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Actuaries DECEmbEr 2014 ISSUE 196T h e m ag a z i n e o f T h e ac T ua r i e s i n s T i T u T e

The Economics of Inequality

6 Comment

10 ReportCreating Innovative Insurance Products for Emerging Markets13 ReviewComparing Outcomes from Lifecycle and Balanced Funds33 Review

Public Policy – a Year in Review 34 Event Report

The Summit that Mattered – GIS2014

Actuaries December 20142

We all see the elephant in the room, but don’t want to name it. What about the tiger in the room? It’s unseen and can present a serious strategic risk. Actuaries are already well‑equipped to deal with risk. How can history, psychology, applied

philosophy and ethics help you make better decisions in the face of strategic risk?

The CPD Roadshow will be a half‑day interactive session with Dr Simon Longstaff, AO, Executive Director, St James Ethics Centre. Don’t miss this opportunity to hear Dr Longstaff discuss:

the ‘universal grammar’ of human choice – the ultimate determinant of how the world has come to be the way it is;

how bad decisions have had a strategic effect throughout history;

an examination of key factors, such as ‘ethical literacy’ that leaders must address if they are to manage risk in general; and

a look at the systemic risk that arises from an over‑reliance on the tools of regulation and surveillance.

If you want to enrich how you approach day‑to‑day decision‑making in the face of strategic risk, attendance at this session is a must:

Tuesday 3 March 2015 SA Hilton Adelaide

Wednesday 4 March 2015 WA Pan Pacific Perth

Wednesday 11 March 2015 NSW The Forum – Actuaries Institute

Tuesday 24 March 2015 VIC Sheraton Melbourne

Wednesday 25 March 2015 QLD Hilton Brisbane

Wednesday 1 April 2015 ACT Realm Hotel Canberra

Simon Longstaff AODr Longstaff is a philosopher – reading for his doctorate at Magdalene College in Cambridge – and Executive Director of the St James Ethics Centre. His distinguished career includes being named as one of the AFR Boss True Leaders for the first decade of the 21st century with Carol Schwartz noting “...I don’t know one CEO or Chairman in corporate Australia who has not worked with Simon Longstaff...”

2015 CPD RoadshowThe Tiger in the Room

3 March – 1 April 2015

Find out more at http://www.actuaries.asn.au/CPD2015 Dr Simon Longstaff AO

December 2014 Actuaries 3

ContentsDecember 2014 • ISSUE 196

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30

20

EvEntS4 Coming Up / Thank You and Goodbye!EDItorIal5 Game of Chance ❙ Sharanjit Paddam

CommEnt6 The Economics of Inequality ❙ Ruth Goodwin

rEport10 Creating Innovative Insurance Products for Emerging

Markets ❙ Yiling Cheah

rEvIEw13 Comparing Outcomes from Lifecycle and Balanced Funds

❙ Brnic Van Wyk

lEttEr to thE EDItor15 Pollard’s Political Persuasion ❙ John Pollard

CommEnt16 Occupational Constraints of the Prudential Regulator

❙ Ramani (SG) VenkatramanirEport18 See What We See – Update ❙ Katrina McFadyen

IntErvIEw20 A Chat With Fred ❙ Ruth Lisha

ExCEl mUSIngS22 R1C1 Excel Musings – Sorting and Randomising

❙ Dan Mayoh

aCtUarIES takIng thE lEaD24 Getting Younger Actuaries Involved in Committees

❙ Nicola Westoby

2014 InDEx26 Index of Magazine Articles and Inclusions EvEnt rEport30 Inaugural Public Policy Forum ❙ John McLenaghan

rEvIEw33 Public Policy – A Year in Review ❙ Elayne Grace

EvEnt rEport34 The Summit that Mattered – General Insurance SeminarEvEnt rEport38 Enterprise Risk Management Seminar ❙ Gavin Pearce

In thE margIn40 Funny in Any Language ❙ Genevieve Hayes

UnDEr thE SpotlIght41 Dave MillarStUDEnt ColUmn 42 To Insure or not to Insure? (That is the Question)

❙ Amy Li / Holly Briffa / Mengtong Xia

look-ahEaD CalEnDar43 2015 Look-Ahead CalendaraCtUarIES at play44 Musical Adventures ❙ Nicole Stransky

prESIDEnt’S ColUmn46 Pigs may not but Time Certainly Does! ❙ Daniel Smith

CEo’S ColUmn48 Back Through the Looking Glass – a Retrospective on

2014 ❙ David Bell

notICE50 ASTIN, AFIR/ERM and IACA Colloquia – Innovation &

Invention – Save the date!notICE51 Actuaries Summit – Take the Lead – Registration Opens

Soon

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4 Actuaries December 2014

Actuaries Coming up2015

Sydney graduation DinnerTuesday 24 February 2015, Sydney

2015 CpD roadshow – the tiger in the roomTuesday 3 March 2015, Adelaide

adelaide presidential DinnerTuesday 3 March 2015, Adelaide

2015 CpD roadshow – the tiger in the roomWednesday 4 March 2015, Perth

perth presidential DinnerWednesday 4 March 2015, Perth

2015 CpD roadshow – the tiger in the roomWednesday 11 March 2015, Sydney

2015 CpD roadshow – the tiger in the roomTuesday 24 March 2015, Melbourne

melbourne presidential DinnerTuesday 24 March 2015, Melbourne

2015 CpD roadshow – the tiger in the roomWednesday 25 March 2015, Brisbane

Brisbane presidential DinnerWednesday 25 March 2015, Brisbane

2015 CpD roadshow – the tiger in the roomWednesday 1 April 2015, Barton

Canberra presidential DinnerWednesday 1 April 2015, Barton

actuaries SummitSunday 17 – Tuesday 19 May 2015, Melbourne

aStIn/aFIr/Erm/IaCa ColloquiaSunday 23 – Thursday 27 August 2015, Sydney

Injury Schemes SeminarSunday 8 - Tuesday 10 November, Adelaide

Important InFormatIon For ContrIBUtorSActuaries Magazine welcomes both solicited and unsolicited submissions. The Editorial Committee reserves the right to accept, reject or request changes to all submissions as well as edit articles for length, basic syntax, grammar, spelling and punctuation via [email protected]

All contributions must conform to our submission guidelines which are available from the Communications and Marketing Team.

aCtUarIES EDItorIal CommIttEEEDItor Sharanjit [email protected]

InStItUtE hQ tEam mEmBErSKatrina McFadyenNicole Sitosta

aSSIStIng EDItorSGenevieve HayesChris LarkinKitty LeungJun LiDavid MillarCandice MingMichelle NgSolai Valliappan

magazInE DESIgn Kirk Palmer Design, Sydney www.kirkpalmerdesign.com.au

prIntIng Ligare, Sydney

aCtUarIES InStItUtE ABN 69 000 423 656Level 2, 50 Carrington StreetSydney NSW 2000 Australia t +61 (0) 2 9239 6100 f +61 (0) 2 9233 3446 e [email protected] www.actuaries.asn.auFollow us on Twitter®:http://twitter.com/ActuariesInst

pUBlIShED By thE aCtUarIES InStItUtE© The Institute of Actuaries of Australia ISSN 2203-2215

aDvErtISIng polICyPlease refer to the Institute’s website for our advertising policy and rates:www.actuaries.asn.au or email [email protected]

Disclaimer Opinions expressed in this publication do not necessarily represent those of either the Actuaries Institute (the ‘Institute’), its officers, employees or agents. The Institute accepts no responsibility for, nor liability for any action taken in respect of, such opinions.

Visit www.actuaries.asn.au/knowledge-bank/actuaries-magazine for full details of our disclaimer notice.

thank yoU anD gooDByE!

Thank you to Dave millar who leaves the Editorial Committee after six years of soliciting, writing and editing articles. We’ve put Dave under the spotlight this month – see page 41.

Sincere thanks also to Simon palmer of Kirk Palmer Design for his long period of creative input into the magazine production. (With the move to digital in 2015, content for print will now be automatically generated).


In the interim years between qualifying and having a family, when I had that now elusive thing called spare time, I found my way to volunteering with the Wayside Chapel in Kings Cross. Mostly I helped out in the evenings, walking the streets of Kings Cross with a member of staff, making contact with young people living on

the streets. For Wayside it was an important project around not separating themselves as an institution, but rather being a member of the community that was willing to visit people in their own ‘homes’ as well as inviting them to visit their home. I’m not sure how useful I was to Wayside staff or visitors, but it was certainly a life-changing experience for me.

As an example, I remember a discussion between a young girl who had just turned 18 and a sex workers’ outreach project worker. The girl was being counselled to join a brothel rather than continuing to walk the streets, because she would be far safer in the brothel. Since legalised brothels are restricted to adults, girls and boys who need the most protection are the ones who are most at risk of being driven off somewhere and being harmed. In the universe of actual realistic choices available to her, this girl was choosing between the high-risk and high-reward of walking the streets, of paying a commission to a brothel for lower risk and lower reward. I don’t know what choice she made in the end, but it wasn’t covered in actuarial text books on preference theory. Even though I know the odds were against her, I hope that somehow her life is easier today.

There has been some criticism of the Melbourne Cup this year following the sad death of two horses after the race. I’m reminded that just about the only vice I don’t have is gambling. I’ve just never felt the thrill that others speak of playing a game that I knew was deliberately and systematically rigged against me. But then there are many other examples of my own woeful decision-making.

Gambling is perhaps the clearest evidence that rational decision-making is not the norm for humanity. I still remember when I volunteered at the Wayside, the young men, usually well-dressed, usually from overseas, lining up at the food van near the Domain waiting for a free meal from church volunteers. Yesterday they received the money to pay for their courses or their rent. Yesterday they were Kings. Today they are on the street – a very different world to the $5 office sweepstakes with a nice lunch and a few drinks.

In 2009, the Productivity Commission estimated that between 90,000 and 170,000 Australian adults (0.5 – 1%) suffer significant gambling problems, and a further 230,000 to 350,000 (1.4 – 2.1%) are at moderate risk for problem gambling. Problem gambling is particularly pernicious in how many people, including family members and work colleagues, are indirectly affected by a problem gambler. The Productivity Commission estimated the social cost of problem gambling to be $4.7bn a year. In 2008-9 state revenue from gambling was about the same at $5.0bn, from industry revenues of $19bn. Despite the clear recommendations from the Productivity Commission, very little seems to have changed.

For those of you who choose to donate to charity at this time of the year, I hope you will consider giving to the Wayside Chapel (www.thewaysidechapel.com).

On behalf of the Actuaries Magazine Editorial Committee, best wishes to all for the New Year.

Sharanjit paddam

Editorial Sharanjit paddam [email protected]

@Sharanjit

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Comment

The Economics of Inequality

ruth goodwin [email protected]

@ruthjoygoodwin

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IntroDUCtIon

Today, the combined wealth of just 67 individuals exceeds that of the poorest 3.5 billion people – half of the world’s population. Income inequality is a problem that appears to be getting worse. 70% of

the world’s inhabitants live in countries where inequality is greater now than it was 30 years ago. At the end of October Oxfam issued a new report Even it Up: Time to End Extreme Inequality1 and kicked off their Even it Up campaign to inspire the worldwide community to close the income inequality gap and deal with poverty in the process. These shocking statistics, and many others can be found in Oxfam’s report.

Earlier this year the highly acclaimed French economist, Thomas Piketty, released his book Capital in the Twenty-First Century. The book soared to the top of bestseller lists and brought income and wealth inequality into the public spotlight.

Oxfam and Piketty are not alone in their concern. The World Economic Forum continues to highlight income inequality as a major global risk. The World Bank, The Organisation for Economic Co-operation and Development (OECD), together with The

International Monetary Fund (IMF) have all identified income inequality as an issue that needs attention.

nEvEr haS So mUCh BEEn In thE hanDS oF So FEwIn 2011 it is estimated that 2.2 billion people lived below the poverty line, defined by UNESCO as US$2 per day and just over 1 billion2 lived below the US$1.25 per day ‘extreme poverty threshold.’ At the same time many others lived in comfort.

Earlier this year, Oxfam reported that the combined wealth of 85 individuals exceeds that of the poorest half of the world’s population. These 85 billionaires were identified based on the 2013 Forbes Billionaires list3. Their wealth totalled US$1.7 trillion, which translates to US$80 billion each. This compares to just US$486 per person for those on the unfortunate end of the wealth scale.

Since this statistic was released in January 2014 it has been estimated that those privileged few have seen their collective wealth increase by US$668 million every day, almost half a million US dollars every minute. As a result, by the time Forbes published its 2014 Billionaires List4 in early March, it took only 67 of the richest individuals’ wealth to match that of the poorer half of the world. 28 of this group are from the US; with Germany and Russia close contenders each producing 6 billionaires each.

The percentage of income received by the richest members of society is increasing.


Source: Working For the Few. Political capture and economic inequality. Oxfam

Oxfam have reported that the wealth of the 1% richest people amounts to $110 trillion, 65 times the total wealth of the bottom half of the world’s population. In the US, the wealthiest 1% captured 95% of post-financial crisis growth since 2009, while the bottom 90% became poorer.

Such figures have led to worldwide campaigning by groups such as The Occupy Movement, with the slogan ‘We are the 99%’. They aim to fight back against a system where the rich get richer and the poor get poorer.

CapItal In thE twEnty-FIrSt CEntUryThomas Piketty’s book Capital in the Twenty-First Century, has gained widespread public and political attention. In this bestseller, Piketty aims to focus not only on the level of inequality, but also the origin and structure of inequality. The primary source of data for the book is the World Top Incomes Database (WTID), created by the joint work of about 30 researchers around the world, primarily using tax data. It contains information on the distribution of earnings and wealth of more than 20 countries5. Piketty’s detailed data gathering and statistical analysis has received the praise of many economists.

Piketty examines the dynamics of income and wealth distribution over a longer period of time than previous studies and breaks income down into two components in his work:1. Income from labour (wages, salaries, bonuses etc.)2. Income from capital (rent, dividends, interest, profits, capital gains,

royalties, and other income derived from owning capital)

Piketty’s key findings are that inequality was significant at the beginning of the 20th century, but reduced between 1910 and 1950, mostly due to war and the resulting policy decisions made by governments. In the 30+ years since 1980 inequality has grown. America has returned to and surpassed the levels of income concentration experienced at the beginning of the 20th century.

There are two reasons for this increased concentration of wealth:1. Soaring inequality in wages2. The level of returns that can be achieved on wealth

The trend of increasing executive incomes is especially noticeable in America. In 1980, roughly one-third of national labour income went to the top 10% of earners. Over the next three decades their share rose by 15% and they now receive close to 50% of national income.

piketty states that as a general rule wealth grows faster than economic growth. (He explains this concept with expression r > g, where r is the rate of return on wealth and g is the growth rate of the economy).

Piketty argues that in an economy where the rate of return on capital outstrips the rate of growth, existing inherited wealth will always grow faster than earned wealth. So wealth accumulated in the past grows faster than wages and this leads to the concentration of wealth.

piketty’s biggest claim is that the current free-market system has a natural tendency towards increasing the concentration of wealth.

Faster economic growth reduces the importance of existing wealth in society and slower growth will increase its importance. So economic growth governs the impact of the past on the present. As growth rates fall, as has been the case for most developed economies over the latter half of the 20th century, the impact of past wealth increases. • Piketty calculates that at growth rates of 0.2% per year

the economy expands by just 6% per generation. So the concentration of wealth in society is almost unchanged;

• at 3.5% annual growth, each generation has an economy 2.8 times larger than the last, and over a century a 31-fold increase in economic output will be experienced. This results in the potential for dramatic social change and for the old to be constantly replaced with the new; and

• somewhere in the middle, at an annual growth rate of 1.5% each generation enjoys economic output about 50% greater than the previous, which over a century leads to a three-fold increase in output. Change is possible, but limited.

So, how should the current state of inequality be remedied? Piketty suggests introducing a progressive annual global tax on capital. This could take the form of an annual levy, starting at 0.1% and reaching a maximum of around 10% on the greatest fortunes. Piketty also suggests a 80% tax rate on incomes above US$500,000.

Like any work introducing such ground breaking and potentially controversial theories, Capital in the Twenty-First Century has led to much discussion. Readers have questioned whether it’s right to assume that the future will look like the past.

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Figure 1: The rich get richer

The percentage increase in share of income of the richest one percent

The share of national income going to the richest one percent

Source: F. Alvaredo, A. B. Atkinson, T. Piketty and E. Saez, (2013) ‘The World Top Incomes Database’, http://topincomes.g-mond.parisschoolofeconomics.eu/ Only includes countries with data in 1980 and later than 2008.

0 50 100 150

MauritiusFranceSpain

DenmarkSingapore

New ZealandJapan

ItalyIreland

NorwaySweden

AustraliaUnited States

0 10 20 30

DenmarkSweden

MauritiusNew Zealand

NorwayFranceSpain

AustraliaItaly

JapanIreland

SingaporeUnited States

2008-20121980

Figure 1: the rich get richer


The main criticism for Piketty’s work is that his policy recommendations are ideological and unlikely to be possible, or welcomed, in practice. It is not hard to understand why this might be the case. Governments are unlikely to readily introduce policies that upset those who are likely to have played a significant role in getting them into power and will support them during their term in office. Those with wealth do not always readily share it. However, Piketty asserts that we are on a one-way journey towards inequality unless governments intervene.

thE lUCky CoUntry?In the ‘Lucky Country’ of Australia, most people live relatively comfortably compared to so many of the world.

Australia is traditionally a very egalitarian society, favouring equality for all people. This is ingrained in the culture both subtly and more intentionally.

For example, applicants for selected Australian visas are required to sign a values statement to encourage all new residents to uphold Australian values. These values include6:• respect for the freedom and dignity of

the individual;• equality of men and women;• a spirit of egalitarianism that embraces

mutual respect, tolerance, fair play, compassion for those in need and pursuit

of the public good; and• equality of opportunity for individuals,

regardless of their race, religion or ethnic background.

But even in Australia there continues to be a significant concentration in the distribution of wealth. Oxfam reports in their publication, Still the lucky country?7, released in June 2014, that inequality is also rising in Australia. The richest 1% of Australians now own the same wealth as the poorest 60%. Australia’s richest person owns more than the lowest 10% of the population combined (2.27 million people). The nine richest individuals have a net worth of US$54.8 billion, more than 20% of the population (4.54 million people)8.

The Australian Council of Social Service released the report Poverty in Australia 2014 in October this year9. It highlights that poverty in Australia is increasing, with 2.5 million Australians (13.9% of the population) living below the internationally accepted poverty line. This line represents 50% of median income, after allowing for housing costs, therefore adjusting for the cost of living in different countries.

what IS thE ImpaCt?How does income inequality impact the world? What happens when wealth is concentrated in the hands of a few?

Whilst acknowledging that some inequality is necessary to drive growth and progress, reward talent, hard-earned skills and a willingness to innovate and take entrepreneurial risk, Oxfam argues that today’s extremes of economic inequality undermines growth and progress. Further, it fails to invest in the potential of hundreds of millions of people.

