Working Together

Photo: iStock.com/36clicks

Whether working in the insurance industry, management consulting, banking or other industries, actuaries regularly interact with other business functions that often span a wide range of professions. In this article, a panel of nonactuaries who have experience working with actuaries provide their perspectives on what they enjoy about working with actuaries. They also share ideas about how actuaries could work more effectively with their business function and other topics related to working across functions.

The panelists are:

• Glenn J. Veneziano, a director of Systems Development at a large life insurance and financial services company with extensive experience in finance, reporting, operation and system processes
• Megan Morley, CPA, an advisory manager at Deloitte & Touche LLP with experience in the financial services industry
• Anonymous, an external reporting lead at large U.S. life insurer
• Matthew Campo, a financial advisory senior manager at Deloitte with experience in the insurance industry

In what capacity have you worked with actuaries?

Veneziano: I’ve been working with actuaries for more than eight years, mostly in corporate actuarial for a large life insurer and financial services provider. I have been with my company for more than 20 years, and over the course of that time, I’ve worked across all facets of the enterprise, which has been a great value when assessing how current technology and infrastructure can be leveraged or expanded to achieve the goals of the actuarial community.

Morley: I have worked with various insurance firms in an advisory capacity, assisting with technical accounting implementation and internal controls compliance. Over the course of these long-term projects, I primarily assisted the finance function, but I also worked closely with my clients’ actuarial personnel. While I have coordinated with actuarial teams to enhance the performance and documentation of internal controls, my most substantial work with them has revolved around the detailed review and conversion of new actuarial data sets into an accounting-friendly format. Through this work, I coordinated with actuarial teams to become familiar with the properties and nuances of their data warehouse and worked with them to resolve data issues.

Anonymous: I have worked with actuaries in a variety of different roles, including as part of capital-related transactions, long-duration targeted improvements (LDTI) implementation and in the review/update of quarterly results both for actual and forecasting purposes.

Campo: I’ve had the opportunity to work closely with actuaries throughout my entire career. When I first joined Deloitte, I worked on the audit of one of our largest life insurers and had the chance to team up with actuaries in scoping our audit procedures, walking through client processes and performing detailed testing of actuarial balances. After several years, I transferred to our advisory group and have since had the chance to work with our actuarial associates in an advisory capacity, working with our Deloitte and client actuarial teams to solve complex accounting and actuarial policy/methodology challenges, implement new policies and optimize business processes.

What do you like most about working with actuaries?

Veneziano: The best advice I ever received about working with actuaries is that silence is sometimes a good thing. Typically, when asking a question of another person or group, silence on the other end often means that you need to rephrase your question. What I now understand is that when I ask a question of an actuary and don’t receive an immediate response, it’s because they’re thinking.

Actuaries are very analytical and often want to take their time in responding, so they can process their thoughts and run through various scenarios in their head. I’ve adjusted my thinking from wondering “why aren’t they answering?” to knowing that silence is good. Along those same lines, don’t assume silence means “yes.”

I enjoy working with actuaries a great deal. Coming from a banking, finance and reporting background, actuaries have taught me to think differently and view things through a different lens: not just here’s the number, but also here’s how you get there through predictive analytics.

Eight years of working with actuaries has resulted in people asking me if I’m an actuary. I always say: “No. To me, mortality means you’re dead. An actuary will give you the 25 reasons why you died.” For me, it’s important not to pretend to be an actuary because it would be disrespectful to their education and unique skill set.

Morley: The actuarial function is a pivotal part of an insurance organization—given it serves as the ultimate source for actuarial data, upstream from its finance counterparts. While the finance function can review actuarial output from an accounting and finance perspective, it ultimately relies on the actuarial teams with regard to the accuracy of models and valuation systems. Actuaries therefore provide great insight in that they can explain the “why” at the core of a number and its fluctuations. The complexity of actuarial calculations also dictates significant attention to detail from actuarial teams, which is advantageous in discussions with the finance function and often requires drilling into a specific component of the larger data set.

Additionally, in addressing various actuarial and finance requirements, I have found that actuaries approach the problem-solving process with an open and adaptive mindset. Rather than remaining rigid and committed to an old, familiar approach for a given process, actuarial teams are willing to consider all angles to a problem and are open to changing the process to best meet evolving needs.

Anonymous: The actuarial team has a deep understanding of the underlying numbers that feed financial statements and how they manifest into patterns and results.

Campo: No one in the organization is closer to the business, underlying earnings patterns and expectations around future business than actuaries. They have deep insights into the key drivers of an insurer’s finances and play a critical role in assessing performance and setting organizational strategies based on the emerging trends they see. Their fundamental understanding is critical to the organization, as the insights that actuaries bring cannot be produced by other business functions.

What do you wish actuaries knew about working with your business function?

Veneziano: The downside of the highly analytical mindset that actuaries have is that sometimes, teams with actuaries can get paralyzed by all of the possible cases and scenarios involved in making a business decision or designing a system (including something that happened once 10 years ago). I appreciate the actuaries who are able to table set or prioritize upfront which scenarios are most relevant or likely to happen to help the project move forward.

