Episode 89: Actuaries in Consulting

My guest for Episode 89 is Ron Kozlowski, FCAS, Lead Consultant at RTK Actuarial and Professional Services.

The theme for the episode is 𝗔𝗰𝘁𝘂𝗮𝗿𝗶𝗲𝘀 𝗶𝗻 𝗖𝗼𝗻𝘀𝘂𝗹𝘁𝗶𝗻𝗴.

Ron and I explore the following topics:⁣

✅ Deciding whether to be a generalist or a specialist
✅ Solving business problems and selling business as a consultant 
✅ Specializing in construction defect reserving 
✅ The importance of taking risk as an actuary 
✅ Working with meteorologists, seismologists, and engineers to develop catastrophe models 
✅ Evaluating class action damages for a building supply manufacturer 
✅ Developed and developing actuarial markets in Asia
✅ Software and bancassurance work in Asia
✅ Motor detarrification in China, India, and Malaysia
✅ Promoting general insurance actuarial practice in Vietnam
✅ The offshoring of actuarial work in Asia
✅ What actuarial judgment is, when to use it, and how to develop it 

If you are interested in learning about what it takes to be an effective actuarial consultant, you want to listen to this.

My Website: maverickactuary.com

Episode Transcript

(00:00):
Welcome to episode eighty nine of Livewith the Maverick. My name is Dominic
Lee, founder of Maverick Actuary.We are a content community. Our mission
is to maximize the impact and valueof quant professionals on a global scale.
The goal of this series is toeducate our community on the most relevant themes

(00:21):
in actuarial science, risk management andanalytics. The theme of today's discussion is
actuaries in Consulting and we are veryexcited to have with us our guest for
today's episode, Ron Kazlowski. Ronis lead consultant at RTK Actuarial and Professional
Services. So welcome run, ThanksDan, good to see you again.

(00:46):
Last time I saw you was atthe Caribean Actuarial Association meeting in Trinidad's a
fairly recent towards the end of theyear. The trip to the Caribbean is
always a tough one, right Yeah, Well, you know, I just
love to give you an opportunity tointroduce us those Okay, I'm going to

(01:06):
go a little bit through my throughmy background. So I started my career
almost forty years ago. I joineda company called the Life and Casualty.
While today you might think of itmore as a health company. Back then
they had a property and casualty arm. And one of the great things about
that was that they had a fantasticstudy program where you would you know,

(01:27):
get all your study time. You'drotate through different areas. Every twelve to
eighteen months, they'd rotate you intonew areas, so just when you felt
like you were learning something, they'dswitch you to a new one. And
there I had a chance to workon you know, personal lines and commercial
lines, both rate making, reserving, corporate actuary. Then in nineteen ninety

(01:51):
two I joined a company called Tillinghastwhich went through a number of name changes
to Towers Pair In they merged withTowers whose Utson. Then they I think
acquired emb and today they're known asWillis Towards Watson. But I happened to
resign the day they made that announcementor the day before, and I knew

(02:14):
nothing about it. But I workedfor a consultant for twenty three years with
them in Hartford, Atlanta, SanFrancisco, Hong Kong, and then back
to San Francisco. And then intwo thoy and seventeen I started up my
own actuarial consulting firm kind of wantedto have more choice over what I wanted
to do, and so I startedmy own firm. But I feel today

(02:38):
mostly what I do is volunteer forthe CS. I think it's a great
organization and I do all things Asia, so i'm the CS's Asia Ambassador.
I also do a lot on professionalismand planning conferences, both in the US
and international. And if you happento have seen the link in post that

(03:01):
the DOM had done, Andy Dalcommented on my fishing abilities. So I
do a lot of things outside actuarial. I love to fish, I love
to motorcycle ride, which might notbe typical for an actuary, but I
run, hike, and travel.And we had to do this call this

(03:23):
week because I'm off to raja Ampat, Indonesia to Snorkele for the next two
weeks because I want to see thecoral reef before climate change starts to affect
it. Wow, lots of interestinghobbies and activities there the the hiking and

(03:43):
he said, he said hiking right, running? Yeah, okay, yeah,
I think my last guest how thatis, so it seems to be
a train in the actual community.That's a good one. I think you'll
again you start to hike more.Yeah. Yeah, And I will mention
I allude to this earlier that ifyou're a okay with me saying this,
that run is you know, anhonorary adopted son of the Caribbean, So

(04:05):
he's an honorary member of the Caribbeanactuary community having been involved in with the
Caribbean or some time. No,so I just wanted to mention that anything
you want to say about that,no, you know, I mean the
Caribbean is it's always busy doing lotsof things on an international stage. They

(04:27):
have great volunteers, but they lacka lot of property casualty actuaries. So
I've been trying to tie them abit more with the CIS in terms of,
hey, we can do these things. And you know, during our
talk today we're going to talk alittle bit about some of the work I
do with other actuarial societies around theglobe. So it's a small lift to

(04:47):
ask us for help and we candeliver. So hopefully we'll see more.
I'm on their GI Committee and alsoon some of their climate change committee,
and so hopefully we'll do more forthe g I community. Excellent, So
let's get into it. I didn'tmention that the theme of today is today's
question is actuaries in consulting. Assomeone who's spent several years in the industry

(05:12):
as a consultant, you know,what are the key considerations in becoming an
effective consultant? We talk about impacton value with my brand, so this
is like right right up the valueof value, and you know was becoming
it being effective? Well, wecould probably talk about, you know,
what you need to be become agood consultant, and we could probably have

(05:32):
a podcast that would last about ayear. So I'm going to pick a
couple things. And I think oneof the things that I've always struggled in
my career is whether or not tobe a generalist or a specialist. So
I love learning new things, andall throughout my career at the ETNA and

(05:53):
even in my personal life, Ilike to do a lot of different things.
But one thing that I saw andevery once in a while refer to
it as Tilling Hast because that's thename that most dear and dear to my
heart, is that at Tilling hasto What I found was that the most
successful consultants tended to specialize, right, So there was a trade off of

(06:16):
how easily you could sell business asa specialist versus a generalist. And even
though I knew that, I kindof still preferred to be a generalist a
lot of time. So back inthose days at tilling Hast there were three
practice areas. Insurance corporate you know, companies like Levi, Strauss, et