They state that:

‘Extreme inequality corrupts politics and hinders economic growth. It exacerbates gender inequality, and causes a range of health and social problems. It stifles social mobility, keeping some families poor for generations, while others enjoy year after year of privilege. It fuels crime and even violent conflict. It squanders the hopes and ambitions of billions who are trapped at the bottom with no way out. These corrosive consequences affect us all, but the impact is worst for the poorest people.’ – Even it Up: Time to End Extreme Inequality, Oxfam

what nEEDS to ChangE?The Oxfam report challenges a number of ‘myths’ about inequality. These include the belief that:• there is a trade-off between economic

growth and reducing inequality;• inequality is the inevitable and

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Comment continued

1 Even it up: time to End Extreme Inequality. publication date 29 October 2014. Retrieved from http://policy-practice.oxfam.org.uk/publications/even-it-up-time-to-end-extreme-inequality-333012?cid=rdt_evenitupreport

2 http://www.worldbank.org/en/topic/poverty/overview

3 Oxfam used the Credit suisse (2013) ‘global wealth Report 2013’, Zurich:

Credit suisse, https://publications.credit-suisse.com/tasks/render/file/?fileId=bCdb1364-a105-0560-

1332EC9100FF5C83; and Forbes’ ‘the world’s billionaires’,

http://forbes.com/billionaires/list (accessed on 16 december 2013).

4 Forbes’ 2014 billionaires list can be found here http://www.forbes.com/sites/luisakroll/2014/03/03/inside-the-2014-forbes-billionaires-list-facts-and-figures/

5 http://topincomes.parisschoolofeconomics.eu/#home:

6 Fact sheet 7 - life in australia: australian Values. Retrieved from https://www.immi.gov.au/media/fact-sheets/07values.htm

7 Oxfam’s report still the lucky Country? can be accessed here https://www.oxfam.org.au/wp-content/uploads/2014/06/2014-66-g20-report_fa_web-2.pdf

8 Oxfam used the list of billionaires from Forbes released on march 4, 2014 to calculate the accumulated wealth of the richest families in australia and data from Credit suisse global wealth databook to calculate the wealth of the bottom 10, 20 and 60 percentiles of the population.

9 the aCOss report poverty in australia 2014 can be accessed here http://www.acoss.org.au/media/release/2.5_million_people_living_in_poverty_in_australia_new_report. It uses data from the australian bureau of statistics Income and Expenditure surveys for 2011-12

unfortunate impact of technological progress and globalisation, so there is little that can be done about it;

• extreme economic inequality is not the problem, extreme poverty is the problem;

• there is no need to focus on inequality and the growth in wealth for a few at the top, as long as poverty is being reduced for those at the bottom;

• sustained economic growth only comes from reducing government interventions and leaving markets to their own devices; and

• the wealthy are richer than others because they deserve it and work harder.

Although hard work does lead to prosperity in some cases, not all people begin with a level playing field. The reality is that a person’s future opportunities are influenced significantly by where they are born and the income of their parents. Deliberate political and economic choices impact equality, with both regulation and taxation having a part to play.

Income inequality is a very complex issue and not a simple one to solve, but Oxfam asserts that it is not an inevitable consequence of today’s world. While Piketty’s recommendations are perhaps more theoretical, Oxfam’s campaign is petitioning for four areas of change:1. Tax reform2. Greater investment in public services 3. Decent wages 4. Government policy reformSolving global income inequality will result in substantial changes for the poor. Oxfam

calculates that 1.5% of the combined wealth of all the world’s billionaires could fill the annual shortfall in funds needed to provide health services in the world’s poorest countries and pay for every child in the world to go to school. If India stops inequality from rising, it could end extreme poverty for 90 million people by 2019.

So what nExt? – a pErSonal vIEw

“overcoming poverty is not a task of charity, it is an act of justice. like Slavery and apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings. Sometimes it falls on a generation to be great. yoU can be that great generation. let your greatness blossom.” – Nelson Mandela

Irrespective of our view of how the world in which we live should operate, the growing chasm separating the wealthy from the poor is very concerning.

I believe our voices and actions are a necessary part in overcomi ng a global problem, particularly for those of us privileged enough to be born into a wealthy nation.

Actuaries are in a unique position to be able to understand the economic

forces at work within such complex issues, crunch the numbers and extrapolate trends. We are used to seeing the bigger picture in our work, considering the impact of intergenerational inequity, and making recommendations as to how change can be achieved. Many of us hold privileged positions as trusted advisors to the government and other leaders with significant influence. The question remains, how can we as Actuaries make a difference to global income inequity with our work and will we let our greatness blossom?

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yiling Cheah [email protected]

report

Creating Innovative Insurance Products for Emerging Markets

Agent registering a customer onto an insurance product in Bangladesh


Dinesh lives in Sri Lanka. He is 45 years old with a wife and four kids. He is the sole earner and works as a rickshaw driver. His wage barely covers his family’s expenses and certainly

doesn’t allow him the luxury of saving for a rainy day. He is constantly worried about the risks his job presents for his family – accidents occur in his line of business and the consequences could be tragic. If the worst were to transpire, he has a large network of family and friends to rely on but the extent of help is not predictable, or indeed, guaranteed. So, what can Dinesh do to help ensure that his family can weather the worst, were it to occur?

why Do CUrrEnt InSUranCE proDUCtS FaIl to mEEt thE nEEDS oF thE poor?In most developed countries, we recognise that Dinesh’s problem is one that life insurance policies help to solve. However, in many developing countries, the available suite of insurance products fails to meet the needs of millions of people like Dinesh.

Insurance has sometimes been described as a luxury that only the wealthy can afford. Statistics support this claim as global insurance penetration is 7% of global GDP but it is only 2% in developing countries.

In a similar way to people in developed countries, the poor also worry about coping with unexpected income shocks due to deaths in the family, healthcare expenses and accidents. There is clearly a need for insurance in emerging markets, so why is penetration so low?

A popular misconception is that insurance products are priced too high and that people in emerging markets do not understand the value of insurance. However, even if the price of traditional products was lower and there was a greater expenditure on marketing, it is unlikely that the take-up would skyrocket. Traditional insurance products offered in emerging markets are typically not appropriate or attractive for the low-income population. Insurance products need to be tailored to suit the characteristics, needs and behaviour of the low-income segment.

Last year, CGAP conducted a thorough review of 30 qualitative and quantitative studies on microinsurance. Evidence suggests that there are four key reasons for low insurance take-up:

1) Trust;2) Liquidity constraints;3) Customer value proposition; and4) Behavioural factors.

trust: Trust goes beyond the insurance company’s brand and reputation. The customer also needs to trust the product. This can be done by making the product more tangible. For example, more communication; frequently promoting claims payouts; and having value-added benefits. Another way to build trust is through interaction with trusted sales agents and the provision of financial training.

liquidity constraints: While the absolute price point is a decision-making factor in the purchase of insurance, it is not the only reason for low demand. Often, low-income people can afford to purchase insurance but do not have the funds to do so at the point-of-sale and cannot commit to predetermined payment schedules. Therefore, insurance products need to be flexible to accommodate the fluctuating income stream of individuals in emerging markets.

Customer value proposition: Service quality is highly valued as poor service can increase the implicit cost of purchasing the product. For example, a challenging enrolment process and claims filing process would require a lot of time from customers; time which could otherwise be spent in income-generating activities. Therefore, simplicity of the product; responsiveness of customer care; and the ease of registration and claims procedures have a large impact on sales.

Behavioural factors: While people may have the intention of purchasing insurance, this does not always translate into action. People procrastinate about paying for insurance and renewing their policies. Therefore, ease of adoption and retention is key. Reducing barriers to purchasing insurance will help to stimulate demand. For example, having the ability to purchase insurance at a nearby location; eliminating the need for documentation; and removing the requirement to actively line up and pay for premiums, making renewals automatic unless customers opt-out.

how Can wE rEaCh thE maSS markEt CoSt-EFFECtIvEly?Using the lessons from the CGAP paper, traditional insurance products can be redesigned to meet the needs of mass market consumers in developing countries. However, for these products to exist in the market, they need to be profitable to incentivise insurance companies to develop them.

To date, a big barrier in the creation of financially sustainable products has been developing a cost-effective and efficient distribution channel. Fortunately,

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Agent registering a customer onto an insurance product in Bangladesh Call centre agent in Senegal


this barrier has decreased as the infrastructure for telecommunications has evolved in developing countries. Mobile phones have emerged as a powerful channel for distributing insurance products in a cost-effective way. In 2012, data from GSMA indicated that SIM penetration was at 87% for Asia Pacific, 73% for Africa, and over 100% for the other regions of the world. Given that mobile phones are prevalent in emerging markets, in both urban and rural areas, it is one of the most effective channels to deliver insurance products to the mass market.

BIma’S moBIlE mICroInSUranCE oFFErIngBima is an award-winning global microinsurance provider and is one of the pioneers of selling insurance through mobile phones to the mass market in developing countries. It was launched four years ago but has grown rapidly to have 10 million registered customers and a footprint across 13 markets in Africa, Asia and Latin America. Bima’s insurance products are carefully tailored to the needs of emerging market customers and are distributed in a cost-effective way to ensure that the products are, not only financially sustainable, but also profitable.

Bima’s products include life, health and personal accident cover. These products are affordably priced and range from as little as $0.23 to $2.00 per month.

Bima’s rapid growth trajectory is due, in large part, to its success in tackling CGAP’s four key reasons for low insurance up-take.

trust: Bima has over 2,500 sales agents that are dedicated to selling Bima’s microinsurance products. These agents come from the local community and spend time ensuring that customers understand the product prior to purchase. Customers receive regular SMSs updating them on their

payment and cover, and they can contact an attentive customer care hotline if they have any issues.

liquidity constraints: Customers pay for their insurance products using the prepaid airtime credit on their mobile phone. Inbuilt flexibility around premium payments makes it easy for Bima’s customers to manage their cashflows.

Customer value proposition: Bima provides quality customer service. Registering for the insurance product is almost effortless and when a customer needs to make a claim they are guided through the entire process. Even illiterate customers can confidently purchase Bima’s products knowing that the agents will help them through any paperwork that is required.

Behavioural factors: Customers do not need to change their behaviour to purchase this product. Once they have registered for insurance, their premium payments occur automatically as they top up and use their phone. Customers are kept informed of their

successful payments and their level of cover through regular SMSs.

ChallEngES anD BarrIErSAlthough Bima is rolling out mobile microinsurance rapidly across many markets, regulatory challenges often exist when implementing this business model. In some countries, regulations prevent the use of electronic signatures, which means insurance policies cannot be sold over the phone and registrations cannot occur without collecting and processing a cumbersome amount of paperwork. In other countries, the use of airtime to pay for non-telecommunication products is prohibited, which eliminates an efficient means of premium collection.

On a positive note, several developing countries are evolving their regulatory framework to include microinsurance and they are acknowledging non-traditional distribution channels. Developments such as these are promising if we are to make insurance products more accessible to the mass market and for our rickshaw driver friend, Dinesh.

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Agents in Ghana

Agent in Sri Lanka

Agent in Ghana Agent registering insurance product, Bangladesh


BaCkgroUnD

A new default superannuation regime was introduced in 2013 under the Stronger Super reforms. Funds were required to obtain a license for a

MySuper product which required specific features. One of these was a single diversified investment strategy. The legislation provides for a lifecycle exception to this feature, but only if the lifecycle strategy was based on age only, or age and other prescribed factors.

The majority of funds rebadged their existing balanced options as their MySuper products, but some (predominantly retail) funds introduced new products, a number of them with lifecycle investment strategies. According to the MySuper Market Trends publication by Mercer in January 2014, of the 116 MySuper products approved as of January 2014, 22 had lifecycle investment strategies.

One of the key objectives for MySuper was to simplify comparison between products on the basis of fees and investment returns. The introduction of lifecycle strategies makes investment return comparisons difficult.

This article explores the comparison between balanced and lifecycle funds from the perspective of the member’s expected outcome at retirement, rather than on a time-weighted or portfolio-weighted investment return basis. In other words, what is the effective annual internal rate of return achieved over the whole period of accumulation on a given set of cash flows?

moDEllIng StrUCtUrEIn order to assess the outcomes members could expect for different approaches, a simple assumption set and deterministic accumulation construct is used:• annual starting salary of $40,000;• fixed lifetime contribution rate of 9.5%;• contributions paid annually, halfway

through the year;• 45 year continuous savings period;• two investable asset pools only: growth

assets and defensive assets;• expected nominal returns after fees and

tax:- growth assets: 7%- defensive assets: 4%;

• annual wage escalation of 3.5%;• annual CPI of 2.5%; and• balanced fund allocation of 70/30 to

growth/defensive assets (annually rebalanced).

These assumptions are applied to the following sample of lifecycle strategies adopted by funds in different sectors of the Australian superannuation system:

Sunsuper (industry fund)Sunsuper introduced a traditional lifecycle strategy where assets are invested 100% in the balanced option until age 55, after which the account balance is gradually switched to an allocation of 10% in the Cash option and 90% in a Retirement option over a 10 year period.

Brnic van wyk [email protected]

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Comparing Outcomes from Lifecycle and Balanced Funds

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QSuper (public sector fund)QSuper developed the only lifecycle strategy that groups members by two factors: age and account balance. A higher account balance would generally lead to less investment risk, as these members have less of a guarantee in the Age Pension and will have a larger proportion of their retirement income being self-funded. De-risking (from 100% growth assets) for high balance members starts at an earlier age than for low balance members and ends at a lower growth assets proportion at retirement compared to that for low balance members. The reason being that low balance members are expected to receive a higher proportion of their retirement income from the Age Pension. De-risking is therefore over a shorter period for low balance members.

mercer (corporate trust)Mercer’s lifecycle strategy is developed to invest “through retirement” and manages investment strategies dynamically. The result is that at retirement a reasonably large proportion of the account will still be invested in growth assets. Further de-risking takes place after retirement age.

Colonial First State (retail master trust)Instead of merely using a balanced strategy for younger ages, Colonial’s lifecycle product increases the proportion invested in growth assets significantly for younger members. Risk is then managed in the period leading up to retirement by gradually switching into defensive assets.

Centre for International Finance and regulation (CIFr)In April 2014 the CIFR published a research report that examined the default fund landscape following the MySuper introduction. It contained a survey of balanced and lifecycle fund asset allocation strategies, concluding that ‘lifecycle products offer lower than expected returns of about 1% per annum … compared to remaining invested in a balanced fund with 70% growth assets’. This was based on time-weighted vs. portfolio-weighted net returns. However, when considering member outcomes as described in this article, the conclusion is different. The following graph shows the mean growth percentage allocation from balanced and lifecycle funds surveyed in the CIFR report, which was used for the modelling.

ComparISonSThe table below shows the estimated amounts accumulated in a traditional balanced fund compared to the sample of lifecycle options (future values are discounted to today’s dollars using CPI). It also shows the effective annual internal rate of return (IRR) for each cash flow series.

Fund projected Balance

Effective Irr

Balanced $332,017 6.10%

Sunsuper $318,130 5.93%

QSuper (high balance)

$321,612 5.98%

QSuper (low balance)

$363,091 6.45%

mercer $334,790 6.13%

Colonial $341,427 6.21%

CIFr $322,297 5.98%

oBSErvatIonSIt is not easy to draw conclusions from this analysis. Estimated outcomes are critically based on model assumptions and ex-ante return expectations. Slight adjustments to these could lead to different results.

MySuper products that differ in their investment strategies (i.e. balanced vs. lifecycle) cannot be compared on a time-weighted or portfolio-weighted return basis. In this context, portfolio-weighted returns

are considered to be the linked periodic returns earned in the growth and defensive portions of a portfolio, weighted by the proportional allocation to these asset pools for those various periods. These are different to asset-weighted (or dollar-weighted) returns. Ultimately what matters will be the experience an individual has and the actual outcome achieved through the actual internal rate of return achieved.

It is often overlooked that lifecycle funds may have a much higher growth allocation in earlier years (for younger members) than would’ve been the case in a balanced fund. In a way this counters the lower growth allocations in later years. However, the level of this counter will depend on the early growth proportion, the time at which de-risking starts and the level of growth at retirement.

Lifecycle funds differ vastly in their design. These differences relate to:• the characteristics that group members

(most strategies use age only);• initial proportion in growth assets;• age at which de-risking starts;• rate and method of de-risking;• what types of assets are used for the

growth and defensive proportions;• level of growth assets at the end of the

accumulation period; and• whether design is ‘to retirement’

(e.g. QSuper) or ‘through retirement’ (e.g. Mercer).

A key component not addressed in this article is the level of risk employed in the various strategies. Within the range of balanced funds, even funds with similar stated investment return objectives may have very different asset allocation

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strategies to achieve these, which may well have very different levels of return volatility. The same argument would apply for seemingly similar lifecycle strategies.

The deterministic projections shown have results that are reasonably close for balanced vs. lifecycle funds. Projections can be extended to include stochastic modelling, producing a range of outcomes for each strategy. It can be argued that the range of outcomes will be narrower for lifecycle strategies compared to that of balanced funds, due to the lower expected volatility associated with the higher allocation to defensive assets. This would illustrate the potential upside (i.e. adequacy) sacrificed for a more predictable outcome (i.e. certainty).

Arguably the key risk that needs to be managed is that of member outcomes. This relates not just to adequacy, but also certainty. Proponents of lifecycle strategies will state that this approach assists in managing sequence risk in the period leading up to retirement. With investment in less growth assets in the later stages of a lifecycle strategy, the variability of returns is reduced, which in turn reduces the variability of outcomes for members. The expected average return during this de-risking period is naturally lower, reducing the average expected outcome.

ConClUSIonMembers’ risks are changing and the investment environment is changing. Assets provide different risk/reward ratios over time. While dynamism is not unique to lifecycle funds the advent of a starkly different default has empowered trustees to be pro-active in assessing risks and responding to them. Whether those dynamic decisions will all add value will be seen in time, but Australian funds are now building robust investment capabilities which will allow such investment flexibility to be applied.

The typical balanced strategy is well suited to some members for some part of their investment lifecycle and in some investment environments. But not for all. The balanced strategy comes with a strongly pernicious effect though. It invites ready comparison with other funds. The behavioural impact of these peer comparisons, that are usually made on annual returns and without risk adjustment, encourages inertia in strategy setting. It creates a sense that departing from that balanced strategy introduces risk.

The most important thing that lifecycle defaults have done so far is break the inertia which grows out of balanced defaults and peer relative investing. If trustees feel that their members face changing risk profiles as they move through their lifetime there are now some alternatives for them to consider. As the debates kick off and flourish it will be interesting to see how much we can improve a member’s experience in accumulating contributions and then drawing out incomes in retirement, particularly as account balances inexorably grow.

the key risk that needs to be managed is that of member outcomes. this relates not just to adequacy, but also certainty.

Dear Sharanjit, Thank you for your editorial Pollard’s Political Persuasion.

There is one statement in your first paragraph which I believe is not correct. As far as I and my five siblings are aware, Dad was never a member of a political party. John Howard was his local member and an avid reader of Economic Trends which Dad wrote. But Dad was also well known to senior Labor politicians. I clearly remember staying with Dad at University House in Canberra on one occasion when the former Prime Minister Gough Whitlam happened to be staying there as well. He saw the two of us from a distance of about 20 metres away, and immediately called out “Hello Professors Pollard”. We then spent quite some time chatting with him. John [email protected]

The Kid from

Norfolk IslandTHE STORY OF THE

REMARKABLE ALF POLLARD

John S. Croucher

Foreword by the Hon. John Howard

Article supplied on behalf of the Superannuation Projections and Disclosure Sub-Committee.

