develop organizational and communication skills, both in leading the club and by organizing, planning and hosting club functions. Older students mentor younger students through a student-run mentoring program. Students can learn planning, project management and organizational skills by assisting in the designing and directing of the annual actuarial career fair, year-end banquet or other program-sponsored events. They can develop presentation skills by presenting to their high schools to promote the actuarial career. Universities also offer a number of opportunities for future actuaries to develop core business skills.

Opportunities to Teach Other Actuaries
In addition to club activities, future actuaries are given a chance to practice leadership and teaching skills via the Technology and Enhanced Learning (TEL) Project of the UW–Madison program. This work began as a SOA-sponsored project to develop online materials to provide additional help in understanding material associated with SOA/CAS exam P/1. Students teach other students by creating videos that are available worldwide. (Find out more.)

Exposure to Employers and Real-life Work
Exposure to employers through the actuarial club remains a key aspect of a successful actuarial education for students to learn about different areas of practice and being an actuary. The club sponsors events to allow students to gain exposure to the Student Code of Conduct and Actuarial Standards and their application in the workplace. Internships allow students to learn about the industry, and subsequent club meetings give students the opportunity to present their internship work experiences to their peers. These student presentations help reinforce knowledge of the industry and risk, and help develop communication skills as well as educate others about their experiences.

Centers of Actuarial Excellence

The program at the University of Wisconsin–Madison is one example of the well-rounded, comprehensive actuarial education programs offered at all Centers of Actuarial Excellence (CAE) universities. The list of current CAE universities is:

  • Australian National University
  • Brigham Young University
  • Central University of Finance and Economics
  • The Chinese University of Hong Kong
  • Concordia University
  • Drake University
  • Georgia State University
  • Heriot-Watt University
  • Illinois State University
  • Macquarie University
  • Pennsylvania State University
  • Robert Morris University
  • Simon Fraser University
  • St. John’s University
  • Temple University
  • Towson University
  • Université Laval
  • University of Connecticut
  • The University of Hong Kong
  • University of Illinois at Urbana-Champaign
  • University of Iowa
  • University of Manitoba
  • University of Melbourne
  • University of Michigan
  • University of Nebraska–Lincoln
  • University of New South Wales
  • Université du Québec à Montréal
  • University of St. Thomas
  • University of Toronto
  • University of Waterloo
  • University of Wisconsin–Madison
  • University of Wisconsin–Milwaukee
  • Western University

For more information about the Society of Actuaries (SOA) CAE program, the benefits for the actuarial profession and international development, read “CAE: Looking Back on 10 Years of Excellence” in this issue of The Actuary.

Education via Case Study
Actuarial programs could create an external board of industry representatives to help coordinate activities for students to expand their knowledge of the profession and the workplace. At UW–Madison, the Co‐curricular Learning Board has sponsored case competitions that involve students quickly planning their response to a specified problem and presenting that solution. Other activities supported by this board include the use of marketplace simulations that introduce students to the impact of decisions for a particular company in the face of competition in the industry.

Increasing the Diversity of the Actuarial Talent Pool
Actuarial programs and industry actuaries are integral to making a more diverse and inclusive pool of students aware of the actuarial profession. Examples of this include reaching out to minority and low‐income students who are interested in a career in science, technology, engineering and mathematics (STEM) through a presentation at a local college, an informational on‐campus lunch and email communications. Younger students are made aware of the role of an actuary, the characteristics and functions of actuaries, and the concrete steps to take to begin an actuarial career. Colleges and universities, along with industry professionals, can help create a more diverse candidate pool for the actuarial profession. Ultimately, the goal is for greater diversity among future actuaries to lead to a more inclusive profession and more creativity and innovation in the assessment and management of financial risk.

Additional Considerations

Educating the future actuary is a constantly changing process. The previously discussed examples inside and outside of the classroom can help develop a diverse, adaptable, well-prepared generation of actuaries. But there are areas that need to continue to evolve.

Focus on New Technologies
Many companies will place actuaries and data scientists in roles where they will work directly with nascent technologies and tools such as machine learning, artificial intelligence (AI), cognitive automation and blockchain. Actuarial programs can adjust to ensure their graduates have a requisite background in cutting-edge technology.

Encourage Participation in “Additional Skill” Development
There are a considerable number of activities at UW–Madison where students can learn about the profession, develop leadership skills and improve their communication. However, participation rates of students in activities can be low, as many activities compete for their time.