(06:41):
cetera, and then professional liability clients, which were usually healthcare related physicians,
hospitals. And so I worked inone third in each of those areas,
and they kept trying to say youshould do one, and I would say,
well, you know, I loveall three. So and I love
some of the clients that I had. I also had a lot of sub

(07:02):
specialties during that time. I joinedTillinghast because I wanted to do M and
A work, but at that pointthere was no M and A work.
So I ended up going into catastrophemodeling, writing code, and you know,
learning about how to develop cap models. And then you know, I
liked the medical malpractice and working withphysician owned insurance companies. I mean,

(07:27):
if you ever have a client,a great client, it's going to be
doctors. That's what I found forthis and then the last thing which was
probably defined more of my career wasconstruction defects. But let me talk a
little bit about construction defects, andso I I in the mid nineteen nineties,
I started working for insurers and reinsurers, and then eventually, as you

(07:54):
know, the business wasn't very good, insurers and reinsurers were reacting to this.
They started raising the self insured retentions. So a lot of the large
homebuilders had retentions of five million orten million, and maybe they would have
that for specific states as compared tocountrywide. So started to eventually move over

(08:16):
into the homebuilders as well. SoI got to see everything from both sides,
which I thought was really really great. Now, one of the reasons
why CD is difficult is that thepast isn't always a good predictor of the
future. So there were things likeprecedent setting, legal decisions, jury awards,

(08:41):
changing policy forms, notice an opportunityto repair laws and all of those
things said you shouldn't just square atriangle. So there's also a really long
statute of repose that tends to beyou know, on the shorter side,
maybe six years, on the longerside, ten years. So you can
file claims for a long time,and generally the way you end up analyzing

(09:09):
construction defect is to break it intothe claims that are known already and then
the claims that are going to occurin the future. So you'll do more
of a report year methodology on reportedlosses, and then you'll use an frequency
and severity approach for ibn R.One of the things that I loved about

(09:33):
working at tilling Hast was that allof the offices work together, so they
had made a pack that on littleknown projects and things that required more depth
of knowledge, they would contact otheroffices and say, hey, you're the
expert in here, why don't youwork on this. So at tilling Hast,

(09:54):
over the years, I saw probablymaybe close to one hundred different insurance
companies construction defect reserves, and youknow, got to work on a lot
of them, got to peer reviewsome, got to be an advisor on
some, and that was really helpfulfor building a industry knowledge base. And

(10:22):
I think that was one of thethings that you know when we talk about
the generalist versus a specialist, Thatallowed me to be a specialist in construction
defects, and one of the otherthings that I did when working in that
industry was that it was really helpfulto attend conferences on construction, you know,

(10:46):
whether or not to learn new constructionpractices or you know, rub shoulders
with the risk managers. You justfound out a lot more of what their
concerns were, and oftentimes it wasn'tdirectly related to what I was doing,
but I was learning what was keepingthem up at night. And so,
you know, for those of youlistening in today, one of the things

(11:09):
I would say to really help yourcareer is to spend more time understanding the
business that you're analyzing. Don't thinkof it as just numbers, like really
go down and try to figure out, you know, if it's cars,
well, what are the new typesof cars? You know, how are
people dealing with electric vehicles? Andhow is the safety features changing? You

(11:33):
know, if you're working in retailor education, try to spend a little
time in those industries. And anotherthing I would say about consulting, and
I I have probably three more pointsto make, is that I think the
most successful consultants are good at solvingclients' business issues and problems. And there

(11:56):
was a certain gentleman used to workfor me. It was so good at
trying to relate the actuar work tothe client's issues. And I was just
really amazed out in that. Andthen I saw, you know a little
bit after that that Jessica Leung andSteve Armstrong, we're really trying to sell
this point across the cis to like, hey, we're not just math guys,

(12:20):
like we solve business problems. Soif you want to become a good
consultant, you need to figure outhow to solve business problems and relate it.
It's not just squaring a triangle forreserving, it's you know, what
are they worried about, what arethe risks, what are they doing?
What should they change? And onething I'd say is, whenever you do

(12:41):
in a report, always try toadd value. You know, I hate
compliance work, right, nobody reallyloves compliance work. I always tried to
figure out, okay, so somebodyneeds something, but how do I add
some value to it. So alot of times in our reports, I'd
always want to stick in a sectionthat would say that you know, hey,
maybe there was a book of businessthey know they should relook at,

(13:03):
or maybe we had to cut thedata differently or segment it something that would
provide value. Another challenge with beinga consultant is that somebody has to sell
the business, right and so peoplewho tend to sell, who have the
ability to sell as consultants, tendto do better. I mean there's things

(13:26):
like revenue credits and how you getpaid. But you know, even if
you're not a good seller, finda good seller to help sell your business.
And I think that's really important.And I've worked with some fantastic actuaries
that just didn't like to sell.So I would sell it and take them
along so that they could prove theyhave the expertise. But I would do,

(13:52):
you know, more of the selling. And that's something that I didn't
have early in my career, butlater in my career I really relish that
opportunity. And the last thing,which I won't talk in detail, is
you need great communication skills, rightwhether or not it's delivering the results,
whether or not it's staying in touchwith somebody, whether or not it's sending
them articles to say hey, you'rethinking of them. You need great communication

(14:16):
skills. So don are you readyto you know, re up as a
consultant. I mean technically, Ikind of. I'm a pseudo consultant.
No, because working in software presales, you know, I'm a part
of the sales cycle day in,day out. So but a lot to
unpack. There is a few things. First of all, love that call

(14:37):
out on solving the business problem.So both Steve and Jessica were former guests
on the podcast. I check outthose episodes. I remember the numbers,
Jessica, I think early twenties,the early thirties, A couple other things.
When you talk about the generalists versusspecialists, I'm glad you mentioned that
because that's something I've certainly struggled within my career. And I genuinely believe

(14:58):
a lot of bactuaries do. Iremember there's one Clris Seminar. I forget
who the person the men they usean analogy to talk about the actuarial value
prop and who actuaries are, andthe analogy he uses were like general contractors
so or not. So when ahouse is being built, we're not necessarily
the plumbers or the carpenters, butwe need to understand how the pieces come
together. And I think that wasa really good analogy, and I think