I’ve been working on a transformation project recently with both actuarial and finance that is related to the new regulatory requirements associated with LDTI. It has forced the actuaries to learn finance’s needs for reporting, reconciliation and ledger booking, and it has forced finance to learn what actuaries need to do their analysis. It’s a two-way street and a nice culture change.

Morley: Given the regular coordination required between finance and actuarial functions, a strong partnership between the two is crucial. When collaborating, it is valuable for actuarial teams to consider which concerns are top of mind for finance.

Often equally important to the actual performance of detailed and regimented processes is the documentation of the associated procedures and controls. The proximity of the finance function to auditors makes SOX compliance a key finance priority, but the need for thorough documentation extends to every department and offers additional value outside of compliance, facilitating better transparency and standardization.

Additionally, to utilize time and efforts most effectively, actuarial teams should be mindful of the materiality policies applicable to the finance function. While the actuarial function may have its own thresholds and policies to consider, the finance materiality policies should frame discussions between the two functions and guide prioritization of tasks and issues.

Anonymous: The most successful actuaries with whom I’ve worked are those who can simplify or “dumb down” technical actuarial concepts for an audience without an actuarial background. Some actuaries are able to do this really well, while others could practice this more to help improve communication between functions. They also need to understand the end result of their work product (i.e., how something is conveyed to external audiences).

Campo: Because actuaries possess such a deep understanding of the business and have the ability to drill into the details, it can be challenging for an executive audience to fully grasp the nuances of the underlying drivers. This can create challenges for certain stakeholders who don’t “speak that language” and may inhibit the ability of some insights to come forward and be understood by those who need to be aware of them.

Could organizations benefit from more interaction between business functions and less operating in silos?

Veneziano: Absolutely, there will always be a uniqueness to each business; however, the benefit and real value you can achieve is identifying where similarities can be leveraged across those organizations while still maintaining the ability to specialize for unique business needs. It’s a balancing act, but if performed correctly, it will bring diverse, flexible and valued solutions to your customers. Challenges come in all forms, and being able to adapt and improvise will allow you to overcome those barriers—especially if you allow yourself to consider options outside of your immediate world.

Morley: Productive communication between functions in an organization can enable significant efficiencies relevant between different functions, such as actuarial and finance, as well as across business areas within the same function. The primary benefit in enabling communication between the actuarial and finance functions is the time savings associated with expediting essential discussions and issue resolution, while the primary benefit of communication between business areas is the avoidance of recurring issues, especially if the same processes and workflows are applicable.

In facilitating greater communication between functions, the most notable hurdle to overcome is “translating” the language of another function. While a finance team member may be interested in understanding the nature of a particular ledger account, providing the ledger account number to an actuary for explanation may not be helpful for a productive conversation. If the actuary is not familiar with the ledger, the question instead will need to be framed around the applicable model or valuation system. Team members are empowered to have productive cross-functional conversations if they can speak the basics of the other’s language.

Anonymous: The more the two teams collaborate, the more they can understand one another’s processes/perspectives and try to link those processes. This results in significant time savings and less frustration by each of the respective teams.

Campo: Many insurers are extremely rigid in their interactions. Improved collaboration between finance and actuarial teams can ensure that all stakeholders are well-informed of how the business is performing and effectively set a vision for the future.

Has virtual work made it easier or harder to work with other business functions?

Veneziano: The recent pandemic forced individuals and businesses to work virtually whether they were ready, willing or able to function that way. It didn’t matter—you had to adjust on the fly. As with any project, there are challenges, so how quickly you accept the situation and are willing to adapt your approach will determine your path of success.

I’m a people person, so I enjoy interacting with individuals and developing a connection to better understand their needs and expectations. For me, working from home adds another layer to trying to build or even expand upon business relationships. In the end, you must be sincere and honest in your approach and presentation because that is what will ultimately filter through to your business partner. I learned long ago that you should be truthful with your opinion because you can’t fake sincerity, and that applies whether you are in the office or working remotely.

Morley: While many of us discovered that virtual work makes collaboration with colleagues more challenging in that discussions generally need to be scheduled rather than happening spontaneously, I have not experienced this same challenge when collaborating across functions. Depending on the layout of an organization’s office, functions such as actuarial and finance often sit in completely different areas. In this case, not many spontaneous, cross-functional collaborations were lost in the migration to a virtual work environment. Instead, the virtual environment provides greater accessibility to others. Similar to the way the virtual work environment allowed an international colleague to feel just as accessible as a colleague in our home city, colleagues in other functions are often more accessible than in their original work environment.

Anonymous: I don’t think it’s had a big impact for me personally. I’ve always been a big believer in virtual work and relationships, and there’s still plenty of room for improvement working in the office and remotely.

Campo: At the beginning of the pandemic, the shift to a virtual environment made it more challenging to maintain the same levels of collaboration that we saw in the office. However, as people became more familiar with the tools available to them—leveraging videoconferencing, shared documents and other informal communications—I’ve seen us get back to the levels of interaction we saw before the COVID-19 pandemic hit.

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 © 2021 by the Society of Actuaries, Chicago, Illinois.