Students may also get mixed messages—from other students or employers—about the trade‐off between passing more SOA/CAS exams and spending more time on learning other subject matter or building other skills. With their “extra” time, students could instead take classes outside of their major or participate more in other activities that develop other aspects of their character rather than focus primarily on passing another actuarial exam.

Be Clear on the Value of “Additional Skills”
Students may pressure professors to structure classes primarily for the purpose of passing SOA/CAS exams. They may ask, “Why in our regression class are we learning R?” Or “Why are we spending time on a project?” Some students may think it is better to spend time in class solely preparing for questions on the new Statistics for Risk Modeling (SRM) exam. While there are no questions on the preliminary exams in which knowing Excel or R would directly benefit students, students would benefit from knowledge of R and from completing a project in class for their future work as an actuary as well as for the new Predictive Analytics (PA) exam or the ASA modules.

Employers can also help when they interact with students. When university faculty connect with employers, the employers are clear that they want to hire students who can think critically and solve problems. They want students who can pass exams, but they are not necessarily looking for students who are close to becoming an associate in an actuarial society. If students see their peers graduating with more passed exams and with multiple majors, they may feel they are at a competitive disadvantage if they do not keep up similarly—even when that is not the case. Students would benefit greatly from hearing thoughts directly from employers and understand what employers value in a new hire.

Conclusion

In the end, we want to remember that these young adults are college students. Part of the growing-up process is figuring out how to balance their time. We want them to do well in their classes. We want them to participate in actuarial‐related activities. But we also want them to explore the world beyond the actuarial realm. It is healthy for students to learn other subjects and spend time with others outside of their actuarial group. It is healthy for students to have fun.

To continue to develop successful generations of future actuaries, universities will continue to explore ways of improving the educational experience of their students. One successful approach to educating students inside and outside of the classroom is to promote their growth as individuals. Schools can:

  1. Continue to take advantage of advanced technology to improve student learning.
  2. Incorporate several analytics courses in curriculum with a business perspective to consider the challenges and opportunities of big data in the insurance industry.
  3. Capitalize on academic–industry partnerships to develop applied learning experiences for students.

If colleges and universities continue to push the boundaries of an actuarial education, future actuaries will be able to push the boundaries of the profession.

This article was a collaboration of efforts by the following actuarial faculty at UW–­Madison.

Daniel Bauer, Ph.D., is an associate professor of Risk and Insurance in the Wisconsin School of Business at the University of Wisconsin–Madison, and the Hickman-Larson Chair in Actuarial Science.
Richard Crabb, FCAS, is a lecturer in the Risk and Insurance Department of the Wisconsin School of Business.
Gordon Enderle, FSA, EA, MAAA, is the director of the Capstone Certificate Program in Actuarial Science in the Risk and Insurance Department of the Wisconsin School of Business.
Edward (Jed) Frees, FSA, Ph.D., is an emeritus professor in the Risk and Insurance Department of the Wisconsin School of Business.
Paul Johnson, Ph.D., is is a lecturer in the Risk and Insurance Department of the Wisconsin School of Business.
Kirk Peter, FSA, is a faculty associate in the Risk and Insurance Department of the Wisconsin School of Business and is the faculty adviser of the student-run actuarial club.
Marjorie Rosenberg, FSA, Ph.D., is the Assurant Health professor of Actuarial Science in the Risk and Insurance Department and the Michael E. Lehman Distinguished Chair for Inspired Learning in Business at the Wisconsin School of Business.
Peng Shi, FSA, ACAS, Ph.D., is an associate professor in the Risk and Insurance Department and the Charles & Laura Albright Professor in Business and Finance at the Wisconsin School of Business.

References:

  1. 1. Bloom, B. S. (ed.). 1956. Taxonomy of Educational Objectives, Handbook 1: Cognitive Domain. New York: McKay.
  2. 2. Anderson, Lorin W., David R. Krathwohl, Peter W. Airasian, Kathleen A. Cruikshank, Richard E. Mayer, Paul R. Pintrich, James Raths, and Merlin C. Wittrock. 2001. A Taxonomy for Learning, Teaching, and Assessing: A Revision of Bloom’s Taxonomy of Educational Objectives, Abridged Edition. White Plains, New York: Longman.

Copyright © 2019 by the Society of Actuaries, Schaumburg, Illinois.