(15:22):
I might have interpreted it too literallybecause I think I've missed up the piece
about the specialists. I think thespecialization piece is really important. I guess
you could argue depending on the rolegeneralists versus specialists, you know, just
but I think the specialization has tobe there in something, and I truly
believe that. You know, specializationis a secret sauce, and you know,
people love to have go to people. One challenge that I've found,

(15:45):
at least from my insurance background,is that I found that people who are
subject matter experts tended to be compartmentalizedfrom people who were perceived to be leaders.
So I think sometimes people who endup specializing tend to get put into
a corner and sometimes don't get someof the leadership opportunity. So I'm hoping
that that changes and continues to change. Not quite sure what you thought that

(16:07):
what you observed in a consulting worlds. You know, I never worked as
an actual consultant, so kind ofque you know. I think you as
a leader of a consulting firm,you've got to recognize that you're not going
to know everything. So I thinkyou could take somebody and make them a
leader. One thing I really believein that the leaders of consulting firms shouldn't

(16:30):
just manage, they should also haveto sell business, do work, et
cetera, because then you understand,you know, some of the changes organizationally,
and you know some of the difficultiesthat you're putting your staff through.
So but I think, I thinkyou can be a leader and a specialist
at the same time. I agree, and I think the observation I made

(16:53):
was that sometimes it was compartmentalized.Sometimes the implication or insinuation, even if
not explicitly, the way that promotionswere, you know, puturely the people
who were just meeting, people whowant to be in meetings, the people
who had the deep expertise. Nogranted sometimes they didn't want to be in
meetings, but I think there's timeswhere you had people who probably had that

(17:14):
those capabilities or the potential, butthey weren't viewed as leaders. So I
fully agree with you. I thinkthat as a leader you should be able
to get into the details. Sometimes. Another thing you mentioned is the business
selling the business. And it's funnybecause ironically, I actually we just missed
each other because I started I interneduh Willis Tars Watson with my first internship,
so I guess I started right afteryou left. And I remember my

(17:36):
manager at the time he explained tome that that was a part of his
job is to convince the clients thatthey need this service, which which I
guess is selling business essentially, Andat the time I never thought much of
it because I was so early incareer. I was just thinking of taking
actual eal. Example, So whenbeing in a pre sales role now and
being so close to the sales cycle, selling business is really hard, and
I don't think a lot of bactuariesinnately at least have that skill. And

(17:59):
it took me a while to appreciatewhy people who are in sales get compensated
that well, it's very hard andyou have to be very determined. So
I'm glad that you know you mentionedthat, Yes, selling as a generalist
is more difficult. I always usemy expertise to sell business. And you
know, I used to joke like, put me in a room with anyone,

(18:21):
I'll I'll take them on and talkabout construction defects. And you know
today there's some great folks working inthat area. But it's a lot easier
when you can talk about you knowwhat's happening, you know in the marketplace,
what risk managers are saying, andyou know otherwise, if you don't
have that expertise, you know,how do you distinguish yourself from from everybody

(18:44):
else? Fully fully agree that thatexpertise is is is critical. Now something
that I think we have in commonis at least from what the limited time
I've known you. Actually funny enough, I thought that this I was thinking
we met before the CAA. Thefirst time we met, it was our
mutual colleague, Alexandra Nolibos who introducedus. It was that San Diego was

(19:06):
cis Annual. I remember we werehaving breakfast. Yeah, that's when I
met you the first time. SoI guess it's been a while now,
but from during the time of Jodmet you, you definitely strike me as
someone who's taken a risk. Imean, just living in Asia for someone
who's America, that seems like arisk. No, the actuary sometimes overlooked
the importance of taking risk and youknow, the opportunity opportunities to use their

(19:26):
actual real skills to do other things. So in your career, what are
some examples from your career you knowwhere you've done something outside the box.
Well, when I first joined tillingHast, one of the issues was that,
you know, I joined to doM and A. I mentioned this
already, and there just wasn't alot in the industry. I mean,
I think I worked on one inthe first year, but the market kind

(19:49):
of dries up over time, andso somebody said, well, hey,
Ron, you're not busy, howabout you know, working on developing a
cap model. So this was shortlyafter Hurricane Andrew. You know, I
think RMS was out there and KarenClark's shop was out there, but we
decided to try to build our own. And one of the things I loved

(20:11):
about it was there was a lotof risks, but I got to do
things that nobody else had really donebefore, you know, within our firm
at least. And so, youknow, I got to work with meteorologists
and seismologists, you know, studyingthe forces that create the wind or the
shaking intensity. Got to work withengineers to determine damage curves. And I

(20:36):
actually think we paid somebody to shoota two x four out of a cannon
at the side of a building totry to simulate a palm tree. Flying
through the air, and so Imean there was just some really interesting things
that we're doing. And then lastly, the stuff that was easy for us
to understand was, you know,how to convert the losses from the damage

(20:57):
curves and the wind or aking intensity. And we also needed exposures how did
we can convert that into insured lossesright, because not everything was insured and
so there was definitely a lot ofrisk. And part of the risk was
that there was no immediate payout.I mean, it took us years to
build the model, and so therewasn't you know, revenue coming in the

(21:19):
door. No one was going tosay, hey, Ron, you got
a great bonus this year. SoI mean there was definitely some risk with
compensation, but also whether or notthe model was going to end up being
something that we could we could sell. And you know, we eventually got
the model up and running. Wewere helping reinsurers or insurers figure out how
much reinsurance they should purchase, andthen we started helping companies determine how they

(21:45):
ought to set loss costs to loadinto the rates and working a lot with
regulators on why models should be allowed. But it was fun, you know,
rubbing elbows with the likes of peoplelike Karen Clark, and I think
it might have been a sure somethinglike that at RMS. I probably have
the name wrong, but there wasa lot of really interesting things, and

(22:07):
so all throughout my career I alwaystried to do different types of things.
But one time I got a calland it was from a manufacturer of building
supplies and they said, how'd youlike to be part of our class action
team? And I'm like, well, what are you talking about? And
they said, well, for thistype of product, there's been a lot

(22:29):
of lawsuits in the industry. Wethink our product, you know, is
the best, but we need tobe prepared for if, you know,
with this class action, if it, you know, makes it through the
courts. And what I loved aboutthis, and this isn't the first time
that this happened to me, butI was invited by the client to visit

