By: Katrina Redelsheimer, ACAS, Candidate Liaison Committee
This is the third in a series of “This Actuarial Life” articles, which illustrates the day-to-day life of the actuary in different fields.
Previously in “This Actuarial Life,” we explored the daily work of the consulting actuary. Closely related to actuaries who work for consulting firms are actuaries who work for brokerage and audit firms. As key players in the risk arena, auditors and (re)insurance brokers often have need of the actuary’s skillset. For large audit and brokerage firms, having actuaries permanently on staff is highly valuable.
When working at a brokerage or audit firm, actuaries are typically part of a designated consulting practice, and as part of their work they will collaborate with other risk professionals to deliver the kinds of consulting products described in the previous installment of this series. As members of the broader company, however, the main focus of the actuary’s job is to provide support services to the brokerage or audit function. Often, this work doesn’t look too different from standard consulting work, but there are important differences that affect the actuary’s daily life.
As a brokerage/audit actuary, the end user of your work (the firm’s client) is not your client; the broker or auditor who commissioned the work is your client. Brokerage and audit firms typically employ an “account executive” model, where one person is designated as being responsible for the firm’s relationship with a particular client. Everyone else at the firm who interacts with that client does so through the account executive. As the actuary, you may not ever interact directly with the end user of your work.
One benefit to the account executive model is that you rarely have to haggle over fees, at least not with the end user. Internal billing allows you to be paid by the account executive, who then decides whether to cover the cost himself or pass it along to his client. It also means that you have a whole network of potential clients built in, which means less competition with other actuarial firms and fewer cold calls to prospects. On the other hand, this setup can be challenging for the actuary. You have to keep both the account executive and his client happy. Ensuring that your work is used appropriately can be difficult. Brokers especially like to get “a quick loss projection” from their actuaries two hours before a key presentation, often based on sparse data. Abiding by professional standards is especially important in such situations.
Aside from knowing how to work with limited data, audit and brokerage actuaries sometimes have to do extra work to obtain the data, as it may reside within your firm, with the client, or with a third-party administrator (TPA). You also need to be able to see things from the account executive’s perspective. Brokers and auditors have their own terminology, which can be confusingly similar to actuarial language. The person to whom you’re talking may not realize that you don’t have the same reference points.
Educating both yourself and others is crucial. An audit actuary needs to be well versed in accounting principles, while a brokerage actuary must be comfortable reading commercial policy forms, which vary significantly from line to line and from insurer to insurer. Actuaries also need to educate both internal and external clients about our work, what it means, and how to use it. Of course, no matter how many educational sessions you run, you can expect your account executive to panic when an exposure increase drives up your loss projection, despite an unchanged loss rate!