BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
AVENTURA, Fla. -- David Letterman is now getting competition from actuaries and risk managers.
At the 7th World Captive & Alternative Risk Financing Forum last month, an actuary and a risk manager squared off with the top 10 problems each has with the other.
Susan J. Patschak, who analyzes captive and self-insured loss reserves as an actuary and principal with Tillinghast-Towers Perrin in Atlanta, offered her top 10 problems with risk managers, including that they:
10. Think IBNR (incurred but not reported losses) really stands for "indicated but not required" for their companies.
9. Think calendar year loss experience is the same as accident year experience and can't understand why results differ.
8. Think of claims data as the actuary's data, not their own, especially if the results are worse than the risk manager expects.
"It's important to understand what you're sending your actuary," she said. "The better your data is, the less expensive your reserve review is going to be."
7. Tell the actuary nothing has changed at their company during the year when, for example, the head of claims has died, the claims staff has doubled or the mix of business has shifted.
"You cannot use normal actuarial techniques when there have been changes in the claims process," she said.
6. Take the actuary's estimates as exact science until the results turn out worse than expected.
5. Assume loss reports don't need to balance with financial results because they are from different data sources.
"They do need to be consistent," she said.
4. Think they'd be making a profit if it weren't for actuaries.
"It's a lot easier to get upset with a bunch of nerds than guys you play golf with every week," she said of risk managers' urge to blame actuaries for poor reserving.
3. Are sure their experience is always better than industry benchmarks.
2. Believe every large loss is a fluke that won't happen again.
1. Tell actuaries they've weeded out all their bad business.
"Yep, and the check's in the mail," Ms. Patschak deadpanned.
Meanwhile, Fred Travis, director of corporate safety and risk management for Anheuser-Busch Cos. Inc. in St. Louis, offered his own top 10 list. To his mind, actuaries:
10. Love math and focus too much on their estimating techniques and not enough on the meaning and ramifications of their estimates.
9. Don't include formal variance statistics or confidence intervals with their estimates.
8. Always want to add to reserves for large losses, even when the claims were closed long ago.
7. Present their estimates as gospel, no matter how soft the data that produced them.
6. Think IBNR stands for "increase because (we) need (more) reserves."
5. Don't understand risk managers' businesses or their risks and don't always understand the nature of the claims they're estimating reserves for.
4. Can't produce concise reports for management.
"There's an extreme disconnect between what an actuary can produce and what senior managements of corporations can digest," Mr. Travis said.
3. Think data grow on trees and always want more, no matter how much risk managers give them.
2. Don't understand that the risks in a captive are much better than average.
1. Never get in trouble for adding to reserves.
To get the most from actuaries, risk managers should provide good data, explain limitations to their usefulness and review inputs for errors before they are used, Mr. Travis said.
Risk managers should also seek clarity from actuaries by getting confidence intervals for estimates, and a separate analysis of large losses and estimates by line of coverage and business group, he said.
Risk managers should also be part of the actuarial review process, reviewing draft results, questioning actuarial assumptions and collaborating with the actuary on the final presentation to management, he advised.