(22:49):
the plant to see how everything wentfrom you know, the raw materials to
the finished product to you know,meet and talk to different people throughout the
organization. Spent a ton of timewith the engineering folks to learn how they
tested for product defects and what kindof statistics and what kind of data they

(23:11):
had, and so it was verycollaborative effort. And one of the things
we also had to do was,you know, it's kind of like the
difference maybe between book value or marketvalue, like what you know, here's
what it costs, but what youknow, can you sell it for in
the market. And one of thethings we saw was that there were just

(23:33):
some crazy judgments going on with i'llcall them sister products in the market.
And so we did our analysis andI was pretty happy with it, and
then we you know, took itto management and explained what we looked at,
talked about some market things, andthey were actually worried that, you

(23:55):
know, the analysis we did wouldn'thold up in terms of what juries would
award, and they ended up settlingfor something like ten times the losses that
we thought were out there, andyou know, we had, okay,
you're gonna get sued, there's gonnabe lawyers fees. But there were some
other products that had really taken somelarge hits, you know, and they

(24:19):
thought that if the same kind ofratios were used on the other products,
that they could have a loss fortytimes a class action forty times that we
determined it would be. So thenit kind of came become, well,
what do we need to preserve thecompany? And they could afford something ten

(24:40):
times, but forty times would haveshut them down. So they ended up
settling for something much larger. Butthat was one of the maybe one of
the times I really felt like Ihelped solve a business problem, right.
I mean it was you know,it was a little lactuarial, but there
was a lot of considerations and Ithink that that was just you know,

(25:03):
fantastic. But you know, workingon usual projects definitely taught me new skills.
Uh, taught me new new thingsto look at them different ways.
It definitely helped me establish new contactsin the industry. And I should say
that I think I won some ofthis work because I went to a construction

(25:27):
conference. If I hadn't been atthat conference, I don't think they would
have ever found me. So ifyou want to do different types of you
know, cutting edge thinking outside thebox, maybe talk to non actuaries,
right, talk to the people andneed to solve problems. And it definitely
created new new opportunities. I knowthat I got some references from that project

(25:52):
to some other risk managers that youknow similar and even different types of companies.
But I don't know which famous personsaid this, but you know,
if you never fail, you're nottaking enough risks. And I remember that
stuck with me and Jim McGinnity,who's the first actually, you know,

(26:17):
one of the leaders of probably startedTilling Hassen way back in the day.
He said something similar, if youdon't miss at least a few flights a
year at the airport, you're notworking hard enough and you're going to the
airport too early. And I alwayskind of laughed at that, And I
just saw Jim at the SaaS springmeeting. But you know, he was
the kind of guy who always said, you know, take some risks,

(26:40):
fail once in a while, andyou'll have, you know, a more
fulfilling career. Yeah, you know, you're one step a hit him.
I was going to ask you about, you know, some of the rewards
of taking that risk, given thatwe're actuary, so we want to know
about not just the risk, butthe reward. Does well. But you
know, I think he's a sinklysummarize that. You know, you learn
new skills, you establish new contacts, and you create a new opportunity.

(27:03):
So that's so, you know,good to hear that there's some upside.
One thing I want to ask aboutis you mentioned that you were asked to
develop this cut model. And somethingthat people might ask are wonder about is
that there's situations in your career whereyou may not be asked to do something,
but then you have the appetite totake risks or in those situations like
well you recommend someone do they're notbeing asked specifically to do something outside of

(27:26):
the box, but they're interested.Well, you've got to raise your hand.
You've got to express an interest todo some things differently. And I
find that, you know, inconsulting firms, it always seems like the
most productive people are offered the mostwork. So you know, if you

(27:49):
don't have good productivity, then peopleare going, what's going on there?
Why why isn't this So you know, maybe it's the rich get richer,
But you know, if you workhard, I think opportunities will come your
way. And you know, oncein a while you have to raise your
hand and say, hey, youknow, I want to do something different.
This isn't working for me. Youknow, it's actually one of the

(28:11):
reasons I moved from Hartford, Connecticutto Atlanta was that there were a lot
of folks who had great mentors.And my mentor who hired me to Tilling
has left to become a chief actorof an insurance company shortly after I was
there. So you know, Ikind of raised my hand and said,
you know, yeah, maybe I'mI'm not getting enough opportunities besides cap modeling,

(28:33):
of course, and you know,and quickly they're like, okay,
well what office do you want togo to? And so yeah, so
raising your hand is not a it'snothing you should be shy about. Yeah.
Now, something that we talked aboutearlier is something unique about your career
is that you spent many years practicingin Asia, specifically I think in Hong

(28:55):
Kong. So how would you describethe market there? How do you describe
the market in the Asian reis andwhat countries were you focused on within the
scope of that practice. You know, when I first went there, I
thought I was going to be ableto just sell work really easily. And
when I got there, I realized, like I had an expertise in cap
modeling, but you know, thehouses look completely different there, you know,

(29:18):
I mean, here, we havea lot of a lot of actuaries
who have single family homes, butthey're in Hong Kong. Everything was you
know, tall, tall apartment buildingsand condominiums, and I was thinking,
well, you know, we've gotdevelopment factors for that, but the density
of these buildings was different. Andso I started to learn that you know,

(29:44):
while things were the same, theywere also very different. Another example
was cars. I mean, mostof the cars in Hong Kong were taxis
and it was really expensive to owna car there, and in places like
Singapore to you know, kind ofbuy a license to own a car,
and so you know, selling motorworkwas what, well, maybe it's not

(30:07):
going to be that easy. MaybeI need to sell sell it to the
taxi companies. And so definitely theexposures were different. I mean, at
that time, there weren't a lotof cars in China. There wasn't a
lot of data to analyze. Butthe amazing thing in China was just how
big it is and how in acouple of years they just had more than
enough data to do a lot ofthe sophisticated analysis. But you know,

(30:33):
what I learned was that there wasn'ta ton of data within the market to
do a lot of things and definitelydo you know, sophisticated classification analysis,
et cetera. So it took mea little while to kind of understand the
market and the challenges. So,you know, listening more than speaking ended

