The Importance of a strong Mathematical foundation for an Actuarial Career

This topic emerged while I was talking to a junior earlier this week, and it feels important to document it for the posterity.

When a large building is built, an enormous amount of effort, resources, time and energy is spent on its foundation. Analysing the soil, depth, contours, and surrounding area, establishing the foundational structure, and all else that they need to do for it. If the construction is rushed, with a shoddy foundation, this can be dangerous for the building and its occupants, and the effects may not be seen till years later. If a poor foundational structure is discovered during the inspection process, the building will be declared unsafe for occupation and will need to be abandoned and eventually dismantled.

When in a building, enjoying its nice amenities, the foundation is often out of sight and out of mind, but deep down we know its vital importance.

Mathematics is the foundational structure for an actuarial career (and many other related careers in the STEM field). In fact I would go further to say that love for mathematics is the real foundation for a strong actuarial career.

In this rapidly evolving world, the need of this strong foundation is becoming more, not less.

Here are my observations on why I place such importance on it:

An Actuary is a Mathematical Strategist

The capabilities of AI to transform the way we work forces us to re-examine - what is our real value-add as an actuary? Specialising in actuarial software and tools have been viable career strategy for the last two decades or so, but that time is coming to an end. It will get less costly and less risky to migrate out of specialised actuarial software, and it will save a significant amount of money to do so.

Taking that away, we are left with our domain knowledge, and analytical ability. What distinguishes our domain knowledge from another insurance professional? What distinguishes our analytical ability from an AI calculation engine?

To the first question, the difference is our rigorous mathematical training that enables us to do abstractions, spot patterns, on a bedrock of logical rigour.

To the second question, the difference is we are human, or rather we are sentient beings. Our sentience comes from a source beyond our mind and intellect, that allows us to feel, connect, love, believe, doubt, desire, transcend and more.

For the businesses that we work in, we add value as sentient mathematical beings by helping them navigate risks and opportunities, for sustenance and growth. Hence, we are mathematical strategists.

The Era of Multipotentialite Actuaries has begun

For a long time, we actuaries have specialised in specific domains of Life, Health, General Insurance, Pensions, etc. Consulting actuaries may work across many domains (depending on the respective consultancy’s path) as a matter of economic necessity.

In recent years, with the various (and unending) shocks to the labour markets across various geographies, it is becoming increasingly riskier to put all our eggs in one basket. We see some insurers and industries contracting and some growing. We see some countries with a shortage of actuaries, and others laying off actuaries (in some sectors).

Diversification is a cornerstone principle of actuarial education, and it is now time to apply that in our careers too.

Being a multi-domain, multi-country/region and perhaps even multi-profession actuary will position ourselves strategically to benefit from this new era. In order to do this, a strong mathematical foundation plays a very important role. With internalised frameworks and approaches from this foundation, we can then relate to the analytical techniques (or even come up with novel approaches) applied to various domains, understand the country/regional differences, and even wear the hats of different profession.

Defining these terms:

Multi-domain: Knowledge and ability to work in multiple domains such as Life, General, or Health Insurance, Pensions, Banking, Climate Risk and others

Multi-country/region: Ability to work and move across different geographies

Multi-profession: Actuary + accountant/lawyer/computer scientist, etc

This was a lot more common in the early days of our profession, before its boom in popularity and the mushrooming of actuarial degrees (which I'm not quite a fan of now).

The Way Forward

It is the best of times, it is the worst of times.

It is time for us to introspect carefully and place ourselves strategically in ways where we will be more resilient, and in fact benefit from the developments of this new VUCA (Volatile, Uncertain, Complex, Ambiguous) era.