At SIGMA, we pride ourselves in our efforts to educate both our own clients and the general insurance industry on actuarial concepts and methodology. Nearly fifteen years ago, we developed a booklet as part of these efforts titled “An Actuarial Advantage,” which has been utilized by over 100,000 insurance and other related professionals to understand the core steps of an actuarial analysis. This educational resource has traditionally been read by professionals who are already working within the industry, but it has recently found its way into the academic setting as well. One such academic user is Michael Zuckerman, an associate professor at Temple University’s Fox School of Business who teaches enterprise risk management. We recently had a chance to speak with Michael about his use of “An Actuarial Advantage” in one of his own courses.
1. How did you first discover the Actuarial Advantage book?
“I found the ‘Actuarial Advantage’ book when searching for material to assist in teaching the basics of loss development, IBNR, and loss forecasting for the Managing Risk Across the Enterprise course (RMI 4597) in the risk management and insurance program at the Fox School. This senior-level capstone class is for RMI majors focused on the property and casualty insurance industry. The curriculum offers a combination of designing advanced risk controls and risk financing programs to drive enterprise risk management.”
2. What made you want to use the book with your class?
“The book explained basic actuarial science concepts well by using a case study method. As a result, the students were able to follow the process of developing incurred losses to ultimate loss and the loss forecasting process. The material helped me to teach how the loss forecast is used to create a self-insurance budget and accrual is used for loss contingencies. We also discussed how to incorporate the loss forecast into the alternative risk financing feasibility process.
The book very clearly defines IBNR, how to calculate the IBNR and why it is essential. I also wanted my students to gain an appreciation of the actuary’s role in risk financing. We discussed how the insurance broker works with the actuary: developing the knowledge needed to address issues with loss data to improve loss forecasting.
This approach enables students to understand the impact of claims management/reserving issues, fluctuation in exposure data and changes in regulations on claims data. Students also learn that those factors may require the actuary’s judgment to adjust loss development factors, loss rates and the loss forecast.”
3. Which class do you use it for and what is the content of the class?
“This course is a senior-level capstone RMI course. The students need to understand loss forecasting as a part of the risk identification/assessment and as a foundation for designing alternative risk financing programs.”
4. How do you incorporate the book into the class?
“I discuss ‘Actuarial Advantage’ at the end of the Risk Identification/Assessment topic so that the students understand the importance of loss data, exposure data, loss development and loss forecasting to the risk management process. The students need to understand that they can become good data scientists by thoroughly understanding the loss and exposure data and identifying issues with the data (reserving, claims management, exposure shifts, regulatory changes, etc.) even if they are leaving the math to the actuaries. The broker and risk manager need to work with the actuary to understand data anomalies as previously mentioned. The students gain insight into how the actuary can provide better forecasts if they understand underlying data issues.”
Michael was also kind enough to provide us with direct feedback from his students on “An Actuarial Advantage” and how it helped them develop an understanding of the core actuarial concepts.
Allie Witt: “Within the setting of a high-level enterprise risk management course, ‘Actuarial Advantage’ has provided great context for valuing actuaries and their skills in assessing loss development and forecasting. The most important step in the risk management process is identifying exposures, and without this valuable mindset, exposures can be misidentified or even missed. The ‘Actuarial Advantage’ text highlighted loss reserving and forecasting strategies, which we were then able to apply to our class discussions on risk assessment and financing. It also came in handy when I was writing about claims management for a class paper—I was able to apply what I learned about the role of an actuary and loss reserving in risk financing to argue for the use of big data in developing a robust claims management system for self-funded risks. The ‘Actuarial Advantage’ knowledge has been especially crucial for us to frame what we learned thus far in our risk management degree with the context of how vital it is to partner and work with actuaries to effectively manage risk.”
Rachel Mermelstein: “’Actuarial Advantage’ was very beneficial for risk financing because it thoroughly explained actuarial concepts to students who are not actuarial science majors. This textbook helped our class learn how to forecast future expected losses and analyze incurred but not reported (IBNR). The textbook has allowed my class to understand better loss reserves and how losses develop over time.
‘Actuarial Advantage’ was a useful textbook in the risk capstone class, Managing Risk Across Enterprise, because it taught the class how to better apply risk financing and loss reserves to our lectures on expected losses and forecasting. This textbook helped the class to think critically about losses and the impact that it can have on a company’s loss reserves.”
Brian Fritz: “The information provided by ‘Actuarial Advantage’ was extremely helpful in my capstone course, Managing Risk Across the Enterprise. Among other benefits, it allowed for a better grasp of the actuary’s role in gathering and analyzing data to forecast and adjust loss development. These factors are crucial in designing risk financing programs, and I now have a clearer understanding of how they are derived.”
Michael Zuckerman, J.D., MBA, ACI is an associate professor and academic director for Enterprise Risk Management at the Fox School at Temple University. The Fox School maintains a distinguished tradition of educating the nation’s finest risk, insurance, actuarial and healthcare systems professionals. With more than 700 students and 24 full-time faculty, the Department of Risk, Insurance and Healthcare Management. The department offers both undergraduate (BBA) and graduate (MS, MBA and PhD) degrees in each of the three program areas: Actuarial Science, Healthcare Management and Risk Management and Insurance.
We greatly appreciated the chance to discuss with Michael the specific ways in which he utilizes “An Actuarial Advantage” in an educational setting. We are constantly pleased to see the broad reach of our educational resources, as well as their capacity to help strengthen the wider understanding of actuarial concepts. Any readers who would like to add their own experience with “An Actuarial Advantage” may do so in the comment section below. We would love to hear from you!
Visit SIGMAactuary.com/freebook to request a copy of “An Actuarial Advantage”. To discuss our educational focus and how that impacts our consulting practices, feel free to contact us at firstname.lastname@example.org.