(30:55):
up becoming kind of one of therules to live by. You can talk
about your capabilities, but you neededto get people to tell you what their
business problems were. So, youknow, we keep coming back to that.
But you know, during my timeI lived in Hong Kong. You
know, for those who've been toto Asia, lived on Robinson Road by

(31:17):
the escalators. I still like togo back and you know, walk up
to the peak. It was justa wonderful time. But I also spent
a lot of time on the road. I mean I had responsibilities for offices
in China and Singapore and India andyou know maybe dotted line to Korea and

(31:37):
Japan and other ones. But thedifference was that there were more mature markets
markets like Japan Korea. Even thoughI didn't practice there much, I would
I would kind of go there andtalk to folks see what their issues were.
You know, in Hong Kong andSingapore were more developed. There were
other actuaries in the market. Andthe markets that were developing at the time

(32:01):
clearly was China. I mean,China didn't have a lot of personal insurance
at that time, didn't have aton of cars on the road, so
that was a developing market. Taiwan, you know, seemed to almost be
a little bit more developed, butyou know, their P and C actuaries

(32:22):
didn't work on workers' comp that wasdone more by life folks, and so
I was like, hey, thisis a market we ought to get.
We know a lot about workers compensation. And then there were markets like India,
which like China, just had somuch growth potential. And then there
was Malaysia and Thailand. Malaysia wasvery well regulated, had a great regulator,

(32:45):
and you know in Thailand there wasthere was lots of growth. So
those are some of the markets thatI've worked with. And then more recently
I've interacted with actuaries in Vietnam andyou hope to be working with the actuarial
societies and in the Philippines and maybePakistan. But you know, people ask

(33:08):
me a lot about, you know, moving back and forth between Asia and
the US, and I think thatin the US, actuaries can be very
technical, but in Asia, actuariesneed to be more like general management or
business consultants, working with various disciplinesto solve problems. So that whole thing
about tackling, you know, businessproblems, I think resonates a little bit

(33:32):
more. So. I think fortechnical actuaries it's easy to move to Asia,
But sometimes I wonder, you know, will people who've been in Asia
want to come to the US.And I think it might be a little
bit difficult just because of the someof the technical work, but maybe they
might be better with, you know, managing a division or something like that,

(33:53):
because they've done more with marketing aswell. And you know, in
markets like Vietnam, and I lovegoing to Vietnam, the actuaries there are,
you know, they're very young andjust kind of starting off on their
careers, and so we were askedto help out with rate making and reserving

(34:15):
principles. So we actually taught acourse there. I think it was me,
Mary Hosford, and most of theheavy listing lifting was done by an
actuary by name of Peter Mirzda who'sout of North Carolina these days. I
think he used to teach at oneof the universities there, and you know,

(34:37):
so we're trying to just educate themarket on what some of those challenges
were. And it wasn't the CAISsponsored thing. It was more of a
grassroots thing they asked. We gota couple of volunteers together and that was
quite interesting. You know, countrieslike India, China and now the Philippines

(34:58):
and Pakistan were seeing that companies arehiring and training locals to offshore ACTUAO responsibilities
from other markets, and so youknow, CIS and other folks are looking
at, you know, how dowe how do we train them, how
do we develop them? And thereis just so much opportunity for growth in
Asia, whether or not it's localor offshoring. But I think one of

(35:22):
the big challenges is that their legal, legal and judicial systems are so much
different than ours. You know,you get an injury, you know,
here's a small amount of payment,where in the US you're going to court,
You're going to have a jury decidingthis, and so I think it
it'll have some challenges in terms ofyou know, how it's going to develop

(35:45):
over time. Had I had acouple of follow ups, so regarding China,
India, and Malaysia. In ourprevious conversation you talked about detification.
I just wanted to quickly ask,like, I know in the US,
when we think attire is it hasmore of a negative connotation, it's more
like an embargo. But how doyou think of the concept of tire and
detiification in that in that those countries, Well, in a lot of countries

(36:08):
in Asia, the government used toset the motor rates right, there wasn't
a ton of expertise, very simple. So in China, Malaysia and India
they've actually had challenges when they tryto deteriff. So tariff is the government

(36:29):
set rate. D Tariff is whenyou're when you're getting rid of it and
you can do it all at once. You can do it in phase you
know approaches. But when you doit all at once, companies tend to
go wild, right, you know, everybody's like, we're going to make
it up in volume. We're goingto write unprofitable business, but we're going
to write so much it's going tobe profitable. Well, we as actuaries
know that that doesn't happen. Andin a lot of those markets, when

(36:52):
your's lots of new players, youdon't have the client loyalty to the carrier,
so people will move for the smallestgreat difference. So you know,
we've definitely talked to some folks,most recently, you know, in Vietnam
they are starting to go through deterrification. So we we found some representatives from

(37:16):
India, Malaysia, China, andeven in the US. I mean when
I started my career, I thinkMassachusetts had some rates that would you would
call, you know, say thatthere was a tariff, and I think
Jeff Werner had had told me that, you know, well he looks at
it that Texas had some tariffs.I don't know what line of business at

(37:37):
some point. So you know,the whole understanding of how that works.
It's not just a pricing assignment.It's you know, how do you control
agents and underwriters and how do youlook at you know, what's being paid
off for commissions as you're trying togrow market share. So I mean,

(37:59):
it's a really interesting thing. Andthere's a few new countries that I'm not
going to name, that are talkingabout doing this, and I think it's
a great opportunity for the folks who'vebeen through it in Asia to kind of
lend their expertise. So I'm lookingforward to working on that one more quick
follow because I get this question allthe time on Instagram. Is with regards

(38:19):
to offshore and people in those areas. Some people are asking if it's common
to be able to work for aUS company in a one of those regions
you mentioned. Is that happening today? Would you say, like, well,
you think of it? That isit current state or a future state?
It's current state. When I startedgoing to India a number of years
ago, and the first time Iwent to India for the CS was two

(38:40):
thousand and eight, and funny enough, I gave a talk on de terrification.
I didn't know anything about it.It was just that they wanted somebody
from a large acturoial association. Andso over the years, you know,
I've heard more about it, andthen it kind of hit a wall.
But there are some really large companieswho have some extremely large actuary groups.