Other Committee members are: Bill Buttler, Jackie Downham, Ian Fryer, Colin Grenfell, Glenn Langton, David Orford, Richard Starkey and Ray Stevens


P rUDEntIal manDatEPrudential regulation seeks to ensure that financial intermediaries can meet their obligations to beneficiaries (‘consumers’) under all reasonable

circumstances, as a general guarantee against failure entails unacceptable moral hazard and taxpayer costs.

The prudential regulator achieves its aim through licensing, on and off-site supervision and risk-based assessments and enforcement. Legislative powers are granted to obtain information, review the strategy, risk management systems and their implementation in institutions and outsourced service-providers, commence enforcement action and manage insolvent providers. Unbridled regulatory action or abuse of power is checked through tribunals, courts, industry consultations and parliamentary scrutiny.

Prudential regulation differs from tax, competition and market conduct regulation in its reach and application. It is easy to miss its nuanced constraints, leading to ineffective outcomes.

The prudential regulator’s primary task is to protect the interests of consumers. They are among the competing interests of shareholders, investors, distributors, employees, tax authorities and the community at large, including global markets.

It is sensible to work collaboratively with other stakeholders when things are normal. The business of intermediaries is to operate profitably and to provide a risk-adjusted return to entrepreneurs by servicing customers sustainably over the long term. It is critically in the regulator’s interest for this process to work smoothly.

Thus, the regulator needs to balance its actions not to harm other stakeholders in normal times. Here is necessary alignment between institutional and regulatory perspectives. The regulator works for the same shared aims.

In practice, things diverge. Institutions get their risk assessments, execution or both wrong; the proverbial ‘rogue’ operatives proliferate; Rumsfeldian ‘unknown unknowns’ intervene; regulatory rules, often devised with hindsight, prove unequal in addressing emerging risks; lessons of past failures fade in memory, with inappropriate risk-taking resuming. In such cases,

the regulator works with the intermediary in respect of identified issues, if given a reasonable prospect of securing consumer interests.

At any time, many problems are being worked on, unknown to the consumers or the broader market, like the vast unseen goings-on beneath the ocean surface. When they are resolved, the consumers or the public will never know: the institution itself will not publicise it, and the regulator cannot. Only failures will ever become public knowledge.

Only if cooperation fails, does the regulator work against the institution. Enforcement is often the last resort of the prudential regulator.

StylE oF opEratIonThe complexities of modern financial intermediation demand a close yet professional relationship, whereby the institution can approach the regulator as soon as a problem is identified.

Many formal responses are available to the regulator: statutory investigations, licence restrictions, ‘enforceable undertakings’, disqualification of individuals and licence suspensions / cancellations. Prudential relationships benefit from deliberate ambiguity, from the perspective of better safeguarding consumer interests. APRA’s Supervisory Oversight and Response Systems (SOARS) is based on a continuum of supervision and intervention strategies, with successive steps becoming progressively more formal and legal. If an entity believes that a regulator is limited only to enforcement, the regulator’s influence in achieving optimal outcomes may wane.

Imagine a serious difference between the regulated entity and the regulator, where prudential, market conduct and tax regulators are respectively involved. • The tax regulator sends a bill, threatening punitive

action if not paid by the deadline. • The market conduct regulator sends a legal notice.• The prudential regulator phones an executive to

discuss concerns and canvass resolution options, recorded informally (depending on severity). Only if things threaten consumers’ interests, does the tone change to formal.

ramani (Sg) venkatramani [email protected]

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Occupational Constraints of the Prudential Regulator


Spot the difference? The prudential regulator is not practising ‘wet-lettuce’ therapy here, but acting in the enlightened pursuit of its mandate. It works, mostly.

It is not coincidental that the prudential regulator is populated by accountants, actuaries and economists, while the market conduct regulator is dominated by lawyers. The tax regulator has lawyers, supported by debt recovery experts.

Mistakes can and do occur. Intervention too early or too late, measures that are too light or harsh, applied inappropriately could backfire. A system of checks and balances including peer reviews, with identified internal escalation triggers is essential.

powEr BalanCERegulated institutions are being governed under the law, their licences and subject to ongoing oversight by the regulator. This legal position should not blind us to the considerable de facto power, influence and stake institutions wield, and deserve to wield.

In addition to the de jure protections to guard against arbitrary or excessive regulatory action, industry lobbies, captains of finance and large institutions enjoy access to political leadership as well as opinion-makers. Only a naive regulator would ignore this.

A call from a systemically important intermediary could set off repercussions on industry regulation. Often such intervention could be useful in presenting a different, yet valid, perspective. Where they are driven by collateral motives, robust defence, backed up by sound past performance, should help the regulatory objective.

thE rUlE oF lawThe bastion of any sound system, the rule of law is aimed at transparent rules, enforced without fear or favour and subject to the rigour of proof and procedural fairness. Regulators are as much subject to its oversight as the regulated.

In its application to the rule of law, the prudential regulator faces the following handicaps:• Unlike other agencies, the prudential regulator’s stock-in-trade

is not just proven legal offence, but includes a large measure of fuzzy risk assessment. The legal rigour of proof required to secure a court judgement involves greater certainties than fuzzy actuarial probabilities. Unfortunately, the judiciary in general is not trained in risk management.

• The system often treats the rights of intermediaries to earn profits on par with consumer rights, failing to differentiate the former’s confected rights and the latter’s inherent rights.

• Alternative dispute resolution mechanisms lack the power to order compensation for consequential damages. Such damages, given the long term nature of many financial contracts, could be large.

• Institutions take matters to the Administrative Appeals Tribunals if they are aggrieved with a decision, seeking a merits review. Hindsight could influence this process. Also, there is no provision for the affected consumers to intervene.

• Secrecy obligations on the regulator are stringent. There is no corresponding obligation on the institution not to play the media.

• The public perception of a homogenous regulatory regime where all agencies cooperate with each other in consumers’ interest is not necessarily realistic. Regulators are not always free to talk to other regulators.

In tImES oF StrESSMost regimes cater for normal times in their laws, rules and standards. During stress, these rules often prove inadequate. Rumour and innuendo affect market outcomes as much as real events.

Stressed times call for coordinated decision-making, away from the media glare. Those who must decide, in the heat of the moment and with imperfect information, need protection against hindsight wisdom.

SUggEStED way ForwarDThe prudential regulator could do with several enhancements:• Remove legal and practical barriers to information sharing in

defined circumstances, as incipient stress is assessed.• Use the exception to secrecy as necessary. As a start, de-

sensitised war stories must be published annually to deter unacceptable conduct and better inform the public.

• Impose reciprocal a secrecy obligation on institutions, a breach constituting waiver.

• Allow Alternative Dispute Resolution agencies to award consequential damages.

• Just as institutions can fight consumers with consumers’ money, consumers should have recourse to such funds to fight the institution, subject to defined parameters. While the regulator is often the first stop for such legal action, it would be useful to provide symmetry for aggrieved consumers when the institution fights them with their money.

• Train lawyers, in particular judges, in the fuzzy subject of risk management.

• When the regulator is forced into enforcement mode, penalties should not be paid out of funds belonging to consumers. In superannuation with little or no shareholder capital, this is a real risk. Serious offences must punish the wrong-doers, not the victims.

• The compensation packages of regulators should be better aligned with the market place from which they resource themselves.

• Consider punitive, exemplary and aggravated damages in regard to the worst forms of financial skullduggery, some showcased by the GFC.

• To balance the foregoing, regulatory officials proven of criminal negligence should not be let off easily either.

In the media and the political system, there is rarely any tolerance for false negatives (regulators missing issues that become problems). Tolerance for false positives (regulators finding issues that turn out not to be problems) rises and ebbs, following a broader political / economic cycle accompanied by calls for more / less intrusive regulation. Financial systems must deal with this paradox.

For the full paper, see http://fsi.gov.au/files/2014/08/Venkatramani_Ramani.pdf

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regulated institutions are being governed under the law, their licences and subject to ongoing oversight by the regulator. this legal position should not blind us to the considerable de facto power, influence and stake institutions wield, and deserve to wield.


katrina mcFadyen [email protected]

See What We SeeT

he second phase of the See what we see campaign was launched on Monday 17 November and ran until Monday 15 December. As with phase

one, our objective was to raise awareness and promote the profession to C-Suite, senior HR professionals and recruiters.

Building on what was learnt from the first campaign in April, phase two has focused primarily on digital media and extending the reach of the lift and lobby displays to CBD buildings in Adelaide, Brisbane, Melbourne, Perth and Sydney. LinkedIn advertising was also used and one half-page print advert was published in the Australian Financial Review on Monday 1 December.

Three new case studies were developed to further showcase the breadth of the actuarial skillset, these included working with the Financial System Inquiry (FSI), social welfare in New Zealand and superannuation. The FSI case study was used throughout the campaign to coincide with the release of the FSI final report this month.

A new mobile-optimised microsite, featuring all aspects of the campaign, was created to ensure greater campaign cohesion – https://www.actuaries.asn.au/see-what-we-see – the campaign was also leveraged across the Institute’s social media platforms.

Prior to the launch the performance metrics from the first campaign were reviewed.

Key recommendations from the first campaign included:

• Focus on digital advertising- increase mobile spend;- focus on highly targeted inventory,

reduce more generic targeting;- continue investment with Business

Spectator; and- publish adverts mid-morning and

evenings to maximise budget efficiency.

• Improve creative format by using rich media – larger advert sizes and movement to increase impact.

• linkedIn advertising – target by job title to ensure appropriate audience is reached.

• Social media – promote campaign through Twitter and LinkedIn groups.

Members will be provided with feedback on the performance metrics early next year, and we aim to improve the next planned campaign which is scheduled to run in April 2015.

Delivering this campaign has been a rewarding experience for the Communications and Marketing Team at HQ. We are extremely proud of our ‘21st century rock stars’ and would like to extend sincere thanks to all members and others who have assisted with compiling the case studies.

Promoting the skills of actuaries and the value they bring to business is an extremely important initiative and we look forward to building on this further in 2015.

Upda

teHow do you spend $5 trillion to ensure everyone has a comfortable retirement?

In the next 30 years Australians will amass $5 trillion in superannuation assets – a huge slice of our financial system. How that money should be used is an opportunity for the ages. So when the Financial System Inquiry wanted to understand the future impact of this giant asset pool they called an Actuary. The result? A well-researched analysis that demonstrated how those funds can drive a vibrant economy and provide retirees with a comfortable retirement without placing a burden on the next generation. The world isn’t black and white, but business decisions are.

When you need clarity in a complex world, you need an Actuary.

Visit actuaries.asn.au

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See what we see – an Institute campaign to raise awareness and promote the profession to C-Suite, senior hr professionals and recruiters

A view of lifetime outcomes helped New Zealand refocus welfare spending to where it really works.

Paula Bennett, New Zealand Minister for Social Development, recently said; “Without analytics we were putting our fingers in the air and throwing money at the problem.” Now, thanks to the involvement of an Actuary, the government has valuable intelligence about long-term outcomes – resulting in a change in spending focus. They’re investing more to change outcomes for some of NZ’s most vulnerable citizens, the long-term effect of which will be better outcomes and billions of dollars saved. The world isn’t black and white, but business decisions are.



For super funds it safeguards liquidity. For retirees it safeguards their ultimate payday.

The superannuation landscape is constantly evolving – mergers, acquisitions, innovation, legislation changes. In contrast, fund members’ priorities haven’t changed – they simply want good returns in a risk-free environment. Thanks to an Actuary’s extensive Financial Condition Report, one super fund of over 100,000 members identified the key components of its reserves and redistributed them in a fair and equitable manner. As a result, liquidity is now safeguarded and retirement is even more tempting. The world isn’t black and white, but business decisions are.




We are privileged in the actuarial community to have great role models across all faculties. There are those who have forged the way in developing the profession, those who have

risen to the highest levels of business and those who live according to an outstanding and indisputable set of ethics. One such role model, who encompasses all these qualities, is Fred Rowley.

Fred has been a great contributor to not only the life insurance industry but to the actuarial profession for over 40 years. He was recognised by his peers as President of the Australian Institute in 2007; granted an honorary fellowship of the Faculty of Actuaries in Scotland in 2009; named as ‘Actuary of the Year’ in Australia and given the Society of Actuaries (SOA) Presidential Award in 2010; and will be President of the International Actuarial Association (IAA) in 2015.

Fred is currently the Chief Actuary and Appointed Actuary of TAL Life Ltd. It was a great pleasure for me to spend time with Fred and hear his account of life as an actuary.

how haS thE InDUStry ChangED?At the commencement of Fred’s career, as one of the few graduates who had programmed a computer, he was dismayed to find himself neck deep in tedious weeks of long manual calculations. Thankfully, it wasn’t long before rapidly increasing computer power enabled more

efficiencies. The life insurance business was a different beast at that time – investment-linked products were in their infancy, capital adequacy and solvency controls were largely intuitive rather than scientific and consumer rights were still developing.

Fast forward to now and perhaps one of the biggest changes Fred observes has been the increased emphasis on the consumer, rather than the insurer.

“There has been a big shift in what you can sell, what you can say about a contract and in a company’s duty of care,” he says, noting, however, that in part it took legislation to bring this about.

With an evolved respect for the consumer, the enormous enabler of technology and increasing levels of innovation, there are a whole range of new industries in which actuaries can be involved.

“There is a noticeable shift away from insurance as a main stay towards a much broader base of commercial activities for actuaries,” says Fred.

Although he dwells little on the challenges of the past, Fred does lament the fact that while technology has rocketed ahead, in the life insurance industry at least, there appears to have been almost no improvement in data quality in the industry since the first time he undertook a Group Life quote in 1978. He believes that APRA’s continued focus on data quality and risk management are vital to building a sustainable industry.

ruth lisha [email protected]

Interview

A Chat With Fred

Watch highlights from Fred’s interview at www.actuaries.asn.au/knowledge-bank/actuaries-magazine


how woUlD yoU DESCrIBE thE aCtUarIal BranD?“Going back in time there was a more remote view of the actuary. Actuaries were people who were locked away doing something secret and mysterious. This culture lived inside the profession, with senior actuaries having some sort of mystique about them with no-one really knowing what others were doing. There was very little swapping of information,” says Fred.

This view has now been completely reversed, according to Fred. There is an enormous openness within the profession, with a collegiate focus on sharing knowledge about the most modern and the best techniques. This sort of team work was not emphasised in the 1970s. The impetus for this reflects the way society has evolved towards broader multi-disciplinary teams which have de-mystified some of the things that actuaries do.

“As actuaries, we are very well positioned to see the events that might affect companies and we haven’t in the past always been the ones to come forward first and explain it. Now companies’ management and regulators are looking for that information flow to include considered observations and detailed insights into what is going on and that is something where we can really add value,” says Fred.

Being able to fulfil this role goes further than simply having good technical skills. Fred goes on to describe some of the important personal qualities that support the actuarial brand.

“Actuaries exist to give you advice that you can use as a basis for financial decision-making. This advice needs to include insight and should be authoritative and reliable. Personal accountability is also very important – stand up and voice your opinion. But at the root of what we are about is ethics – protecting the public good and the stability of financial institutions. The only way you can do this is to be there and change the world every now and then,” he says.

what ChallEngES anD opportUnItIES Do yoU SEE ahEaD For thE aCtUarIal proFESSIon?One of the key challenges Fred speaks about relates to the competition with other developing professions for new roles. He cites data analytics and risk management as examples of new and competitive roles and says Actuaries need to justify their success in these areas.

Fred was instrumental in creating the global CERA qualification. The reason he put so much time and energy into the project was to ensure the profession could remain competitive and not ‘miss the boat’. He proudly acknowledges that there are now over 2,500 people with CERA qualifications globally and adds that the ERM course in the UK has now overtaken GI as the most popular subject. In relation to analytics, Fred believes the profession should think more broadly. He is an advocate for recognising the changing landscape and moving to take advantage of opportunities that arise. On analytics, he proffers that the Institute could offer the benefits of a professional body to sponsor, support and educate a generation of data scientists.

“Being part of a profession inspires sharing so you can learn through others and gain a richer education throughout your career,” he says.

An area of great opportunity, Fred states, lies in Asia where there is substantial economic growth, especially in the insurance industry. There is considerable scope here for the Australian profession to use our consultancy skills and build on the Institute’s reputation as one of the leading actuarial bodies in the world.

arE wE poSItIonED to takE aDvantagE oF thE FUtUrE opportUnItIES?Here our conversation quickly turns to the current education syllabus, something which Fred is clearly passionate about. He acknowledges that the Institute is currently reviewing the education program to reflect the needs of the ‘actuary of the future’.

“We have an international syllabus which has basically stayed static (apart from a few add-ons) for a long time,” he says.

“The Institute is now looking to help the IAA to redefine its syllabus to a whole new depth which will lift the standard for everyone.”

Internationally, Fred believes that along with South Africa and the UK, Australia is ‘ahead of the curve’ but he stresses the importance of consistency with the international syllabus, not just the Australian syllabus. He points out that universities are exporting their courses into Asia and this drives a need for international consistency. Fred sees the Australian Institute having a high level of influence in the direction of international education standards, which is vital to its continuing success.

who IS thE FUtUrE aCtUary?Fred asks, “Would we expect anyone these days to work in the same industry throughout their career? In fact, do we expect the industries themselves to be the same in 40 years’ time?” The answer is of course, no.

There is a sense of rigour in the way actuaries work. Fred believes our skill is to think about the true causes of why things happen, not just to observe that they have.

“You learn a lot after becoming a fellow – it’s a lifelong process. The point about the fellowship is to prove that you can put together a sufficiently substantial body of knowledge that is really worthwhile in a particular application. After that, you can replicate the function, but in a different field.”

What is also important, according to Fred, is the process by which entrants are drawn into the profession. He suggests a higher level of engagement is required in the messages that go out to school students, teachers and career professionals.

“If we were more active in this area, it would give entrants into the profession better expectations of what they need to be and how they should behave,” he says, referring specifically to a set of qualification criteria that universities don’t necessarily train for: communication, influencing and leadership skills.

“We should be selecting for adaptability, self-confidence, self-reliance and have an expectation that the young new entrants into the profession will be inquisitive, innovative, problem solvers and good communicators,” he says.

The hour I spent with Fred was uplifting and energising as I listened to how he described the value of not only the Institute, but also that of the role of the Actuary. He left me with a sense of excitement about the direction of our profession in a time where change is all around.