(39:05):
I mean, over one hundred youknow, actuarial students and actuaries doing work
of international companies, and you know, there's a few of them, and
and so that is happening more andmore. I think the question is a
lot of those folks. When theyget their credentials, some of them leave
to go to more to larger markets. You know that you might find them

(39:30):
going to London. I don't thinkas much to the US, but but
definitely to London. And also,you know, if you make fellows,
you're gonna have to pay those fellowsa little bit more, right, So
there's some challenges with those those models. But there's definitely a few companies that
the plan is to save a lotby going to cheaper markets. I mean,
just like manufacturing did. And Ithink that that's a risk to US

(39:53):
actuaries. You know, how doyou play within that role? But you
know, we're not finding that there'sa lot lots of GI actuaries unemployed these
days. Yeah, yeah, yeah, so that's the good thing. Yeah.
No, So, what are somespecific examples of projects that you worked
on during your time in Asia.You know, when I first got to
Asia, one of the challenges wasthat it was very compliance focused. So

(40:17):
you know, somebody needed a reserveopinion, so for X dollars, you
know, they'd want to want areport. But the problem was that a
lot of the work was you know, X times three was the cost of
it, So it was it washard to make money as a as a
GI actuory only. So what weended up doing was doing a lot more

(40:37):
M and A activity and on Mand A due diligence. Companies aren't really
concerned about saving nickels and dimes.They want a good answer, they want
a good insightful analysis. So weended up focusing a lot on M and
A activity and just developed some greatrelationships. I wish I could tell the

(40:57):
name of this one client, butevery time time I was in this one
country and they heard I was there, they'd be like, just come talk
to talk to us about what youknow from other markets. And that relationship,
that M and A relationship was justfantastic because they were just eager to
learn and to get into the insurancemarket. But you know, while I
was there, we ended up youknow, moving on from selling you know,

(41:22):
reserve and lyses to to you know, to the due diligence. But
then we started, you know,selling software. At that point, you
know, my firm had merged withWatson Wyatt, so they had some good
pricing software, and then we mergedwith the MB and they had a lot

(41:43):
of software. So at that pointin Asia, we were trying to sell
a lot of software, markets weregrowing quite a bit, and then we
started doing some economic capital work aswell. Bank assurance was another type of
product that I don't know, Idon't think it's as prominent today, but
banks would make deals with insurance companiesto sell their products and they do it
for a couple of years and switchto somebody else. So there was a

(42:05):
lot of pricing of that. Youknow, how much profit can I make
on this business, et cetera.So that was something that I'd never seen
in the US. You know.When I was in Asia, I think
I was there for about a year, and then the CAAs approached me.
I think somebody from the nominating committeesaid, hey, we'd really like a
representative from Asia. You know,we know you've been a big volunteer.

(42:30):
Would you be interested. So Iactually ran for the board and was lucky
enough to know enough people in theUS to get voted in. So a
lot of my time in Asia Iwas, you know, talking at conferences
both for I guess at that timeit was towards Watson as well as the
CIS. So I counted that inthe forty months that I lived there,

(42:52):
I did thirty six industry presentations onthirty two different topics, And I mean
there were a lot lot of weekendsof you know, studying things and looking
at materials other people had sent meto present And I really love that because
I learned a lot during that time. But but you know the other reason

(43:13):
we were doing is we were tryingto raise the profile of actuaries life.
Actuaries are very prominent in Asia,and P and C actuaries are are less
valued. They get paid less money. We're in the US the opposite of
right, so there's there's lots ofgrowth opportunities for P and C actuaries.
At that time. We were alsotrying to promote things in the market,

(43:36):
like captive insurance, which is heavilyyou know, used in the US.
I was trying to talk to folksabout medical malpractice and trying to get you
know, get awards for people whowere injured. But you know, the
legal market, judicial market really didn'tsupport it at that time. And you
know, we're looking at more advancedrate making things and just a host of

(43:59):
different things. You know, eventoday, I still work with actuarial societies
in Singapore, Malaysia, Hong Kong, Taiwan and India. And when I'm
in Asia, which is usually youknow, a few times a year,
we're you know, visiting the actuarialconferences that these associations are putting together.

(44:21):
But we'll visit universities and gift talks. I mean, I love talking to
university folks about you know, whowould want to be a life actuary when
you have so much excitement happening inGI, right, and so I love
talking to students and try to swaythem to consider GI. And GI is
the same as P and C Generalinsurance. GI includes health, I think

(44:44):
in a bigger way. So youknow, we visit universities, regulators,
employers. This past February, Iwas in India and we visited fifteen employers,
universities, in the local Actuarial society, and many of the companies.
We were doing visiting was about offshoringmarket in India and people were talking how

(45:05):
much it's growing. I tend todo a lot of grassroots things, so,
you know, while I represent theCIS, oftentimes, you know,
sometimes actuarial societies or folks will askus to do something that you know isn't
really what the CIS, you know, needs to be involved. And so

(45:27):
in the case of you know,Vietnam, we found a couple volunteers to
do it, and you know,and that was great. And when we
were teaching the basics of rate makingand reserving during that course that I talked
about earlier, we had eighty sixpeople sign up to do this this course,
and I can't remember if we startedoff with like we thought we were
going to do it in twelve weeksand it took eighteen or something like that

(45:51):
happened where we needed to slow downa little bit, But eighty six people
started and it was actuarial students andaccountants and underwriters and insurance company executives,
and it was, you know,pretty interesting teaching these folks. And at
the end, the IAV gave atest to see, you know, how
many people followed through and gained somecompetency, and I think about half the

(46:15):
people took an exam and passed,So that was quite exciting, excellent.
Now, through the course of theepisode, we talked a lot about actuarial
practice through the lens of consulting andthrough your experiences in Asia, and we
focused a lot on general insurance,our property and casualty and I think I
think this is partially true for lifeand some other disciplines. When I think

(46:36):
actual orial practice, I think ofit that is part well science of course,
like the math part, and thenpart art. And I think certainly
for PNC our General insurance, alot relatively speaking, more art. And
a part of that is developing actuarialjudgment. And that's a part that's that's
a topic that you've recently been involvedwith. So first of all, how

(46:57):
would you define or describe actuarial judgment? You know, the words that come
to mind are wisdom, insight,experience, astuteness, foresight, intelligence.
It's that stuff that we develop overtime. Right, But in a lot
of markets, you're seeing young actuaries, you know, whether or not they

(47:17):
might be you know, starting towork for crews or uber or you know,
overseas you'll see young actuaries become chiefactories of companies. So a lot
of people always ask me, youknow, how do I speed up my
development of actual judgment? And youknow, I think when we talk about
actual judgment, I probably ought toexplain the difference between that and expert judgment.

(47:43):
Right. You know, statisticians,data scientists, they go through the
training, they go through the experience, they get expertise. But what separates
us and why we can say it'syou know, professional judgment or you know
that's synonymous with actual judgment, isthat we have a code of conduct that
we have to adhere to. Andone of the codes within the code of

(48:06):
conduct says you need to follow theactual standards of practice, so you know,
it covers those two components. Italso says in the code of conduct
that we have a duty to thepublic, and so you know, every
time we do anything, we oughtto be saying is this fair to the
public. And then lastly, oneof the difference things is that there's a

(48:27):
disciplinary component. Right Actuaries can becounseled, they can be reprimanded, they
can be suspended, or they canbe excelled. But I don't think that
exists for a lot of other professions. So that's how we get from expert
judgment, I think, to professionaljudgment. And something I'll add to that,
certainly as someone who's gone out tothe core insurance space and is now

(48:50):
working with more of the folks youmentioned, whether it's data science or statisticians.
In the past, I've no cometo appreciate the importance of that code
of that you mentioned. I thinkone thing that says the actuarial professional part
is that the integrity and the rigorof you know, some of the insights
that we provide on us being heldaccountable in some ways to that code.

(49:13):
You know, it's it's certainly notthe shiniest object in the room when you
think of code or conduct and actualstandards of practice. But I think later
in my career I've certainly come toappreciate it because the way that we do
things are just different. It's notit's not just a level of detail,
it's just the way you think itthrough, and just how thoughtful we are
in terms of how we approach ourwords something I've come to appreciate. So

(49:35):
with regards to actuarial judgment, whendo we use actuarial judgment? So,
you know, some examples might bewhat data we choose to do an assignment?
You know, how do we howdo we set it up? You
know, what do we do withmissing or inappropriate data? Which models do
we select or which ones do werely upon? How do we pick assumptions?

(49:58):
You know, assumptions like lost developmentfactors or trends or you know,
adjustments for for climate change, thosetypes of things. There's testing model outcomes
for reasonableness, and you know that'ssomething that's a trade of a great actuary.
You can look at something and say, this doesn't make sense, this
isn't the answer I'm thinking we shouldget, and someplace in the calculations something's

(50:22):
going awry. There's the interpretation ofmodel outcome. What's this mean for the
business? And you know another thingis, you know, just when you're
dealing with things like constraints on timeand money, you know, where can
you make shortcuts but not have itaffect the analysis? So that's probably just

(50:43):
a couple simple and easy to understandexamples of actual judgment. So, you
know, we taught, we talked, we talked about the importance of actuarial
judgment. What it is? Ithink the next the most the next intuitive
thing to ask is you know whethersome of the key what are the most
important considerations and actually developing actuarial judgment. Well, well, funny story here

(51:07):
is that when I figured out that, you know, we wanted to create
a presentation on developing actual judgment,I you know, went away for a
couple of weeks and kind of everyday thought a little bit about things that
I've learned over my career and howI've you know, learned them, and

(51:28):
and so I wrote this like reallylong list of things, and and Josh
Tob who's one of the guys worksfor the Infinite Actuary, Josh took the
easy way out. He used GPTand said, how do you create actual
world judgment? And so it cameup with the list of eight ways to

(51:50):
develop it? And I'll just gothrough these quickly. We could talk a
little bit more in depth about afew, but education and qualification, learning,
continued learning, understanding the business,practical experience, critical thinking, mentorship,
ethics, and communication skills. Andso I've actually given this presentation probably

(52:15):
over maybe twenty twenty five times,kind of around the globe, gave it
to I think I've given it inAfrica and a webinar and given it,
you know, different places. Butif we have time, I'd like to
just talk a couple of them.And the first one I've actually talked about

(52:38):
in me understanding the construction business wasthat you really need to delve down and
understand more about the risks, right, And I think that you know,
I've always had a problem with,you know, finding actuarias who I say,
well, you know, what's thepolicy language saying is well, we've
never read a policy in something,And I'm like, okay, you need

(53:00):
to know more than just the numbers. So in kind of understanding the business,
I always say, you need tounderstand the risks. So if it's
construction, retail, if it's youknow, personal property, commercial property,
commercial auto, you really ought tobe trying to understand those risks and what
those issues are. Another thing isto understand the business environment, trends,

(53:21):
inflation, regulatory issues. Third,i'd probably say policy language and contract terms,
and oftentimes those don't change a lot. Well, for construction, they
were changing a lot, you knowwhen when there were CMP policies that were
now throwing in a little cyber coverageto kind of control their loss. But

(53:42):
they'd offer a small limit. Thatwas a way of kind of you know,
addressing the unknown of how big lossescould be. And you know,
whether or not it's excluded. Thereused to be you know, mold claims
were big for a while, andso companies like do I include it,
do I exclude it? Do Ioffer a little limit? So we should
be knowing those things. And probablyanother really important thing is that you know,

(54:07):
you should be talking with underwriting tofigure out how the book is changing,
how they're reunderwriting it, as wellas with the claims folks, to
understand what new things are popping up, you know, how they see that
the Book of Business has changed interms of the types of claims, and
I mean over microvs. Just seeingsome great presentations on how, say,

(54:27):
for like a hospital chain, hownurse injuries are changing over time, so
you know they ended up having liftmachines to lift patients and so you know,
getting down into that detail I thinkis really good. And if if
you're looking for any type of risksthat you're analyzing, I always go back
to I think it was a statementof principles on rate making. Used to

(54:52):
be one on reserving, one onvaluations, and it used to have a
list of considerations, and I alwaysgo back to that. I think today
ASoP. Fifty three, which isdealing with the risk transfer for property casualty
companies. There's some great lists ofdifferent things to think about as you're analyzing
a risk, and those that kindof be used to be my bible of