Interview continued

Fred Rowley and Ruth Lisha


Welcome to another edition of R1C1 – Excel Musings. In this edition I want to share some thoughts on sorting lists of data, and its opposite, randomising the order of lists

of data. Most people reading this are, I would expect, aware of the built in ‘Sort’ functionality in Excel, located in the Data tab of the ribbon. This is a useful stand-alone analytical tool, but it has two major shortcomings in my view. One is that it is a completely one-way operation. In using it, you overwrite the original ordering of your data, losing any record of it. If you begin at point A with a model including some raw data, wish to arrive at point B with a model that includes this data sorted and analysed, and need to keep an audit-trail of exactly how you moved from A to B for easy reproduction or independent review, then this discontinuity of overwriting your original data with a sorted list is not ideal. The second shortcoming is that if you need sorting functionality in a live model that is to be deployed to other end-users, then it is much more complicated for the end-users to use the model as a live tool if they need to manually call up the sorting process via the ribbon every time they change assumptions, compared with a model that could do it for them automatically. The second shortcoming can be mitigated via a macro that sorts, so all the user needs to do is click a button, but as it happens we can dispense with the macro, and sort lists exclusively using formulas. Doing so gets around both shortcomings of Excel’s built in sorting tool.

USIng FormUlaS to Sort lIStS oF nUmBErSWhen sorting lists using formulas, we can use different approaches for lists of numbers and lists of text strings. Let’s start at looking at how to sort lists of numbers. This is actually fairly simple – all we need to do is make use of either the SMALL() function or the LARGE() function. Both of these functions take two arguments – the first argument is our list of data, and the second argument is a number, between 1 and n, where there are n elements in our list. The SMALL() function returns the nth smallest element in the list, and the LARGE function returns the nth largest element in the list. For example, let’s say cells A1:A10 each contain a number, and we wish to sort these in ascending order. We’ll use cells B1:B10 as some helper cells, and C1:C10 for our output. All we need do is put the

numbers 1 through to 10 in B1:B10, and then in C1 type =SMALL($A$1:$A$10,$B1), and drag that formula down to cell C10. If we wish, we can even do it without the helper cells in column B, by using the ROWS() function as follows: =SMALL($A$1:$A$10,ROWS(A$1:A1)). Sorting in descending order can be done exactly the same way, using the LARGE function.USIng FormUlaS to Sort lIStS oF tExtUnfortunately, the simplicity of using SMALL() or LARGE() won’t work if we wish to sort a list of text. As it turns out though, we can still build a formula based solution around the COUNTIF() function! This solution will however require the use of helper cells, unless we wish to use a multi-cell array formula. I will walk through the solution using the helper cells.

Let’s say cells A1:A10 contain our data, this time a list of 10 names that we wish to sort in alphabetical order. As per before, place the numbers 1 through 10 in cells B1:B10. In cell C1, write the formula =COUNTIF($A$1:$A$10,”<=”&$A1) and drag this down to C10. For each entry in our list, this tells us its relative rank in the list, by counting how many members of the list are less than or equal to the element at that row. This makes use of the fact that in Excel, the inequality operators < and > work not only on numbers but also on text, and base their less than or greater than assessments on alphabetical ordering. Quite an insight!

All that’s left now is to construct our final list of the sorted order. This involves an INDEX and a MATCH function. We can do this together in one column, but I will split it out to two columns here to better explain what is going on. In cell D1, we want to know which cell of our original list occurs earliest in the sort order. In cell D2, we want to know which cell occurs second in the sort order, and so on down to D10 where we want to know which

Dan mayoh [email protected]

Excel musings

R1C1 – Excel MusingsSorting and Randomising

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A B C D711 1 348 =SMALL($A$1:$A$10,B1)505 2 505 =SMALL($A$1:$A$10,B2)732 3 512 =SMALL($A$1:$A$10,B3)764 4 515 =SMALL($A$1:$A$10,B4)512 5 711 =SMALL($A$1:$A$10,B5)936 6 732 =SMALL($A$1:$A$10,B6)515 7 751 =SMALL($A$1:$A$10,B7)348 8 764 =SMALL($A$1:$A$10,B8)775 9 775 =SMALL($A$1:$A$10,B9)751 10 936 =SMALL($A$1:$A$10,B10)

Values Helper Sorted Formula in column C


cell of the original list is last in the sort order. To achieve this, in cell D1 write the formula =MATCH($B1,$C$1:$C$10,0) and drag it down to cell D10. What this is doing is telling us in cell D1 the relative position in the original list of the first ranking item – that is the item which caused the COUNTIF function to return 1. Finally, cells E1:E10 will contain our sorted list. In cell E1, write =INDEX($A$1:$A$10,$D1) and drag down to cell E10. That’s it!

As it happens, this approach will also work to sort a collection of numbers too, however the SMALL function is much, much simpler to use when sorting numbers. And if for some reason we are sorting numbers with this approach, then we can also use the RANK() function in place of the COUNTIF() function – either will work. But for sorting text, only COUNTIF() will work.

BUt, BE warnED! (oF CoUrSE It CoUlDn’t BE that EaSy, CoUlD It?)There are unfortunately a few caveats to be aware of with this COUNTIF / MATCH / INDEX approach. It won’t work properly if (i) the data contains a mix of text cells and numeric cells; (ii) the data elements are not all unique (i.e. if there are any duplicates in the data); (iii) there are gaps of blank cells in the data. There are workarounds to each of these caveats, but explaining them is moving beyond the scope of this article.

what aBoUt ranDomISIng?Sometimes we may wish to go the other way, from a sorted list to a randomly ordered list. An example would be if we wanted to simulate a shuffled deck of cards in Excel for the purpose of some game analysis. Let’s say the numbers 101 through 152 represent our deck of cards, and our objective is to place the numbers 101 through 152 into a random order (the reason I am not using 1 through 52 is to make clearer the distinction between the elements we are sorting, and the list of 1 through 52 that we will use as helper cells). The basic approach is as follows:

(i) In cells A1:A52, place the numbers 1 through 52 (in order).

(ii) In cells B1:B52, place 52 unique random numbers. (They can be any value, including decimals, with any upper and lower bound, and placed in any order. I suggest use =RAND() to first obtain them, and then copy/paste-as-values over the top of cells B1:B52 to end up with static random numbers.)

(iii) In cells C1:C52, write a formula to return the numbers 1 through 52 as a randomly ordered list.

(iv) In cells D1:D52, place our original list of the numbers 101 through 152.

(v) In cells E1:E52, write a formula to return our randomly shuffled deck of cards.

I’ll start with the formula for column C. What we want to do here is say “In row n of column C, what is the location of the nth smallest element of column B’s random numbers?” To achieve this, in C1 write =MATCH(SMALL($B$1:$B$52,A1),$B$1:$B$52,0) and drag down to cell C52.

What this will do is place the numbers 1 through 52 in cells C1:C52, but in a random order. Let’s say for example that cell C1 returns the value 18, meaning the first-smallest element of column B is at cell B18. Now, in cell E1, write =INDEX($D$1:$D$52,$C1) and drag down to cell E52. Here, the formula at E1 is returning the 18th element from our sorted deck of cards at column D. Because all of the numbers 1 through 52 are contained in column C, but in a random order, every element from our deck of cards at column D will be returned in column E, also in a random order.

But what if we wanted to shuffle the deck again on cue – not every time we changed any cell, but frequently enough that we don’t want to rewrite the =RAND() formula in Column B and do the copy/paste again. Is there a way to achieve this? The answer is yes, depending on how relaxed we are about the definition of ‘random’.

EntEr thE lInEar CongrUEntIal gEnErator (lCg) (Google it for more detailed information if you like.)The idea here is that we choose a few different numbers for starting assumptions, and then use a simple arithmetic function to generate an ongoing sequence of numbers that behave like random numbers. A given set of starting assumptions and arithmetic function will always generate the same sequence of numbers. To get a new sequence, all we need to do is alter one of the starting assumption values. To recreate a previous sequence, simply go back to the earlier set of starting assumptions.

For example, pick three integer values and enter them at cells F1, F2 and F3. Let’s use F1 = 12345, F2 = 501 and F3 = 2^16. Using our earlier example, set cell B1 to be =MOD($F$2^3,$F$3). Then, in cell B2, write the formula = MOD($F$1*B1+$F$2,$F$3) and drag this down to cell B52. Bingo, pseudo-random numbers! How “random” these are depends on our choice of the 3 variables. As some general guidance, using 2^16 (or a larger power of 2) for F3, an odd number for F2 somewhere between 100 and 1000, and a number that is 1 more than a multiple of 4 for F1 will be a good start.

wrappIng UpYou can download a workbook containing examples of all the items mentioned in this article: www.actuaries.asn.au/Library/AAArticles/2014/R1C1Dec2014.xlsx.

A quick note about the previous challenge on Defined Names: There is no book prize winner to announce. It seems that challenge wasn’t as popular as the previous challenge on array formulas! Finally, I’ll be back in 2015 continuing Excel Musings for the digital edition of the magazine. I’m putting the final touches on this article from New York, having just concluded co-organising the finals of the ModelOff Financial Modeling World Championships. My congratulations to institute members Peter Suen (Australia) and Michael Clarke (New Zealand) who shared 3rd place in the competition from over 3,000 competitors. Happy New Year to all!

Excel musings continued

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A B C D EHomer 1 4 6 AbeMarge 2 7 3 BartBart 3 2 8 EdnaLisa 4 5 1 HomerMaggie 5 6 4 LisaAbe 6 1 5 MaggieNed 7 9 2 MargeEdna 8 3 10 MoeSeymour 9 10 7 NedMoe 10 8 9 SeymourNames Helper Rank Interim Sorted ListFormula in C1: =COUNTIF($A$1:$A$10,"<="&$A1)Formula in D1: =MATCH($B1,$C$1:$C$10,0)Formula in E1: =INDEX($A$1:$A$10,$D1)

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A B C D E1 0.338513312 17 101 1172 0.017711672 2 102 1023 0.747289968 9 103 1094 0.362239441 28 104 1285 0.861642539 14 105 1146 0.54052786 37 106 1377 0.5220338 21 107 1218 0.716146463 47 108 147

49 0.120526342 20 149 12050 0.572384259 29 150 12951 0.230635152 12 151 11252 0.356369687 33 152 133

Helper Column B: Random Numbers Column D: Values to randomisecells Column C: Interim Calculation Column E: Randomised values

Formula in C1: =MATCH(SMALL($B$1:$B$52,A1),$B$1:$B$52,0)Formula in E1: =INDEX($D$1:$D$52,$C1)

Example 3: Randomising. Note rows 9 to 48 are hidden for space reasons


V olUntEErIng on CommIttEESThe Leadership and Career Development Committee is committed to building leadership in the actuarial community, at all levels. There

are many ways to build on your own development; one way is by volunteering on a committee.

Many actuaries already recognise the benefits of being involved on an Institute committee, with 26% of Fellows volunteering in some way. However, not as many younger actuaries seem to be getting involved, and this is to the detriment of both the committees they could be involved in, and their own development.

As a profession, we need to encourage committees to include younger actuaries, and highlight the potential benefits of contributing to younger actuaries.

BEnEFItS to CommIttEESHaving a diverse range of people on a committee is the best way to ensure the views of all actuaries are being represented. The Actuaries Institute represents actuaries of different ages, ethnicities, professional experience and geographical location, so ideally all committees would include people from these differing demographics, so as to contribute to decision-making processes that affect them. There is a danger that homogenisation of a committee and loss of diversity means similar viewpoints may be represented, potentially contributing to the ‘groupthink’ phenomenon.

Younger actuaries have more recent experience of

university and the actuarial education process, which may be useful if a committee is looking for ways to boost member involvement at events, or improve the education program. Young actuaries can contribute with personal examples of areas of interest and concern to themselves and their peers.

Younger actuaries bring enthusiasm and passion to a committee that is often more muted in older actuaries. One critical factor is spare time. With generally fewer family commitments, young actuaries are often able to attend meetings and participate in and organise events on evenings and weekends, when their time-poor older colleagues may be juggling more commitments.

A committee might argue that a younger actuary doesn’t have the same experience as an older actuary, and prefer to appoint the older actuary. I would argue that the young actuary probably brings skills and views that make up for lack of experience. In addition, how are young actuaries expected to gain this experience if we don’t give them a go!

aDvICE For CommIttEESCommittees need to provide a supportive and welcoming environment, to help ensure young actuaries feel comfortable participating. For involvement in a committee to be an empowering and satisfying experience, young actuaries need to feel that they are being included in decision-making and that their contributions are respected.

Actuaries Taking the Lead nicola westoby [email protected]

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getting younger actuaries Involved in Committees


actuaries taking the lead continued

To provide the best learning opportunity for younger participants, and for the benefit of all members, committee meetings need to be well run:

✓ Stick to scheduled time✓ take minutes✓ Ensure action items are clear✓ Chairperson to manage the agenda✓ know what the committee wants to achieve✓ Encourage participation

Delegating particular actions to young actuary committee members can be a useful way to develop their skills and confidence. In addition, younger members might benefit from private feedback from the chairperson or another committee member, and encouragement.

BEnEFItS to yoUng volUntEErSActuaries of all ages benefit from being involved in the actuarial community. For younger actuaries in particular, it is a safe environment in which to gain experience outside of their work environment, allows them to pursue an area of interest, and provides satisfaction from having contributed to the actuarial community. It is also

a very important way to start developing a professional network at a time in your career when you are unlikely to have a broad pool of past contacts and colleagues.

I volunteer on the Leadership and Career Development Committee. I have found everyone to be extremely welcoming and have enjoyed seeing and influencing leadership and career development amongst actuaries.

I’ve had a chance to see how the mentor program runs behind the scenes, watched how a well-run committee operates, and met a whole lot of interesting new people. Writing articles like this one for the magazine has helped my development, and hopefully increased my profile in the actuarial community. Well, at least with those who’ve read this far!

aDvICE For yoUng aCtUarIESIf you are interested in getting involved in a committee, I suggest choosing an area you are passionate about. It can be very easy for the initial enthusiasm to fade if the meetings begin to feel like a chore, and you don’t feel any desire to volunteer for the upcoming actions your committee has agreed on. Fortunately, there are over 100 committees you can choose from!

To register your interest please contact [email protected], and keep an eye on vacancies listed in the Institute Bulletin.

I’ve had a chance to see how the mentor program runs behind the scenes, watched how a well-run committee operates, and met a whole lot of interesting new people.

BEnEFItS to volUntEErS

• Do something new

• CpD points

• Build your network

• Stay up-to-date with the industry/area you are passionate about

• give back to the profession

• Develop your leadership and communication skills

arEaS yoU mIght BE IntErEStED In volUntEErIng In

• practice area committees

• Education committees

• organising events, newsletters, or journals

• Stay up-to-date with the industry/area you are passionate about.

• preparing policy submissions/white papers on a current topic of interest

• professionalism, governance, and disciplinary support


FEatUrE artIClES

187 March 8 More than just an Actuary Appleton/Aitken Niki/Amanda Comment

187 March 10 Telematics Stephan/Shaw Kaise/Rick Comment

187 March 18 2013 J.P. Morgan – Taylor Fry General Insurers Barometer Paddam/Gomes/Jaroudy Sharanjit /Kevin /Josh Report

187 March 20 Falling Profits for Australian Life Insurers Lang Jennifer Report

187 March 22 An Interview with Phillip Everett Crowley Alice Leading Actuary Profile

187 March 32 Latest Results Latham Philip Education Update

188 April 10 Financial System Inquiry Grace Elayne Comment

188 April 12 Sustainability of Common Law Atkins Geoff Comment

188 April 16 Support and Compensation – Lessons from Victims of Crime Hardy/Chan /Edwards /Ngai Peter/Betty/Ben/Andrews Review

188 April 25 A Contributing Life – The 2013 National Report Card on Mental Health and Doble Alan Report Suicide Prevention

188 April 28 Investment Linked Lifetime Annuity Dunsford Geoff Comment

188 April 32 Group Insurance Logan/Fehon Chris/Brendan Review

188 April 46 The Kid from Norfolk Island Pollard John Biography

189 May 8 Privacy and the Actuary Sainty Katherine Report

189 May 12 The National Efficient Price for Public Hospital Services Campbell Mireille Review

189 May 16 The Kid from Norfolk Island Lyon Jenny Review

189 May 19 Wellbeing: A Holistic and Employee-Centric Approach to Staff Engagement Goodhew/O’Heihr/Rolland Tim/Chris/Louise Comment and Productivity

189 May 37 International Capital Standards for Insurers: A Common Framework? Carrett Paul Review

190 June 6 How Actuaries can get a Seat at the Boardroom Table – An Interview with Crowley Alice Leading Actuary Profile Elaine Collins

190 June 9 Latest Developments in Mortality Projection Methods Li/Tickle Jackie/Leonie Review

190 June 12 CAT Modelling in the Cloud Era Langein Dr. Foster Comment

190 June 16 Social Media and Actuaries Huppert Stephen Comment

190 June 18 Football World Cup 2014 Predictions Cover/Paddam Myles/Sharanjit Comment

190 June 30 General Insurance Practice Committee (GIPC) Tang/Dang Mery/Jennifer Report

190 June 37 The Censoring Problem of an Actuary’s Career Path – Have We Painted the Right Chu Brian Comment Picture, or Have we Left Something Out

191 July 6 Standing at the C–ROSS of China’s Insurance History – An Outline of China’s Yulong Dr. Zhao Review Risk Oriented Solvency System

191 July 10 Micro-Insurance in the Philippines Purcal/Carroll Sachi/Peter Comment

191 July 14 Actuarial Careers in Asia – An Update Singh/Killick Jas/John Review

191 July 16 No Fork Required – An Australian Traveller in Asia’s Insurance World Holz Alissa Report

191 July 18 An Equatorial Perspective – Experiences in Malaysia Howell Tim Report

191 July 20 Asian Insurance – Still a profitable high growth market for the next decade? van Veen Arjan Comment

191 July 22 An Analytics Minded Actuary’s Guide to MOOCs Semenovich Dimitri Comment

191 July 26 A Social Actuary: Putting Passion into Practice – An Interview with Sarah Johnson Crowley Alice Leading Actuary Profile

191 July 28 Actuarial Transformation – the Future Actuary Stephan/Bennet/Ayoub/Nagarajan Kaise/Caroline/Matthew/Senthooran Comment

191 July 30 The Winner’s Curse Yellowlees Colin Comment

191 July 48 See What We See McFadyen Katrina Report

192 August 6 Chasing Your Tail on TPD Claims: Insights from Injury Schemes Dang Jennifer Review

192 August 9 Research into Claim Dependencies – An Industry and Academic Collaboration Avanzi/Taylor/Wong Benjamin/Greg/Bernard Review

192 August 12 Fearless Leadership: Neuroscience Helps us Understand our Common Stress at McLennan Katharine Comment Work – Making us Better Leaders

192 August 14 The Public are from Mars and we are from Venus – The Failure of Financial Diamantidis Peita Comment Services Communications

192 August 18 Actuaries in Banking Sinkins/Scott Peter/Nick Report

192 August 22 Never Smile at a Crocodile – The Group Risk Story Leas IIan Comment

192 August 26 Statistical Politics in the Eurovision Song Contest Isaac Arun Comment

192 August 36 Latest Results Latham Philip Education Update

192 August 47 Photo Competition Entries Photography Competition

193 September 6 Life Insurance Lapses – Responding to the Challenge Jackson/Hinton Dale/Bozenna Review

193 September 8 Australian Insurance Industry Awards Mannering Dimity Report

193 September 11 2014 Aon Benfield Scholarship Winner Cooke Jenna Review

193 September 13 Actuarial Expertise, Social Goals – The Launch of the Institute Microfinance Website Wulfsohn/Wang Michael/Qing Report

193 September 14 A Brief History of Cat Bond Prices Alvarez Adam Review

193 September 16 Investing for the Different Phases of Retirement Rice Michael Comment

193 September 18 Let’s go Investment Zhang Henry Report

193 September 20 I am an Actuary – Professionalism Course participants Baskin/Hogan/Young/Williams/ Robert/Kylie/Jane/Lloyd/ Comment Weenink/Devi/Ly/Qi Monika/Slesha/Tony/Yongjie

193 September 23 Whistleblowing – eLearning Course/Public Policy Forum Comment

193 September 24 How to Nail Your Next Job Interview Wake Christina Comment

193 September 26 Australasia CPD Tour – the New Zealand leg Rhodes/Azzato Paul/Jeffrey Report

193 September 27 Sydney Volunteers Cocktail Party Report

193 September 28 Mentor Skills – a Practical Example Westoby Nicola Comment

Edition MontH PagE titlE autHor’s surnaME First naME articlE tyPE

2014march april may June

Index



July august September october november December

193 September 46 Photo Competition Entries Photography Competition

194 October 7 Congratulations to Peter Martin – 2014 Actuary of the Year Award

194 October 8 What Can Insurance Claims Management Teams Learn From Social Workers? Bulcraig Iain Review

194 October 10 Royal Commission into Institutional Responses to Child Sexual Abuse Paddam Sharanjit Report

194 October 14 Estimating Liabilities for Child Sexual Abuse Atkins Geoff Comment

194 October 16 Insurance and Proportionate Liability – A Snapshot Smith/Spain Claire/Chris Review

194 October 18 Fundamental Financial Analytics Helenius/Comes/Taylor Cary/Kevin/Graham Review

194 October 20 Big Data Adoption – A Question of Mind Set Singh/Lyon Jas/Jenny Comment

195 November 10 An Actuary Seeking Answers – Will Matthews Fry Martin Report

195 November 13 The Annuity Puzzle Hemmings Georgina Review

195 November 16 Time-Weighted Return… Only Tells Part of the Story Hicking Martin Review

195 November 18 Q&A with a Microfinance Heretic – Hugh Sinclair Wang Qinnie Interview

195 November 22 2014 Governance Review Outcomes Peters Anne Review

195 November 24 Group of Retired Actuaries in Melbourne/Retired Actuaries Group, Sydney Amond/Jones Barry/Edward Report

195 November 25 The Digital Era Paddam/McFadyen Sharanjit/Katrina Report

195 November 32 I am an Actuary Dickinson/Jones/Leung/Mer/ Travis/Brendan/Alex/Marc/ Comment Qian/Rehill/Shah Lauren/Paul/Tejas

196 December 6 The Economics of Inequality Goodwin Ruth Comment

196 December 10 Creating Innovative Insurance Products for Emerging Markets Cheah Yiling Report

196 December 13 Comparing Outcomes from Lifecycle and Balanced Funds Van Wyk Brnic Review

196 December 16 Occupational Constraints of the Prudential Regulator Venkatramani Ramani (SG) Comment

196 December 18 See What We See – Update McFadyen Katrina Report

196 December 20 A Chat With Fred Lisha Ruth Interview

196 December 26 Index of Articles Index

196 December 33 Public Policy – A Year in Review Grace Elayne Review

notICES (notICE, awarDS, CompEtItIon wInnEr, annoUnCEmEnt)

187 March 33 Actuarial Studies: Problem Solved High Schools Program

187 March 35 Welcome to New Members – February 2014 Notice

187 March 36 Philip James Ryan Byrne/Hession/Ferres/McDonald Judi/Martin/Ian/Ron Obituaries

187 March 37 Lindsay Joseph Cutler Dance Ken Obituaries

187 March 39 Practice Risk Management eLearning Course Notice

188 April IFC – 2 See What We See Photo Competition

188 April 31 Wanted – New Members for Actuaries Magazine Editorial Committee/Want to Write for Actuaries Magazine Notice

188 April 39 CERA the Globally-Recognised Risk Management Credential Reaches 2,000 Members Notice

189 May 6 Wanted – New Members for Actuaries Magazine Editorial Committee/Want to Write for Actuaries Magazine Notice

189 May 6 Want to Write for Actuaries Magazine? Notice

189 May 7 We Have Moved – New Institute Address Notice

189 May 43 Welcome to New Members – April 2014 Notice

190 June 38 A Man for Others: A Tribute to Sir Owen Woodhouse O’Connor Paul Obituary

191 July 51 Welcome to New Members – May 2014 Notice

192 August 35 Welcome to New Members – June; July-August 2014 Notice

193 September 33 ‘Update your Details’ Prize Winners/Membership Subscription 2014-2015 Notices

193 September 39 Raymond Colin Palmer Trahair/Evans Tim/John Obituary

194 October 47 2014 Council Election – Have You Voted Yet? Notice

194 October 49 Welcome to New Members/2014 Melville Financial Services Prize Notices

195 November 42 Welcome to New Members/H M Jackson Prize Notices

195 November 47 Actuaries in Microfinance – Actuarial Expertise, Social Goals Notice

196 December 43 2015 Look-Ahead Calendar Calendar

UnDEr thE SpotlIght

187 March 13 Charles Pollack Pollack Charles Under the Spotlight

188 April 19 Samantha Fuller Fuller Samantha Under the Spotlight

189 May 25 Luke Carroll Carroll Luke Under the Spotlight

190 June 25 Rashi Bansal Bansal Rashi Under the Spotlight

191 July 35 Brnic Van Wyk Van Wyk Brnic Under the Spotlight

192 August 37 Sam Maitra Maitra Sam Under the Spotlight

193 September 31 Marc Sofer Sofer Marc Under the Spotlight

194 October 31 Gavin Pearce Pearce Gavin Under the Spotlight

195 November 35 Andy White White Andy Under the Spotlight

196 December 41 Dave Millar Millar Dave Under the Spotlight

EvEnt rEportS

188 April 40 Sydney Fellowship and Graduation Dinner Event Report

189 May 34 Australasia CPD Tour Lurie/Yeung/Ma/Mulcare/ Peter/Wynnie/Darren/Martin/ Cannon/Hansen/Bernau Wayne/Debbie/Hadyn Event Report

190 June 20 Financial Services Forum Event Report

191 July 32 Catastrophe Risk Seminar Ahluwalia Ashish Event Report

FEatUrE artIClES (Continued)


2014 Index continued


191 July 47 Developing Stronger Client Relationships Morris James Young Actuaries Program

192 August 34 New Members Networking Evenings Trasy Shreya Event Report

194 October 45 Improving Your Public Speaking Skills Huang Ruby Young Actuaries Program

194 October 48 Melbourne Fellowship and Graduation Dinner Gibson Sarah Event Report

195 November 37 How do Actuaries See Art? Chow Raymond Event Report

195 November 43 Sydney Fellowship and Graduation Dinner Gibson Sarah Event Report

196 December 30 Inaugural Public Policy Forum McLenaghan John Event Report

196 December 34 The Summit that Mattered – GIS14 – Insuring Tomorrow Event Report

196 December 38 Enterprise Risk Management Seminar – Capturing the Upside Pearce Gavin Event Report

EvEnt promotIonS

187 March 26 Financial Services Forum – Scoring Goals in a Changing World Event Promotion

187 March IFC Catastrophe Risk Seminar Event Promotion

188 April 6 Financial Services Forum – Scoring Goals in a Changing World Event Promotion

188 April 45 ASTIN and AFIR/ERM Colloquium – Innovation & Invention Event Promotion

188 April 51 Catastrophe Risk Seminar – On Your Watch Event Promotion

189 May 26 Catastrophe Risk Seminar – On Your Watch Event Promotion

189 May 28 General Insurance Seminar – Insuring Tomorrow: Call for Papers Event Promotion

189 May 29 Enterprise Risk Management Seminar – Capturing the Upside: Sponsorship Prospectus Close Event Promotion

190 June 29 18th East Asian Actuarial Conference Event Promotion

190 June 47 General Insurance Seminar and Enterprise Risk Management Seminar, Early Bird Registration Opens – 1st September 2014 Event Promotion

191 July 42 Actuaries Summit 2015 – Take the Lead Event Promotion

191 July 51 New Zealand CPD Tour – Maximise Your Contribution Event Promotion

191 July 54 General Insurance Seminar and Enterprise Risk Management Seminar, Early Bird Registration Opens – 1st September 2014 Event Promotion

192 August 32 Actuaries Summit 2015 – Call for Papers and Presentations Event Promotion

192 August 46 Enterprise Risk Management Seminar – Capturing the Upside Event Promotion

193 September 40 General Insurance Seminar – Insuring Tomorrow Event Promotion

193 September 44 Enterprise Risk Management Seminar – Capturing the Upside Event Promotion

193 September 45 6th Australasian Actuarial Education and Research Event Promotion

194 October 22 General Insurance Seminar – Insuring Tomorrow Event Promotion

194 October 26 Enterprise Risk Management Seminar – Capturing the Upside Event Promotion

194 October 54 ASTIN, AFIR/ERM and IACA Colloquia – Innovation & Invention Event Promotion

196 December 2 2015 CPD Roadshow Event Promotion

196 December 50 ASTIN, AFIR/ERM and IACA Colloquia – Innovation & Invention Event Promotion

196 December 51 2015 Actuaries Summit Event Promotion

lEttEr to thE EDItor

193 September 25 Editorial feedback Brownfield Christine Letter to the Editor

194 October 35 TPD Insurers Lee Stephen Letter to the Editor

196 December 15 Letter to the Editor Pollard John Letter to the Editor

rEgUlar artIClES

187 March 34 African Chichilds Qin Ben Actuaries at Play

188 April 42 Extreme Unicyling Lim Milton Actuaries at Play

189 May 38 Life’s Just a Stage Egan Jessica Actuaries at Play

190 June 40 Actuaries - The Rock Stars of the 21st Century Codron Richard Actuaries at Play

191 July 44 Cissy Zhang Zhang Cissy Actuaries at Play

192 August 38 Modern Yo-Yo Play Xue Wayne Actuaries at Play

193 September 34 Why Write Poetry?... Why Breathe? Scully Paul Actuaries at Play

194 October 42 Happy Feet Twigg Jessica Actuaries at Play

195 November 40 Nailed It! Gow Rachel Actuaries at Play

196 December X Nicole Stransky Stransky Nicole Actuaries at Play

187 March 5 Learning the Lessons of the Past Paddam Sharanjit Editorial

188 April 5 Change of Pace Paddam Sharanjit Editorial

189 May 5 We are not the Experts, We Have Never Been the Experts Paddam Sharanjit Editorial

190 June 5 Mental Arithmetic Paddam Sharanjit Editorial

191 July 5 Myopia Paddam Sharanjit Editorial

192 August 5 Technocrats and Democrats Paddam Sharanjit Editorial

193 September 5 Whistleblowing Paddam Sharanjit Editorial

194 October 5 Pollard’s Political Persuasion Paddam Sharanjit Editorial

195 November 6 A Crack in the Glass Paddam Sharanjit Editorial

196 December X Game of Chance Paddam Sharanjit Editorial

187 March 6 Introducing David Bell - New CEO of the Actuaries Insitute Bell David CEO’s Column

188 April 48 Goodybe to All That?- Review of the Financial Services Sector in a Post-GFC World Bell David CEO’s Column

189 May 41 International Actuarial Association and International Congress of Actuaries 2014 Bell David CEO’s Column

190 June 44 The Politics and Policy of Retiring Bell David CEO’S Column

191 July 52 Let’s Go Digital Bell David CEO’s Column

192 August 41 Should the Institute CONSIDER Adopting a Public View on Climate Change Bell David CEO’S Column

193 September 37 When Leadership Counted Bell David CEO’S Column

194 October 52 Should the Institute Adopt a Public View on Climate Change Bell David CEO’S Column

195 November 45 Lunch Feed(back) Bell David CEO’s Column

EvEnt rEportS (Continued)


2014 Index continued


196 December 48 Back Through the Looking Glass – A Retrospective on 2014 (with apologies to Lewis Carroll) Bell David CEO’s Column

187 March 14 Goals and Resolutions Hayes Genevieve The Actuarial Pulse

188 April 20 Perception Versus Reality Millar Dave The Actuarial Pulse

189 May 22 Collaborative Workspaces Ming Candice The Actuarial Pulse

190 June 34 Casual Fridays Ng/Miller Michelle/Tony The Actuarial Pulse

191 July 36 Working in Asia Valliappan Solai The Actuarial Pulse

195 November 26 The Digital Era Paddam Sharanjit The Actuarial Pulse

187 March 24 Bringing Soul into the Workplace Brown Andrew Actuaries Taking the Lead

188 April 34 Leadership Maturity and Evolution of Organisations Brown Andrew Actuaries Taking the Lead

189 May 30 Presence and the Art of Being an Actuary Brown Andrew Actuaries Taking the Lead

190 June 26 Leadership Themes from the Financial Services Forum: 5-6 May Brown Andrew Actuaries Taking the Lead

191 July 40 The Importance of Reflection Mulcare Martin Actuaries Taking the Lead

192 August 13 Mind Fitness for Leadership – Melbourne Session Brown Andrew Actuaries Taking the Lead

193 September 19 Reaching Your Full Potential Lyon Jenny Actuaries Taking the Lead

194 October 28 Leadership – A Cook’s Tour Bell David Actuaries Taking the Lead

195 November 30 Who Enjoys Feedback Mulcare Martin Actuaries Taking the Lead

196 December 24 Getting Younger Actuaries Involved in Committees Nicola Westoby Actuaries Taking the Lead

187 March 28 A Significant Year Ahead Smith Daniel President’s Column

188 April 36 Remaining Relevant Smith Daniel President’s Column

189 May 40 Gossip and Happenings Smith Daniel President’s Column

190 June 43 Public Policy and APRA Smith Daniel President’s Column

191 July 52 Perception Smith Daniel President’s Column

192 August 40 Educating the Actuary of the Future Smith Daniel President’s Column

193 September 36 September Already Smith Daniel President’s Column

194 October 50 What is the Role of the Australian Institute on the International Stage Smith Daniel President’s Column

195 November 44 Why is Studying Mathematics on the Nose? Smith Daniel President’s Column

196 December 46 Pigs may not but Time Certainly Does! Smith Daniel President’s Column

187 March 30 Call for the (Doctor) Actuary Hayes Genevieve In the Margin

188 April 38 Travelling Companions Hayes Genevieve In the Margin

189 May 32 The Puzzle Kings Hayes Genevieve In the Margin

190 June 28 Ninth Mirage Hayes Genevieve In the Margin

191 July 38 You are Here Hayes Genevieve In the Margin

192 August 30 Welcome to Jurassic Park Hayes Genevieve In the Margin

193 September 30 Meet the Beghilos Hayes Genevieve In the Margin

194 October 40 Casino Jupiter Hayes Genevieve In the Margin

195 November 36 Initially Speaking Hayes Genevieve In the Margin

196 December 40 Funny in Any Language Hayes Genevieve In the Margin

187 March 31 Old Enough to Not Know Better Robinson Gae Ask Gae!

189 May 33 Take it from Me Robinson Gae Ask Gae!

191 July 39 Cheerio Robinson Gae Ask Gae!

187 March 38 Don’t Fall Behind Your Competitors! Wetherbee Sue Staying Ahead

188 April 44 Changes to Your CPD Wetherbee Sue Staying Ahead

187 March 4 Coming Up Event Promotion

188 April 4 Coming Up Events

189 May 4 Coming Up Events

190 June 4 Coming Up Events

191 July 4 Coming Up Events

192 August 4 Coming Up/Photo Competition – See What We See – Winner Events

193 September 4 Coming Up Events

194 October 4 Coming Up/Don’t Just Read… Watch Us! Events

195 November 4 Coming Up/Congratulations to John Walsh Events

196 December 4 Coming Up/Season’s Greetings Events

188 April 50 Something Wicked This Way Comes... The Beginning of the End of the US Dollar? Prasad Snigdha Student Column

189 May 42 Students – Make the Most of Your University Life! Zhang Edwin Student Column

190 June 46 Pick a Fund. Any Fund. But, Pick One Now! Le Jennifer Student Column

193 September 32 How to Avoid ‘Death by PowerPoint’ Le Jennifer Student Column

194 October 46 The Case for Authentic Assessment in Actuarial Education Hibbert Aydin Student Column

195 November 38 The Confirm: Why Breaking the Bamboo Ceiling is Proving More Difficult Yang Elan Student Column Than We Thought

195 November 39 Impacts of Performance on Cash Inflows in the Asset Management Industry Wang Tingqu Student Column

196 December 42 To Insure or not to Insure? (That is the Question) Li/Xia/Briffa Amy/Mengtong/Holly Student Column

190 June 32 R1C1 – Excel Musings – Monte Carlo Simulation Without VBA Mayoh Dan Excel Musings

192 August 28 R1C1 – Excel Musings: Array Formulae Mayoh Dan Excel Musings

194 October 36 R1C1 – Excel Musings: Defined Names Mayoh Dan Excel Musings

196 December 22 R1C1 – Excel Musings – Sorting and Randomising Mayoh Dan Excel Musings

192 August 31 Doctor Who? Dr Bruce Ask Bruce

194 October 41 He (or She) Who Wears the Pants Dr Bruce Ask Bruce

rEgUlar artIClES (Continued)


John mclenaghan [email protected]

Event report

Inaugural Public Policy Forum

The Institute hosted its first Public Policy Forum on 3 November 2014. Chaired by CEO David Bell the program featured a mix of high calibre external and internal speakers and attracted an audience

of 50 members. The aim of the exercise was to explore the profession’s role in public policy.

David Bell opened the Forum by providing some context as to why the Institute sees public policy as a key plank of its overall strategy. David explained that the Institute’s ‘vision’ is to position the profession as a source of valued advice and authoritative comment. That positioning aims to enhance the actuary ‘brand’ and raise the reputation of the profession. Our public policy work supports those ambitions.

It was also explained that Council wants to create awareness about the expertise of actuaries and increase demand for their skills in traditional practice areas and emerging fields. But engaging in public policy research and debates has broader objectives.

David stressed that actuaries can make a difference by bringing their expertise and professionalism to bear on important issues to drive better outcomes for all key stakeholders – business, policymakers, the public and the profession.

Two distinguished public policymakers were introduced to further set the context for public policy engagement. Tony Cole AO is a former Secretary of Treasury and of Health. Tony also served on the boards of the Reserve and Commonwealth Banks and was Chairman of the Industry Assistance Commission. He was at the forefront of economic reform in the 1980s and 1990s which saw the deregulation of the economy and the advent of compulsory superannuation.

Tony emphasised the power of economic policy to change the wellbeing of societies. Citing the economic rise of China, Australian tax reform and industry

deregulation Tony made some salient points about public policy: changes in policy can have dramatic transformational impacts; important change always takes time; and, to effect change you must be armed with a well researched empirically based case.

China’s dramatic economic rise had its seeds in economic policy proposals first floated in the 1950s by Arthur Lewis around agricultural de-collectivisation that advocated the transfer of low paid rural workers to urban manufacturing. It took until 1978 for China to implement these policies under the ‘Reform and Opening Up’ programs which put that country on its rapid growth path.