(55:15):
what was on my bulletin board andwhether or not it was a class action
lawsuit or some you know, typeof warranty or something completely different. I
would always go through that list tomake sure I was asking the right questions
and understanding that business. So that'sthe first one I want to talk about.
The second one is practical experience.And I was working on getting Jim

(55:38):
Gusha, who's an actuary term datascientist, to speak about the challenges with
AI, and we were talking aboutactual judgment and AI at the same time,
and Jim gave me this quote thatyou know, he he, he
says, isn't his that somebody elseprobably said at first? And I'm going

(56:00):
to say it twice. Data youuse is more important than what you do
with the data. So data youuse is more important than what you do
with the data. Now by sayingit twice, people are going to remember
this a little bit more. ButI think the point is that is it

(56:21):
better to study the data and learnthe intricacies and what's going on, or
is it better to, you know, apply twelve different models for twelve different
numbers. And you know, whenyou do a predictive modeling or you do
a catastrophe exposure management to PML analysis, about sixty to eighty percent of the

(56:43):
time is actually studying the data andyou know, pulling out bad data,
filling in information where there's holes inthe data. And I wonder how many
people on this call probably don't spendenough time looking at that. I mean
I probably got so much street credwith a bunch of my clients because I'd

(57:05):
ask them about a large claim intheir data and they'd say, oh,
we forgot to tell you that wasa bad faith claim and you can't use
that for rate making purposes. Soyou know, by really asking great questions
about what's in the data and what'shappening, I've been able to do much
better analysis, you know, kindof reinforce to the client that we dive

(57:27):
dove down into the data. Soyou know, spend more time on data
and that'll help you become a better, more insightful consultant. But also in
practical experience, I'd say review yourdiagnostics, like I would get angry inside
when my staff would pick loss developmentfactors before even looking at you know,

(57:51):
whether or not what was happening withcase reserves or settlement patterns or different types
of things. Another piece of adviceis is perform sensitivity test. You want
to know, you want to beable to tell if something is wrong,
Well play around with the assumptions tosee how much they affect the analysis.
I mean, I'm amazed. Iwould always be like, well, my

(58:12):
twelve to twenty four month factor,oh man, there's so much variety in
here. But then on my finalanswer, it had almost no impact because
I was using a target loss ratioapproach for the last year, So why
did the twelve to twenty four monthfactor work? And the other thing I'll
say with practical experience is review yourwork, you know, check it.

(58:35):
People tend to make the same mistakesall the time. So if you have
problems with you know, figuring outhow to do a partial year calculation,
you know, make sure you lookat that. And I would know by
consultant on my team what they tendedto, you know, do wrong.
And this goes into my last categorythat I want to talk about as mentorship,

(58:58):
and that's to learn from peer use. Every time somebody peer reviews something
and you get some feedback like pickI want a five year rather than a
three year, understand why that personis making that suggestion, they might have
a different view or see something inthe data. Oftentimes I see people use
the latest three of five and Iwould go ballistic and I'd be like,

(59:21):
well, do you know how muchyou're you're giving in bad development versus saving
and you know good development. Youknow you're you're leaving you know, losses
on the table here that we needto be charging for. So there's a
story on why people make those comments. And if you could learn from everybody
who's peer reviewing your work why they'remaking those you're gonna learn their insight.

(59:45):
And you know that's a great thing. So, I mean, I would
always tell my staff. I'd askmy staff, what's your what's your job?
And they'd say, well, blahblah blah, do this, And
I said, no, your jobis to eliminate my job. You're you're
gonna eliminate I should say my role, you should move into my role and
push me up out, you know, really out. But I wanted them

(01:00:06):
to like learn everything they could forme. And another piece I'll give on
peer reviews. When you're asking forpeer reviews, look at I'd say,
half the time I'd find somebody whoknew, you know, medical malpractice,
liability and everything that's going on withit. And then other times I'd ask
somebody not as familiar to look atit, and some of that unfamiliar peer

(01:00:32):
reviews have just been fantastic. Andlet me give you two examples. One
time I was doing an analysis ofGLM project, which I am not qualified
to do, and the three peopleworking on the project told me I was
unqualified to do it, but weneeded to get it out sorry g L
or GLM GLM. And so theywere working on mortgage guarantee and you know,

(01:00:55):
they had great analysis of you know, do they have any other outstanding
loans, what was their credit score, where did they live, education,
blah blah, all these things.Well, I finished the analysis and I
said, well, what happens ifeverything goes sour at the same time?
And they said, well, wedidn't. We don't have a factor for

(01:01:17):
that in our model. We didn'tbuild that in. I'm like, but
don't you think that's important If thewhole market tanks, everything is going to
go bad. And they're like,that's a really good comment. So they
were so much into the weeds thatby having somebody unfamiliar look at it,
they you know they saw a glaringair. And the last point i'll make
is our last example I'll make isat one point we were looking at hurricane

(01:01:40):
landfall probability for trying to figure out, you know, up and down the
coast, what places were more likelyfor landfall, and somebody asked the question,
well, what about a second landfall, the fact that it hits Florida
and goes back out and it hitsNorth Carolina. How are you dealing with
that? And we didn't even thinkabout it, but that was a fantastic

(01:02:01):
question. So so those are,you know, some pieces of advice on
how to develop actual judgment. Wegive this session, or we have given
the session a lot. I don'tknow if the CS records it, because
we tend not to record a lotof the professionalism, but if you haven't
heard it, you know, lookout for it. I think it's a

(01:02:22):
really good presentation, particularly if you'rea young actuary trying to figure out how
to increase your wisdom. I'm actuallyhappy when I post episode. I'm happy
to share. I think you sharethe president, whether it's through the link
or the actual presentation, I'm happyto share that because I think it's a
really important presentation, so I'll besure to include that in the debrief.

(01:02:43):
Okay, thanks, well, yeah, thank you so much. Ron.
This has been highly insightful. Iwas definitely looking forward to this episode,
and you know, it's been apleasure to collaborate with you, and I
think a lot of people in thecommunity will certainly glean out of valuablends valuable
insights from this. Well. Thanksfor having me. I think you're doing

(01:03:06):
a great service for the actuo communitydom and who knows, maybe we'll see
each other in person in the Caribbeanone of these years or in California.
I'm not you know, we areboth in California. Let's not forget that.
That is true. That is true. All right, Ron, have
a good evening. Okay, thankyou. Take care.