Similarly, significant tax reform in Australia commenced through the Commonwealth Taxation Review (1972 – 1975) undertaken by the Asprey Committee. Some of its major recommendations did not come to fruition until 1994. A similar timeframe could apply to the Henry Review.

Dr Rod Maddock is a Professor of Economics at Monash and Victoria universities. He was formerly the Chief Economist for the Business Council of Australia and an economic adviser to the Victorian Government. Rod also headed up the Commonwealth Bank strategy team.

Rod raised some fundamental questions that the profession should answer to justify why it should engage in public policy debates. Firstly, do actuaries want to make Australia a better place? Does the profession believe that public policy is important? And finally, do actuaries believe they can add a professional perspective that can improve policy design?

If we answer yes to all three and we do want to engage in public policy then we need to understand the mechanics of engagement such as how a policy ‘need’ emerges and the role of Ministers, Cabinet and the bureaucracy.


Rod advised that a professional group has three entry points to policy debates – it can identify the need and lead the debate as we did with longevity risk. We can review government policy to improve its efficiency and/or effectiveness thus becoming a ‘trusted adviser’. Thirdly, we can seek to influence political choices by lobbying for outcomes.

Given the actuaries’ areas of expertise and the limited resources of any professional body it is crucial to identify and define those issues that the Institute is willing to engage on such as post-retirement income, natural disaster funding and health insurance.

Having selected its key issues the profession needs to argue consistently and regularly on those topics, to build trust with policymakers and engage with them on a regular basis. This requires commitment and perseverance.

The second session of the Forum featured Michael Rice, Sophie Dyson and Christine Brownfield giving updates and seeking feedback on policy projects that they are undertaking.

Michael Rice discussed whether the superannuation system is meeting its objectives. His analysis raises real concerns about the efficacy of current policy settings. Michael outlined the structure of the current system which is focussed on the accumulation phase with less emphasis placed on the adequacy retirement income levels.

The spectrum of retirement risk was outlined and included; investment, management, longevity, inflation, liquidity, budgeting and health. All these elements posed questions for retirees and many have difficulty resolving them.

Michael also contradicted some myths about retirement; Australian retirees are not wasteful and look to protect their lump sums; income products are increasingly popular; we need to increase growth assets to counter longevity risk and modest incomes are achievable. However, given the size and complexity of the superannuation system and the significant demographic changes taking place there is some doubt about the system’s ability to deliver adequate retirement incomes in the longer term.

Sophie gave a sketch of the Institute’s Green Paper on health funding that has just recently been released. It highlights the spiralling cost of health and the growing

funding/benefit imbalance between cohorts. Forecasts by the Productivity Commission (2013) indicate that spending on healthcare across all levels of government will grow over the next 50 years, from 6.5% to 10.8% of GDP.

This will be by far the most significant change in government expenditure in the coming decades. Healthcare, already the single biggest item on governments’ budgets, will take a much larger share in the future. It also appears that per capita health expenditure is growing faster in the older age groups, which will exacerbate the health expenditure effects of population ageing. Funding these increases will place a heavy burden on working Australians without some policy response by governments.

The Financial System Inquiry has raised questions about the development of products to help retirees access the equity in their homes. Christine Brownfield outlined a compelling argument for future retirees to access their equity in the family home to cope with retirement income and health cost pressures. This would add a 4th pillar to our current retirement income system. Options for releasing equity include selling the home, downsizing, reverse mortgages and home reversion products.

Housing wealth is significant for most senior Australians. The residential property market is the largest asset class and there are high rates of ownership (85% for those over 75 years). Significantly there are an increasing number of retirees with housing debt that needs to be serviced or extinguished.

Christine argued that releasing home equity is an option for managing that debt, enhancing retirement income levels, reducing government expenditure and improving intergenerational equity. Nevertheless, policy issues need to be worked through particularly if the family home should be included in the age pension assets test. There are possible downsides to some products that could negatively affect retirees and these need to be examined carefully by policymakers.

One of the highlights of the Forum was the lively Q&A session that followed the speakers’ presentations. There was significant interest expressed in intergenerational issues and a clear desire for increased activity by the profession in the public policy space. Future Forums have also been foreshadowed.

Event report continued

Keynote Speaker, Tony Cole AO

Keynote Speaker, Professor Rodney Maddock

Michael Rice


Michael Rice, Sophie Dyson, David Bell and Christine Brownfield

Christine Brownfield Q&A session with Professor Rodney Maddock and Tony Cole

Elayne Grace, David Bell, John McLenaghan, Tony Cole AO and Professor Rodney MaddockNetworking

Q&A session with Sophie Dyson, Michael Rice and Christine Brownfield

Rob Paton raises a question during Q&A


Sophie Dyson

Inaugural Public Policy Forum


It’s been an eventful year, with the Actuaries Institute (Institute) involved in a wide range of important public policy issues. The Institute submitted a total of 30

submissions across superannuation, life insurance, risk management and general insurance practice areas. Incredibly, over 100 Institute members (through practice committees and working groups) were involved in the development of policy positions and formulation of submissions – a great reflection of the interest actuaries have in public policy.

Many interested members attended our inaugural Public Policy Forum on 3 November 2014. The program featured two key speakers Tony Cole AO and Professor Rodney Maddock, who have both contributed to public policy development over many decades. Institute members, Michael Rice, Christine Brownfield and Sophie Dyson also presented on emerging developments in the fields of retirement incomes, home equity release and health insurance.

FInanCIal SyStEm InQUIry Only arising every 16 years, the Financial System Inquiry (FSI) was an important focus in 2014, with two of our members, Geoff Atkins and Brad Parry, working within the FSI Secretariat. The Institute’s views were put forward directly to the FSI panel and secretariat on a number of occasions and our submissions to the initial and interim FSI reports were well referenced throughout the mainstream press. We had some positive results with some of our key proposals included in the final FSI recommendations. The Institute was referenced a number of times in the final report and it was mentioned we convened a special working group that assisted the FSI secretariat on retirement incomes.

hEalth grEEn papErThe Institute released a Green Paper entitled Who will Fund our Health? in December 2014. The paper explores why health care

expenditure is increasing, the impact of future population ageing and what it means for future generations; and how we can tackle the funding challenges. The Institute argued that without a rigorous and comprehensive policy effort, Australia will face a series of major public policy problems in the funding of health care; the working population may be paying almost double their own health expenditure to subsidise older Australians. We expect the paper will encourage community debate on health care policy framework revision.

othEr IntErEStIng ISSUES In 2014 Royal Commission into Child Sexual Abuse – we provided advice to the Commission on the redress scheme design and formed a working group to assist actuaries with reserving considerations.

Productivity Commission Inquiry into National Disaster Funding Arrangements – a submission was presented and Institute representatives attended Commission hearings.

Role of the Life Appointed Actuary in current life insurance issues – a taskforce was formed to report to the Public Policy Council Committee (PPCC) and Council regarding life insurance concerns.

An online discussion forum to determine whether the Institute should have a

policy position on climate change and if so, what form it would take.

Two significant submissions were made to Treasury – ‘Review of Retirement Income Stream Regulation’ and ‘Better Regulation and Governance, Enhanced Transparency and Improved Competition in Superannuation’.

An information note to members and a media release was issued on Federal Budget night lock up in Canberra in May 2014.

So what’S ahEaD In 2015? Continuing on from the success of the Institute’s ‘Australia’s Longevity Tsunami’ White Paper, the Institute has commissioned a Retirement Incomes White Paper which will assess by various cohorts (income/generation) whether the retirement income system is effective now and will continue to be in the future. The paper is intended to spark public discussion and guide retirement income policymakers.

The PPCC (with new Convenor Michael Rice) is also keen to develop a public policy framework that more clearly articulates the Institute’s public policy intent, principles and areas of focus for the coming years.

We are also keen to build on the first Public Policy Forum by hosting further events in 2015. Continuing and emerging projects in the new year include a review of the FSI final report (including the Government’s response), Treasury’s 2015 Intergenerational Report, Federal Government’s Tax White Paper, the 2015 Federal Budget and the Royal Commission’s proposed redress scheme.

THANKS again to all the members who got involved in 2014, in particular outgoing PPCC Convenor Estelle Pearson, PPCC members and Practice Committee Convenors. We look forward to your involvement in 2015 as the Institute continues to provide insights and advice to business and government in important areas of public policy.

Elayne grace Deputy CEO

[email protected]

review

Public Policy – A Year in Review


Immediately after the G20 Summit wrapped up in Brisbane, it was Sydney’s turn to play host – to an even more prestigious event. The G14 kicked off

on Monday morning with a welcome from our President Daniel Smith. Rumours that he had arrived in an eight-tonne bulletproof presidential vehicle could not be substantiated.

plEnary onE – ChallEngES For tomorrow’S InSUrErSPlenary One kicked us off with the big picture perspective. Estelle Pearson channelled CEOs, and reported that what keeps them awake at night includes challenger brands, the influence of social media, and the balance of power between insurers and their customers. Geoff Atkins spoke for the FSI – which has diligently included general insurance in its focus but hasn’t found anything dramatic to say about

it. Vicki Mullen from the ICA focused on the consumer perspective – including the ‘left of field’ requests for coverage (motor scooters, tattoo parlours). Last, Siddharth Parameswaran evaluated the industry from an investor’s angle.

plEnary two – tomorrow’S pErIlSIn contrast to the G20, the G14 had Climate Change – and perils more generally – firmly on its agenda. Plenary Two brought these topics into focus. Andy Pitman from UNSW’s Climate Change Research Centre got things going with a mesmerising 20 minutes on the science of perils and climate change. Frankie Carroll of the Queensland Reconstruction Authority gave us a vivid picture of what can happen when ‘perils meet politics meet policyholders and prices’. We also heard from Ty Birkett (Willis) on long-term trends and the role of reinsurers, as well as Karl Sullivan from the ICA on the industry’s response to perils.

plEnary thrEE – a worlD oF DataWe saw Big Data from two perspectives in this session – (1) the cautious: “what data are we allowed to get, how do we keep it private, and can we insure ourselves in case we don’t?” and (2) the confident: “wow – what can we do with all of this data?” On angle (1) we heard from Richard Bergman of PwC, Jeanne Fennell of Marsh and Justine K

Event report

The Summit that MatteredGeneral Insurance SeminarInsuring Tomorrow

who was there?about 250 delegates gathered at the hilton in Sydney. there were actuaries, more actuaries, insurer executives, the odd lawyer and even a journalist or two.

plenary 1: vicki mullen, geoff atkins, Siddharth parameswaran and Estelle pearson (at lectern)

Watch what went on at GIS2014 at http://actuaries.asn.au/microsites/general-insurance-seminar-2014/networking/gala-dinner


Brindley from Suncorp. The findings: careful + insurance = comfort. And things got even more exciting for angle (2). Richard Enthoven, CEO of Hollard, shared his insights and enthusiasm – and offered us all jobs. Finally Paul Ormonde-James (ex-Australia Post, now “I can’t tell you yet”) gave us practical advice, presented with oomph (big data isn’t useful unless you know what you’re doing).

plEnary FoUr – CapItalISIng on rISkThe last session of the conference saw us contemplating the central issue of capital – how much does an insurer need, and how do you link it with the organisation’s risk profile? Stuart Bingham from APRA introduced the session by reminding us of APRA’s requirements and expanding on APRA’s current big topic: risk management. Next up was Andy White from QBE, discussing the value – and the challenges – of having your own internal capital model. The debate got going with our third speaker Anne O’Driscoll, who has had senior roles at general insurers and is now a non-executive director. Anne gave us the directors’ view, including hard-hitting questions that Boards must face: How much capital is enough but not too much? What if it’s less than APRA estimates? How do you link capital with risk profile? Which bucks stop with management and which with the Board? Questions and comments from delegates flowed, despite this being the end of two big days.

monDay nIght gala DInnErAfter day one, delegates spruced themselves up in Gatsby style – think feather boas and top hats, and at least one weapon in a violin case – for the conference dinner at Doltone House Hyde Park. What a room!


Plenary 2: Frankie Carroll, Ty Birkett, Andy Pitman and Karl Sullivan

Plenary 3: Paul Ormonde-James, Richard Enthoven, Justine K Brindley, Michael Pascoe (Facilitator), Jeanne Fennell and Richard Bergman

Gala Dinner

David Bell welcomes Gala Dinner Guests

Plenary 4: Stuart Bingham, Anne O’Driscoll and Andy White

Doltone House – Gala Dinner venue


The G14’s attention moved to military spending during the mid-meal entertainment. Andrew Smith gave a demonstration of the potential impact of military budget cuts as he keenly fought a sword fight with a balloon. Ash Evans (representing – what country?) showed a more menacing approach as he launched a sword at a European’s head.

The positive effect government can have on society became clear when Australian Government Actuary Peter Martin stepped forward to accept his richly deserved 2014 Actuary of the Year award. Peter’s acceptance speech was humble, gracious and demonstrated a fantastic spirit of collaboration across actuarial borders. His First Lady Marie-Ann was proudly by his side.

As is traditional at all high level summits, in the later stages of the evening the delegates split into two camps – the enthusiastic dancers taking advantage of the live music (think Angela Merkel in the nightclubs of Brisbane), and those who kept talking – admittedly on topics of reducing strategic importance as time went on. Happily, there was no shirtfronting.

ConCUrrEnt SESSIonSAs the G20 had side meetings, the G14 had concurrent sessions – 33 of them. There were no translators on hand to convert ‘actuarial speak’ into plain English, but fortunately most of the delegates were bilingual.

Here are a few highlights from the sessions our reporters attended. The materials for all 33 sessions are of course available on the Institute’s website.


Tango: Daniel Smith and Estelle Pearson

Andrew Smith joining in the fun

Ash Evans showing his juggling skills

Marie-Ann and Peter Martin

Concurrent session

Working Lunch

presidential tangothe dinner’s entertainment showpiece saw Estelle pearson and Daniel Smith dance a faultless tango, encouraging g14 delegates to contemplate the richness of latin america’s contributions to world culture. thanks to Estelle and Daniel for taking the dare on, and raising over $500 for our conference charity in doing so.

• Getting to Truth with Your Customers – The Power of Human Centred Design. This session started with each attendee being asked to take a piece of A4 paper, hold it behind their back, and tear it into an elephant shape. This symbolised the ‘elephant in the room’: that the typical company isn’t using all of the skills and tools within the organisation. Companies should take the time to use their people; while rationality drives good business outcomes, creativity and empathy create great business outcomes.

• Hybrid, Electric and Driverless Cars. Premiums are already falling as fewer accidents happen off the back of technology such as ABS, traction control and active breaking systems. Driverless cars will remove driver error altogether, though they’ll introduce technology error instead. But who will be responsible for accidents – driver, manufacturer or software developer?

• Big Data: Implications for the General Insurance Industry: We heard about the ‘data lake’ which contains all data, deletes nothing, and allows you to run any queries against all history. There was talk of ‘interactive’ policies that customers would be able to turn off and on via an app as their needs change. Brave new world indeed!

• The Royal Commission into Institutional Responses to Child Sexual Abuse: How can insurers reserve for molestation claims, given the lack of data, information, and widespread under-reporting? And the redress scheme (report due early 2015) will influence outcomes and required reserves. Insurers are still a few steps away from estimating the ultimate financial impact.

• The 2nd Global Customer Insurance Survey 2014 (50 questions, 24,000 people, 30 countries) discovered that insurers are less trusted by their customers than banks. Conclusion: insurers need to rethink and take control of ALL customer relationships.

• Cyber Threats and the Insurance Response. Cyber attacks are an increasing concern for business, and governments have been slow to respond with appropriate legislation. The worldwide market for cyber insurance is currently US$2-2.5b and will grow quickly over the next five years (only US$150m in Australia). It’s hard to price this business due to sparse data and secrecy around reporting.

• Robotic Reserving – Are We There Yet?



John Killick and Jas Singh, SKL

Karl Marshall, Quantium

Scott Collings, Finity

Andrew Smith, PwC

Scott Duncan, Taylor Fry

Lynette Nixon showing participants how to find the elephant in the room

Morning Tea

Organising Committee

Bowel Cancer australiathe conference raised $2,000 for our chosen charity, including presidential tango contributions and donations from Finity and taylor Fry. Bowel cancer affects men and women alike, and is australia’s second biggest cancer killer.

DanIEl SmIth thankS oUr gIS SponSorS

The answer is no – we’ll still be doing valuations for a while yet! Standard statistical measures of fit aren’t useful for models that extrapolate, so we humans may still be required even after the robots rise up and overthrow the human race.

• Gold Standard Underwriting. The underwriting departments of most local and international insurers were assessed as having ‘significant room for improvement’. More automation and effective tools can help us to take a truly holistic view of underwriting opportunities and risks. Australia lags the rest of the world in predictive analytics and distribution (mainly because of our immature direct channels).

• Actuarial Offshoring – Will you be here in 10 years’ time? If the robots don’t take over, will cheap overseas labour do the job? Conclusion: we may be here, but possibly not in the same roles and functions. Offshoring is moving up the value chain, and as actuaries we will need to differentiate ourselves by adding value and thinking strategically and innovatively.

• Superimposed Inflation – Study of Impact on Premium Rates. An investigation of the superimposed inflation allowances in premiums across seven CTP & WC schemes found that the total cost to policyholders across the schemes is nearly half a billion dollars!

anD thEn It waS ovErAfter two intense days, it was time to dismantle the security fences and return from high level meetings to everyday life. The committee, sponsors, Institute staff (including tango choreographer Liz Gemmell), and Michael Pascoe – our excellent plenary facilitator, who had found something to scare him in every session – all heaved a sigh of relief and sank into the nearest comfy chair.

Delegates headed off, feeling inspired and with new learnings to apply, clutching their satchels and copies of the daily Taylor Fry newsletters. The G14 was brief, it was great, and it cost a lot less than the G20’s whopping A$400 million. Once again, actuaries do it better!


The sixth ERM Seminar was held at the Hilton Hotel in Sydney on Wednesday 19 November 2014. The seminar was opened by President Daniel Smith who commented that there were over 140 delegates this year, of which a quarter had also attended the General Insurance Seminar on the two days before.

Overall, the seminar had a very ‘hands on’ feel as most of the presenters were risk management practitioners (CROs, actuaries, analysts) and subject matter experts (subjects including climate change, emissions and environment, innovation, risk appetite statements). We also heard from stakeholders on their view of ERM in practice (CEOs and CROs).

The seminar format consisted of a keynote address followed by six plenary sessions. Each plenary session was independently chaired and included a panel discussion at the end during which questions could be asked by the audience either via SMS or the old fashioned microphone method – SMS questioning was by far the most popular option.

In the keynote address we heard from Howard Silby, President of Risk Management Association Australia (RMAA). Howard covered the six hot topics highlighted by RMAA members during 2014. These included strategic risk management, risk culture, regulatory impacts, rebranding of the risk profession and new engagement skills needed, operational risk and economic and market insights. When asked how far along the risk management journey we were in terms of ‘Capturing the Upside’, Howard said we were half way through but that resource constraints and cost pressures are resulting in less time to think. Risk functions need breathing space to do deep thinking and take a ‘balcony view’ of the risk and business landscape. If this doesn’t happen, Howard said there is a danger we don’t make the rest of the journey.

The first plenary discussed ‘Capturing the upside in Practice’. Scott Mackenzie (TAL CRO) said we need to overcome the stigma of RISK as a four letter word and suggested CROs be relabelled as ‘Chief Challenge Officers’. Mike Thornton (AMP CRO) suggested the Risk Function should aspire to be like the Apple iPhone – intuitive, easy to use and interact with. Mike also likened the Risk Function to a soccer team – you need to decide whether you’ll be all attack, mostly defenders with a lone striker grinding out a 1-0 win, or some other formation. During the Q&A session there was a lot of discussion on businesses needing to identify and own the risks associated with their strategic plan upfront, not use Risk as a filter after the plan has been set.

Plenary two covered ‘Stress Testing and Scenario Analysis’. The four speakers discussed the uses of stress testing and scenario analysis in the context of general insurance, health insurance, lenders mortgage insurance and reinsurance. Potential uses highlighted during the discussion included monitoring risk profiles relative to Risk Appetite Statements, business continuity planning, escalation of potential risks and exposures, internal model building and/or validation, reinsurance purchasing, resource planning, engagement of key stakeholders, and deeper dives on particular risk topics. Jeremy Waite educated the audience on the Feynman Algorithm, which can be used to solve any problem – first you write down the problem, then you think very hard, and lastly you write down the solution!

The third plenary session enlightened us on ‘Emerging Risk from Climate Change’. Professor Barbara Norman presented on a risk management approach to climate change. The major points Barbara made were that Australia is getting hotter and drier, and we do not have an adaptation strategy. Our current planning system is based on a static environment,

gavin pearce [email protected]

Event report

Keynote Speaker, Howard Silby

Enterprise RiskManagementSeminarCapturing the Upside



Daniel Smith and Josh Corrigan, Milliman (Sponsor)

Plenary 1: Richard Willis, Scott Mackenzie, Antonio Ybarra and Mike Thornton

Plenary 4: Kieran McKenna, Tara Cahill, Heather Navid and Blair McAuliffe (Chair)

Plenary 2: Jeremy Waite, Tim Spicer, Ignatius Li, Andy White and Stuart Rodger (Chair)

Plenary 5: David Creaven, John Evans, Stephen Britt and Dean Saunders

Plenary 3: Professor Barbara Norman, Tim Andrews, Brett Riley (Chair) and Emma Herd

Plenary 6: Conor O’Dowd, Shaun Dooley, Damien Mu, Jim Minto and Simone Leas (Chair)

not one that is changing significantly. Emma Herd talked about Westpac’s strategic response to climate change, including their three engagement themes – building resilience, sustainable cities and investing in the two degree economy (i.e. limiting temperature change to two degrees). Tim Andrews shared some of the work Finity has been doing on the impacts of climate change on the future of the insurance industry.

After lunch, plenary four discussed ‘Operational Risk – Value and Resilience in a World of Disruptive Change’. Heather Navid (TAL) highlighted some disruptive products and services including the internet, digital cameras, Uber and Zopa (peer to peer lending service). Heather also talked about how to develop resilience in a world of change – have a strong radar, get to know your customers, try stuff yourself, and be the disrupter. Tara Cahill then discussed the

drivers of disruption in the banking industry which included new technology, new entrants, changing customer expectations, regulation, economic conditions and heightened geo-political risks. Finally, Kieran McKenna (Cuscal CRO) introduced us to the ideas of futurist Richard Watson. He also challenged actuaries to question how they can pull levers to positively influence future experience, not just analyse the past.

Plenary five covered ‘Risk Appetite’. David Creaven and Stephen Britt spoke on behalf of the Life and GI Risk Appetite Working Parties respectively. David talked us through the ‘Risk Appetite Framework’ – an approach to establishing, communicating and monitoring your risk appetite. He also proposed definitions of risk tolerances (constraints on business outputs) and risk limits (constraints on business inputs). Stephen expanded on the attributes and gave examples of risk limits and tolerances,

including an interesting ‘non-insurance’ example involving teenagers being home on time. Dean Saunders (Westpac) then talked about risk appetites from a banking perspective. He posed the question “Why have a risk appetite?”, then went on to discuss current trends and key success factors in the risk appetite space.

The last plenary of the day discussed ‘Stakeholder Views of ERM in Practice’. Jim Minto (TAL) highlighted the differences between a CRO and Appointed Actuary. Damien Mu (AIA) presented a maturity map of the risk function as a three state model – efficient fundamentals, insightful partnership and value enhancement. He also discussed the challenges for ERM – behavioural economics (getting customers to behave better), thinking in terms of ‘today, tomorrow and the day after’, finding the opportunities and avoiding complacency. Shaun Dooley (NAB) gave a banking perspective on ERM. He talked about Risk Management’s role in rebuilding trust and confidence in banks. Conor O’Dowd (Genworth) talked about capturing the essence of ERM – integrating risk thinking into business decision making. During the Q&A session two memorable questions were:• what are the core capabilities of a CRO?;

and• what keeps you up at night?

This article only scratches the surface in terms of the rich content of the ERM Seminar. I’d encourage everyone to check out the presentations, including audio and video recordings, on the Actuaries Institute website. You can also read what tweeters were saying by searching #2014ERM or @ActuariesInst on Twitter.

A huge thank you to the presenters and chairs for their input, and the Organising Committee and Actuaries Institute staff for putting on a great seminar. Thanks also to the event sponsor, Milliman, and supporting partners.


T here comes a time in any adventure when it’s time to call it a day. Although I had had a great time, travelling through space and time with the Actuary, I missed my family and friends and was ready to go home.

“Before you go,” said the Actuary. “Let me take you on one last journey. I’ll take you anywhere you want to go. What’s your favourite time of year?”

“Christmas,” I said, before I could stop myself.

“Then we’ll go to an intergalactic Christmas party in the year 5014 A.D. You’ll love it and it won’t take long.”

What could I say? I do love Christmas, so I had no choice but to agree, and we had a great time. Interestingly, many of our Christmas traditions from the 21st century have managed to survive to the 51st, including my personal favourite,

Christmas crackers. At an intergalactic Christmas party, though, the jokes inside the crackers aren’t necessarily in English. I couldn’t understand a single one of them. Nevertheless, I saved as many of the little slips of paper as I could find, if only to keep them as souvenirs.

At the end of the evening, the Actuary took me back to my office on the night we first met. Even though it had seemed to me like a year had passed, to the rest of the world, I had barely been gone five minutes.

“Are you sure this is what you want?” said the Actuary. “There’s still time to change your mind.”

“I’m sure,” I said. “But I wouldn’t mind one last puzzle, if you could manage it.”

“Check your pockets.”

I did so and pulled out the joke slips I’d saved, as well as another sheet of paper covered in the Actuary’s handwriting. “What do I do with these?”

The Actuary smiled. “You’ll figure it out.” With that, he wished me farewell, stepped into his time machine and vanished from my life. I hoped it wouldn’t be forever.

1. Yhw did eht nekcihc ssorc eht daor? Ot teg ot eht rehto edis.2. Wophopatop’sop bopropowopnop anopdop soptopicopkopyop? A

bopropowopnop soptopicopkop.3. Hw ta ik dn fo um dr re re ah ms ro la if rb e? Ca re ae kl li el r.4. Atwhay oday ouyay allcay otway owscray onway away anchbray?

Attemptedway urdermay.5. Otw fhis aer in a aknt. Eno nrstu ot eht ehort adn assy “Do ouy

know how ot deirv hist ghint?”6. Ipx nboz tvssfbmjtut epft ju ublf up dibohf b mjhiu cvmc? Gjti.7. An ngisma, an rihmn ad a Autrlin wlk nt a br. Te brmn aks, “s tis joe?”

the actuary’s Joke: Owt hopunoptoperopsop ra e outway in uif wods nehw onope fo emthay acellopss. If dosn’ mees topo eb eathingbray adn ijt eys era goplopazopedop. Ht e otherway guy qvmmt ou sih pophoponope na d allscray 000. If gaps, “Ym fopropienopdop si eadday! Ahtw ep I od?” Tophope po re ta ro ayssay, “Aclm epxo. Fist s’tel mopakope us er e’shay adde.” Uifsf is ecnelis, tophopenop a otshay is ifbse. Bak no tophope hp no e, ethay guy tbzt, “OK, won wophopatop?”

Presented above are seven jokes, written in seven different ‘alien languages’ (i.e. codes). Decipher the jokes and then combine this information to decipher the Actuary’s joke.

For your chance to win a $50 book voucher, email your solution (with working) to: [email protected].

genevieve hayes [email protected]

@murderandangst“I have discovered a truly marvellous proof of this, which this margin is too narrow to contain” – Fermat.

In the margin

Funny in any language

8♣ 10♥ 9♦ J♦ Q♣

K♣ K♥ K♠ 8♦ K♦

9♣ A♥ 9♥ 8♠ A♦

J♣ J♥ A♣ J♠ A♠

10♣ Q♥ 10♦ 8♥ 9♠

CaSIno JUpItErAcTuArIEs 194 SolUtIonIn Actuaries 194, you were told that 25 of the 28 cards in a deck made up of 8 through Ace in each of the four suits had been dealt into a five by five grid and asked to deduce the face values and locations of each of the dealt cards. The solution is presented opposite.

16 correct answers were submitted. The winner of this month’s prize, selected randomly from among the correct entries, was Su li Sin, who will receive a $50 book voucher.

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title… Senior Manager, although really just part of the actuarial team at EY

organisation… Ernst & Young, within both the Financial Services Organisation (FSO) and the Advisory group, specialising in Life and Wealth Management

my interesting/quirky hobbies... I’ve been an active member of a community garden at the bottom of my street and also manage the website and social media for the Gordon District Cricket Club

my favourite energetic pursuit… was certainly cricket but now my Saturdays seem to be filled with engagement parties and weddings… even baby showers! It’s a sign of me encroaching on 30

the sport I most like to watch... is probably the hardest question to answer. There are so many sports that I actively follow. I attend most Swans, Waratahs and Rabbitohs matches in winter and local, domestic and international cricket in summer. However, if it needs a ‘judge’, rather than a referee or umpire… it’s out. Scoring out of 10 is too subjective for an armchair spectator

the last book I read (and when)... recently finished The Big Short, by Michael Lewis on the GFC. A little difficult to grasp all the key players at first, but an insightful and entertaining read. Numbingly big numbers being bandied around

my favourite artist / album / film… is The Long Kiss Goodnight. However, these days I spend many an hour at Dendy Opera Quays. Walking across the bridge, then breakfast and a film is a great way to start a Sunday

the person I’d most like to cook for… is someone that likes their steaks rare, their red wine flowing and their evenings long

what gets my goat… is a laundry list of things unfit for publication in this magazine. However, inconsiderate people, whether through selfishness or ignorance, really rile me up

I’d like to be brave enough to… jump from a 10 metre diving platform

In my life I’m planning to change… my contributions to worthwhile charities. With our firm doubling everything you donate, you can truly make a difference

not many people know this but I… a week’s work experience in the actuarial team at PwC studying the impact of climate change on insurance claims changed my career path

Four words that sum me up… passionate, committed, loyal, logical

what I wanted to be when I grew up… … outside of all the boyhood dreams of policemen, pilot, fireman and train driver, an Intellectual Property lawyer was where I aspired to end up. Specific hey!

where I studied to become an actuary and qualifications obtained… UNSW, through their Co-op Program, then through the support network at EY. BCom (Actuarial Studies and Finance), FIAA

my work history… has been with EY for seven years now, outside of some amazing experiences at APRA and others while on my Co-op placements

what I find most interesting about my current role... being able to distil technical information into pragmatic and meaningful insights for my clients. Conversing with the full spectrum of people within organisations

my role’s greatest challenges… is finding the necessary time to meaningfully invest in the future of our staff

who has been the biggest influence on my career (and why)… an American university lecturer who spent an entire semester instilling into me the importance of questioning the reasonableness of assumptions. Around the same time Rob Thomson (APRA) was mentoring me while on my Co-op placement, for which I will be forever grateful

my proudest career achievement to date is… convincing my then girlfriend to share the rest of her life with me

10 years from now, I will be… fostering the ambitions of my children while juggling everything else in my life

why I’m proud to be an actuary… because of all the street cred it brings! But in all seriousness, not having to credentialise yourself is of great benefit

the most valuable skill an actuary can possess is… the ability to critically question. And then the confidence to ask questions!

at least once in their life, every actuary should… buy a lottery ticket. It goes against almost everything you’ve been taught. But there’s always a chance!

my best advice for younger actuaries… is the same as for anyone: Think critically and ask ‘So what?’

If I could travel back in time I would… re-live the 10 week holiday from which I’ve just returned

If I win the lottery, I would… frame this page. There’s always a chance. No matter the situation, don’t give up hope!

Dave [email protected]

Dave millar

Under the Spotlight


Chances are, if you are reading this article, you have a pretty thorough understanding of the concept of insurance. Our textbooks tell us that

it’s all about “providing financial protection to individuals by means of transferring risk”. Our lecturers go into depth about the role of an actuary in underwriting, pricing, reserving and surplus analysis, amongst other exciting pursuits.

For the benefit of those who may not be fluent in the language of risk pooling, insurance is all about recognising the fact that a dollar you have before your house burns down is worth less to you than a dollar after your house burns down.

By managing the risks of large groups of people, insurance funds offer a vehicle through which you may transfer some of the money you have today into the state of the world where you would value it more. That is, insurance products provide a source of protective income, should devastation strike.

While the theory behind benefits consulting may not be your cup of tea, the concept of insurance gives rise to some pretty intriguing ideas.

We have all heard the stories of moral hazard, where individuals pretend to be seriously injured as a result of a fall choreographed to extort their insurance funds. However, did you know that the game show ‘Who Wants to Be a Millionaire’? is actually insured against the possibility of a contestant winning?

Or that it is possible to insure yourself against the possibility of an alien abduction?

These days, you can insure almost anything of value – including your Fantasy Football or SuperCoach Team – often with quite attractive benefits, should the triggering event occur.

But before you take to the streets, begging “please steal my car”, we should consider how these unique insurance products are valued and how they work in the first place!

Take David Beckham for example. In 2006, he insured his legs for a cool £100m. Whilst some may argue that this sum of

money is simply spare change for the soccer superstar and that the insurance policy is a mere publicity stunt, there are still sound actuarial principles behind the insurance of body parts, despite how absurd it may sound.

This type of policy is comparable to that of disability income insurance policies, which aim to ease financial strains should an individual injure themselves and be unable to work. Likewise, without the full capabilities of his legs, Beckham would not be able to play soccer competitively, thereby losing not only his primary source of income, but also any additional illustrious sporting titles he may have otherwise been able to achieve. Consequently, the policy would help to minimise the risks associated with playing the sport and ensure that should the unfortunate situation arise where the policy needs to be exercised, he would at least be financially protected.

Then the question becomes, how would the premium for this insurance policy be calculated? A series of assumptions would need to be produced by the relevant insurance company to assess the likelihood of being required to pay out the £100m sum insured. Broadly speaking, this would involve estimating the probability that Beckham would injure his legs as well as the severity of this injury, compounded with a series of estimates detailing potential time periods in which this event may occur.

As we all know, when we are younger, our bodies are more likely to recover faster from injury or other health issues. So it is

safe to assume that in the earlier stages of his career, the chances of Beckham injuring himself to an extent that he would be totally incapable of playing soccer would be fairly low. Likewise, towards the end of his career, as he plays fewer matches on a lesser scale, this may also result in a reduced chance of critical injury.

On top of all that, an insurance company would need to take into account a range of possible claim sizes that they may be required to pay out. For example, if the company is required to pay for the cost of surgery on Beckham’s legs, this may only be a few thousand pounds. Conversely, if he were to become paralysed and unable to play ever again, this would likely result in the insurer paying out the full amount. These are just some of the factors that must be taken into consideration before a final premium can be set.

Another problem which may arise is the lack of insurance policies for body parts on issue, which means the usual risk pooling principle behind insurance would not be applicable in this case. Companies issuing such policies would be taking on a substantial amount of risk and potentially forecasting (or hoping) that they may never have to pay out the full sum insured; because chances are they don’t have exorbitant amounts of money lying around.

So what is the moral of the story? Unless you’re happy to exhaust your assets in insurance premiums or you have assets like Dolly Parton (in which case it’s probably best to cover your assets – pun intended), it’s probably a better idea to simply take out regular health cover.

So maybe, if you are in a position like us, you should reconsider insuring your wrist against the very likely event that your actuarial exams cause irreparable damage to it!

Student Column

to Insure or not to Insure? (that is the Question)

amy li [email protected]

mengtong xia [email protected]

holly Briffa [email protected]

what do rod Stewart’s voice, merv hughes’ moustache and Jennifer lopez’s backside all have in common? they have all been insured – and for very hefty sums at that!


SEptEmBEr1 Membership Subscriptions2 Volunteers Cocktail Party (Sydney) 3 GRAM Meeting (Melbourne)3 RAGS Meeting (Sydney)8 Council Meeting (Sydney)14 – 17 CAP Course 17 Volunteers Cocktail Party (Melbourne)17 CEO Business Luncheon (Melbourne)28 – 29 Professionalism Course (Sydney) 30 CEO Business Luncheon (Sydney)

DECEmBEr3 RAGS Meeting (Sydney)8 Council Meeting (Sydney)

novEmBEr3 – 6 East asian actuarial Conference (bangkok)5 RAGS Meeting (Sydney)8 – 10 Injury Schemes Seminar (Adelaide)26 CEO Business Luncheon (Sydney)

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the 2015 look-ahead Calendar provides a snapshot of what’s coming up in 2015 and some important dates from our Education program. Save the dates in your calendar today!

as event dates are subject to change, you should check the Events Calendar on the website and the weekly Institute Bulletin closer to the event date.

Black text indicates a non-Institute event.

FEBrUary2 – 3 Professionalism Course (Sydney) 5 RAGS Meeting (Sydney)18 Research Colloquia (Sydney)23 GRAM Meeting (Melbourne)24 Fellowship and Graduation Dinner (Sydney)

marCh3 CPD Roadshow and Presidential Dinner (Adelaide)4 CPD Roadshow and Presidential Dinner (Perth)5 President/CEO Curtin University Visit (Perth)5 RAGS Meeting (Sydney)10 Council Meeting (Sydney)11 CPD Roadshow and Cocktail Party (Sydney) 23 CEO Business Luncheon (Sydney)24 CPD Roadshow and Presidential Dinner

(Melbourne)25 CPD Roadshow and Presidential Dinner (Brisbane)30 – 2* CAP Course (* April)

aprIl1 CPD Roadshow and Presidential Dinner (Canberra)2 RAGS Meeting (Sydney)8 – 12 International actuarial association meetings (Zurich) 13 Presidential Dinner (London) 15 Research Colloquia (Sydney)28 GRAM Meeting (Melbourne)30 Annual General Meeting (Sydney)

may5 CEO Business Luncheon (Sydney)7 RAGS Meeting (Sydney)17 – 19 Actuaries Summit (Melbourne)27 New Members Networking Evening (Sydney)

JUly2 RAGS Meeting (Sydney)14 CEO Business Luncheon (Sydney)27 – 28 Professionalism Course (Melbourne)

aUgUSt5 CEO Business Luncheon (Sydney)6 RAGS Meeting (Sydney)18 Fellowship and Graduation Dinner (Melbourne)23 – 27 ASTIN, AFIR/ERM and IACA Colloquia (Sydney)

oCtoBEr1 RAGS Meeting (Sydney)TBC One Day Seminar14 – 18 International actuarial association meetings

(Vancouver)22 Fellowship and Graduation Dinner (Sydney) 29 GRAM Meeting (Melbourne)

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JUnE4 New Members Networking Evening

(Melbourne)4 RAGS Meeting (Sydney)11 CEO Business Luncheon (Melbourne)16 Council Meeting (Sydney)17 Research Colloquia (Sydney)24 GRAM Meeting (Melbourne)

2015 Look-Ahead Calendar


Turning up to Macquarie University to begin actuarial studies, and being surrounded by a bunch of super enthused teenagers who had finished high school just months earlier, I felt a bit

like a fish out of water. I had just returned from a three month whirlwind overseas adventure to clear my head after withdrawing from a Master of Creative Arts. Prior to that I had lived and breathed music full-time for several years, obtaining a Bachelor degree with honours majoring in piano performance and research. ‘You’ve studied music and now you want to become an actuary? – how strange!’ was the most common reaction I received. Not strange at all to me, but I can appreciate the novelty of my situation.

Of course, there’s nothing new about the connection between actuarial science and music; the most obvious commonality being that both are a study of patterns. Then there is also the discipline involved to become proficient in any maths related field, which is also required in training as a musician. A quick survey of the actuarial team I work with reveals that over two thirds have formal training in music and the vast majority have pursued playing music in some way.

Throughout the large portion of my life that I have spent entirely focused on the study and performance of music there are many valuable lessons and a few which are well worth sharing…

thErE’S morE than onE way to FIt a mortalIty CUrvE… or to ConStrUCt a pIano mEChanISmI was fortunate enough that my studies at the Conservatorium of Music in Newcastle coincided with the emergence of the first Stuart & Sons pianos, designed and built by the brilliant Wayne Stuart whose workshop had recently been established as a research initiative of the University of Newcastle.

For a century and a half, very little has changed in terms of the piano’s construction. Ever since Steinway & Sons manufactured its first pianos in Manhattan during the 1850s they have set the benchmark and continue to do so.

However, Wayne Stuart saw the potential for innovations, particularly related to the techniques and expansion of soundscapes which have characterised art music of the last century. A Stuart & Sons concert grand has four pedals rather than the typical three, giving the pianist an additional alternative by which to modify the texture of the sound. It has 97 or even 102 keys rather than the conventional 88, a feature which has been utilised by several leading composers in recent compositions. Perhaps Stuart’s most innovative development has been the ‘bridge agraffe’; a mechanism which couples each string to the instrument’s soundboard so that its vibration is predominantly vertical. Compared with conventional pianos, this leads to greater clarity of

nicole [email protected]

actuaries at play

Musical Adventures The Orion Consort members


each note struck and a unique sustain/decay pattern.

It was a privilege to be able to perform on the first Stuart & Sons pianos – at various concerts I would have played everything from Bach fugues, to Chopin Nocturnes, Prokofiev Sonatas or a new work from one of the Conservatorium’s budding composers. Often Wayne himself would be sitting

in the audience, keenly focused, never completely satisfied and always gathering insights which might be used in the production of his next instrument.

This experience stays with me as evidence that no matter how deeply a convention is embedded, there are always opportunities to use a different approach. There is very rarely only one way to address a complex issue, and it often takes a fresh pair of eyes to recognise that there are other possibilities.

wIth gEnUInE UnDErStanDIng, wE arE CapaBlE oF DoIng amazIng thIngSDuring my Honours year I developed a repetitive strain injury in my left hand and took a break from the piano until it improved. As a result, instead of practising intensely at home, I joined my family on an interstate holiday for about 10 days. I had been due to start learning a Rachmaninov etude (the very beautiful and haunting Op. 39 No. 2). Instead I decided to take the sheet music away with me, thinking I could do some analysis on the structure and harmonic language of the piece. This process was always something that was important and necessary for me to do when studying a new work.

At some point on that holiday I thought it would be interesting to see how much of the etude I could memorise away from the instrument. To do this, I would be calling on several types of memory: aural, visual in terms of the notes on the page, but also visual and tactile in terms of what my hands would be doing at the keyboard.

The night I returned home from the trip, I played the etude (which lasts about six to seven minutes at speed) from beginning to end with no written music in front of me. It certainly wasn’t yet fit to be heard in public but I had memorised the piece in its entirety. I put this down to really understanding how the etude was constructed, how the different thematic motives were used throughout and what techniques Rachmaninov was asking of the pianist. It was not about photographic memory, rote learning or following a set of instructions.

When I think about what I was able to do on that holiday, it becomes relevant to all sorts of problems which appear formidable and where I may not even see a path forward, let alone the final solution – dare I say it – the type of problem I come up against regularly as an actuary.

I’ve never been great with formulae or learning things ‘off by heart’, but memorising that etude proved to me that a genuine understanding can enable me to absorb an incredible amount of detail and use it to achieve an extraordinary outcome.

CollaBoratIon Can BE Far morE rEwarDIng than goIng alonE anD It’S mUCh morE FUn tooIt has been many years now since I’ve felt the isolation which comes with preparing for a solo piano recital. This was one of several reasons that I abandoned that career path. Of course it is a wonderful thing to be able to just sit down and play in solitude, if only once in a while. (“Solitude, what’s that Mummy?” I can hear my two pre-schoolers ask.) But my most recent musical pursuits are as part of a group.

The Orion Consort is a chamber ensemble devoted to Medieval and Renaissance music. We play replicas of period instruments such as crumhorns, gemshorns, shawms and dulcimers. The consort members share a passion for the all too often neglected ‘early music’ genre, and take every opportunity to play at festivals, corporate events and private functions around the Sydney area.

Being able to collaborate with friends in this way is an absolute joy. It gives me the freedom to create and perform music in an inspiring and supportive ensemble environment. As each of us have very different backgrounds, we are able to explore a range of styles, instrumentations and arrangements which are incredibly diverse compared with what we could achieve if any of us were absent.

FInalEStudying and playing music, in all its forms, is empowering and at the same time deeply humbling. In many ways I feel very much like a beginner with so many more musical adventures ahead of me. The learnings I have gained from my experiences have shaped me as a person, including what I might bring to my day job. But above all, patterns and discipline aside, music tugs at my heart strings and puts a smile on my face. I believe that is music’s greatest power and its most valuable gift to all of us.

The Orion Consort performing on gemshorns at Ironfest in Lithgow

Nicole with fellow pianists and one of the first Stuart & Sons concert grand pianos

actuaries at play continued

This is my last article as President of the Institute. It seems like only yesterday that I was being hassled to get my article in for the March edition.

As you might expect, 2014 has been a busy year for me. It’s been a great experience albeit not without its challenges. I prepared a Presidential Address video which was available for viewing in January and, of course, you’ve all watched it several times over the course of the year. I thought it would be worth going back to my statements regarding what I thought the year should contain and compare that to what has actually happened – thus utilising my ingrained practice of applying the control cycle.

The key points raised and my take on outcomes are:

• Enhance the brand of actuary – the See What We See campaign had a successful initial run and, at the time of writing, round two has rolled out. Of course this is not the sole solution. More work needs to be done and Council will continue to work on ways to enhance our brand.

• mission statement and governance reviews – these have been completed and reported to Council. Both reviews provided considerable opportunities for members to contribute. Council is considering the outputs of the reviews as part of its review of strategy and I expect that outcomes will be advised to members in December.

• Education – the Education Strategy Working Group (ESWG) has reported to Council and extensive enhancements to our pre-qualification education have been proposed. A wide range of members were consulted in the development of the ESWG’s report. Council is supportive of the nature of the proposals but a considerable amount of work is still ahead to ensure that the changes can be incorporated into university programs

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president’s Column

Daniel [email protected]

@DanielSmithFIAA

pigs may not but time Certainly Does!


a FEw ‘tImE’ QUotES that takE my FanCy:

“the bad news is time flies. the good news is you’re the pilot” – Michael Altshuler

“For disappearing acts, it’s hard to beat what happens to the eight hours supposedly left after eight of sleep and eight of work”

– Doug Larson

“time is a great teacher, but unfortunately it kills all its pupils.” – Louis Hector Berlioz

… and one that really resonates …

“how long a minute is, depends on which side of the bathroom door you’re on.”

– Zall’s Second Law

Daniel at the 15th China Association of Actuaries Annual Meeting


president’s Column continued

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and align with the education review being undertaken by the IAA.

• CpD – whilst not a huge amount has been achieved this year, the importance of developing a coordinated and forward-looking CPD plan has become clear. Council and HQ will be working on developing the plan in 2015.

• Servicing members in asia – after a few iterations, a Working Group has provided a plan to Council for its consideration. I expect that our members in Asia can look forward to improved support commencing in 2015.

• Big data and data analytics – to be honest, the development in this space has been very disappointing for me. Council are well aware of the importance of this area and I anticipate that it will have a significant focus in the new strategic plan. With limited progress made in 2014, I consider that this is an area which will require a substantial time investment and with a level of urgency.

• Banking – the South African Society has almost completed its banking subject and we look forward to being able to introduce a Part III course in the near future. Nevertheless, the Banking Practice Committee still has a fair amount of work to do before we’ll be in a position to introduce the subject.

• risk management – Council, via the Risk Management Practice Committee, is in the process of reviewing the Institute’s risks across all areas and, in particular, looking to reduce the siloed nature of many of our committees. This is a work-in-progress and I expect it to be completed in 2015.

• longevity – the main development in this area has been the Institute’s involvement in the Financial System Inquiry (likely to be known as the Murray

Inquiry). The Institute and several of our members have provided considerable input into the review, and that will be recognised in the final report.

• transparency of Council – I’m hoping that members consider that the transparency of Council has improved in recent years and that there was further improvement this year. I expect this to continue to improve.

• International involvement – the Institute is involved on the international stage in a range of areas. Throughout the year we have signed an updated MRA with the Institute and Faculty, agreed on a basis to share education material with the South African Society and agreed to co-host CPD events in Asia with the CAS and SoA. I consider it to be extremely important that we have involvement on the international stage and that it would be naïve to think otherwise. That said, it is important that we measure the effectiveness of our international engagement and such measurement may see changes to our approach in coming years.

Ultimately, I stated that I would see success as being a year in which Council works as a team to enhance the status of the profession and to ensure that the interests and needs of the broad range of members are served. We certainly have not solved everything but I do think that Council has worked well this year and that the interests and needs of the broad range of members have been considered in all of our deliberations.

thank yoUBefore I sign off, there are several people who I must thank.

Firstly, thank-you to my fellow Councillors. I think that the deliberations of Council have been effective this year and I wish those of you remaining on Council, notably Estelle Pearson as the incoming President, and Lindsay Smartt, the incoming Senior Vice-President, all the best in continuing to enhance the profession.

In my Presidential Address I thanked Melinda Howes and John Newman for their assistance and guidance and it is worth repeating. Of course we now have a new CEO and I consider that David Bell has made a great transition into the Institute and I am confident that HQ is in good hands. It would be remiss of me not to mention the HQ team. They do a great job in what, on many occasions, are thankless tasks. Julia controls where the President goes and what he/she does. Anne makes sure the President has some idea of what should be on the meeting agendas and the events staff ensure the President knows who to thank at the various events (and choreograph dancing).

Many of you will know that Taylor Fry is my employer. The firm has been very gracious in allowing me to spend the required time to be President and a special thank-you to those colleagues who have covered for me when I’ve been otherwise occupied.

Finally, my family deserve the biggest thanks. Being Melbourne-based means that I have travelled to Sydney regularly and there is also a considerable amount of national and international travel required. While I’m away I can still work (the wonders of technology) but I can’t be with my family. Ultimately they are the ones who have sacrificed the most for my year as President. So, thanks guys – things get back to normal now.

I hope you have all had a successful 2014, can spend some time relaxing over the Christmas/New Year break and hit the ground running for a bigger and better 2015.


John C Calhoun was the seventh US Vice President from 1825-32. Nicknamed ‘cast-iron man’ for his ideological rigidity (not a soubriquet many of us

would aspire to) he somewhat famously said: ‘In looking back, I see nothing to regret and little to correct.’ I suspect that Vice President Calhoun had low EQ.

I wish I could be as bold as this 19th century Veep, but regrettably I can’t. So in my ‘looking back’ exercise over the past 11 months at the Actuaries Institute I would like to share some of my observations under different categories – some serious, some less so.

The serious reflections…

BIg DECISIonS By CoUnCIlAs I sign-off on this article, Council has just held its strategy days which will shape the agenda for 2015-17 and beyond. Members were invited to provide input which a considerable number of you did. Daniel Smith will report back to you the output from the strategy days in December.

mEmBEr FEEDBaCk at lUnChESOne of the most satisfying things I did this year was to receive Member feedback from a number of lunches held in Brisbane, Melbourne and Sydney. A summary of some of that feedback was covered in my November column in the Actuaries Magazine.

moSt SatISFyIng pUBlIC polICy opportUnItyThe time I realised that the Institute and profession was taken very seriously, was when we sat down with the Chairman of the Financial System Inquiry (FSI), David Murray, and other members of his review team. We were able to meet with them twice, and I feel that we have been able to make an important contribution in the area of retirement income. This was supported by our two submissions to the inquiry, and recognised by the involvement of our very own Geoff Atkins with the work of the FSI.

We were able to discuss and debate this at our very first Public Policy Forum held in November.

a gooD DEBatE waS haD on ClImatE ChangEI was enormously impressed by the debate the members were prepared to have on climate change, sparked by my article in August. I absolutely acknowledge that it is a contentious issue, but, equally, it is something the profession needs to work on to adopt a sensible and acceptable public policy position.

volUntEErSIn a snapshot we took in July this year, of volunteers who had served in any capacity since October 2013, we discovered some interesting facts. 14% of our membership (or 615 people) were in volunteer roles; 84% of these roles were filled by Fellows and 22% of volunteers were aged between 26 and 34.

Without our volunteers we literally could not do all of our work at HQ.

a mEmoraBlE aChIEvEmEnt oF thE EntIrE hQ tEamApart from adjusting to the quirks of a new CEO, one of the better things we did

David [email protected]

@davidbell6461

CEo’s Column

Back through the looking glass – a retrospective on 2014(with apologies to lewis Carroll)

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this year was to execute a very smooth relocation of our offices. These things can be highly disruptive, and we managed to shift a decade’s worth of stuff quickly without (hopefully) affecting Member service.

… And the less serious …

BIggESt SUrprISEProbably the day I arrived and was greeted by our young NZ receptionist as Mr Bell. That definitely shows you are getting old, as does the fact that some of your team are the same age as your children.

ColD SwEat momEntListening to my first radio interview on ABC (on the FSI) while driving and hearing, the lead-in to the story completely misquoting me. Thankfully Daniel understood that. To quote that time-honoured defence of many a trapped politician: my comments had been taken ‘out of context’.

‘FIrSt-worlD proBlEm’*Arriving in Singapore at some ungodly hour in the morning, as part of the CPD tour, knowing I had to be up a few hours later for back-to-back meetings. * e.g. ‘My new iPhone 6 fell out of my pocket and cracked my new iPad Air 2’, or ‘The free coffee at work sucks’.

BIggESt no-noTelling jokes about actuaries – why do people find them funny?

BESt tango By an aCtUaryThat has to be a tie – with Daniel Smith and Estelle Pearson showing great courage by tango-ing, for a charity dare, at the General Insurance Seminar Gala Dinner.

thE nICESt aCtUary I’vE mEtThe default answer is each and every one of you – but seriously, our 2014 actuary of the year Peter Martin is a terrific bloke, and obviously knows what he is doing (I like how he wears his ties askew as well).

moSt SUpportIvE aCtUarIES InStItUtE CoUnCIl awarDThere can only be one winner of course.

SaDDESt momEntHaving to go on an enforced Christmas break.

And, I hasten to add, Daniel Smith leaving the role of President – he’s been a fantastic boss.

Which of course leads to the…

SEConD happIESt momEntHearing I had won the job after a gruelling selection process.

happIESt momEntEstelle Pearson taking over as President.

… and thank you

Thank you to all of our members, and especially our volunteers for your support and interest in your Institute. The Institute’s Council also deserves a thank you for its guidance over the past year. I would like to acknowledge outgoing Councillors Andrew Huszczo, Gloria Yu, Caroline Bayliss, Stephen Wood and, of course, retiring President Daniel Smith for their fine contributions.

Daniel has been a terrific leader of the Institute, and was well supported by Senior Vice-President Estelle Pearson and Vice President Lindsay Smartt.

I look forward to working with the new Presidential team, led by Estelle Pearson, and I offer my congratulations to New Vice President Jenny Lyon and incoming Councillors: Andrew Brown, Hoa Bui, Michael O’Neill, Chao Qiao and Barry Rafe.

From all of the HQ team, I wish you a happy and safe Christmas and New Year, after which we will stump up and do it all again, but even better!

CEo’s Column continued

David Bell – inaugural Public Policy Forum, November

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SEaSon’S grEEtIngSCEO David Bell and the Institute staff wish you a joyful Festive Season and a safe and successful 2015!


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Save the date!

plan ahead to attend this significant event

ASTIN, AFIR/ERMand IACA

23-27 August 2015Amora Hotel Jamison Sydney

Innovation & InventionColloquia


Get involved and make sure you save the date for the Institute’s premier event. We look forward to seeing you in Melbourne in 2015. The program will feature five plenary

sessions and 56 concurrent sessions – the biggest Summit program to date.

Plenary speakers confirmed so far…

FaCIlItatorannabel Crabb* Journalist – Author and Political Commentator

plEnary SpEakErSgeoff atkinsDirector – Finity Consulting, Principal Adviser – Financial Systems Inquiry

mark Baxter Member of the Executive Committee and Chief Risk Officer of Prudential – UK and Europe

David Bell CEO – Actuaries Institute

Chris CatonChief Economist – BT Financial Group

andrew CornellManaging Editor – BlueNotes, the ANZ newsroom

professor rodney maddockProfessor of Economics at Monash University and Victoria University

trevor matthews Non-executive director of AMP, CoverMore, Bupa and FNZ

professor Chris parishLeader – Cancer and Vascular Biology Group, The John Curtin School of Medical Research, The Australian National University

Fred rowleyChief Actuary and Appointed Actuary of TAL Life Ltd

tim trumperDirector – Quantium and NRMA

pauline vamosCEO – ASFA

* Annabel Crabb appears by arrangement with Saxton Speakers Bureau.

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Registration Opens SoonActuariesSummitTake the Lead17-19 May 2015 • Grand Hyatt Melbourne

Mark BaxterGeoff AtkinsAnnabel Crabb

Tim Trumper

David Bell Andrew Cornell

Prof. Rodney Maddock Trevor Matthews Prof. Chris Parish

Fred Rowley Pauline Vamos

Chris Caton

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