A handy guide for actuaries on how to better perform work review

Will you unconditionally rely on the actuarial work performed by others?

As an actuary, you make important decisions daily you select a better model to make projections, provide management with forecasts on profitability, report to the regulator on the strengths of booked reserves, the capital position and many others. 

At times, you may perform the analysis yourself. For bigger assignments teaming up with others is almost unavoidable. Smart delegation and assistance, then, become key.  How do you make yourself comfortable with others’ work? How do you make sure that such work is adequately performed and chances of significant mistakes are minimised? What are the best practices around it? What does the profession tell us here?

My name is Aishwarya Khandelwal. I’ve written this article to walk you through some of my personal and professional experiences that have helped me to navigate in such situations. As a junior actuary, I was reviewed and was challenged by others. Now, I am more and more acting as the one delegating and accepting the work of others and finding the right balance, realising scope and depth of it is key.  

You might say that the work review concept is obvious, well understood and equally important in other professions. However, the environment actuaries operate in when acting to support public needs with complex calculations based on multiple assumptions and with simplifications and expert judgments, multiple actuarial tools, new technologies supporting the practice, ever changing regulations calls for a higher level of accountability as the technical part of actuarial work is generally complex and might not be easily understood. 

Let’s face it. Actuaries are perceived as experts dealing with models and tools. It makes it almost impossible for non-actuaries to perform the review of actuarial work. 

I am a part-qualified actuary from the Institute and Faculty of Actuaries, UK (IFoA) and, as a virtue of the membership, the APS X2 standard on Work Review is applicable to me as well. I will refer to it a few times in this article as a good basis for actions, however you may find similar guidelines from other actuarial associations.

When I first realised the importance of review in my actuarial journey 

In one of my previous organisations, when we were busy in preparing the year end deliverables for statutory reporting, we welcomed a new joiner who had little experience in actuarial reserving. I was assigned as a ‘coach’ to him. Since he was a starter, I suggested he go through the basics of non-life actuarial reserving using actuarial textbooks and some online papers so he could, later on, prepare and present a small slide deck to the team. 

As it was one of his first tasks, he invested quite a good time and effort in preparing the presentation with what he thought was important. Due to my tight schedules, I couldn’t find enough time to properly review his work to make sure that his deliverables were suitable, the topics were relevant and, overall, if the entire presentation was correct. On the scheduled day when he was presenting the results in front of the whole team, I felt very embarrassed as the messages were not clear, results were obviously incorrect, conclusions were not supported with analysis. And of course it was not his fault, it was mine.  

I felt quite disappointed with myself and irresponsible at the same time.  To me, it was largely my mistake. 

Although it was an internal training, I can blame the episode for not a few sleepless nights.  What if I had failed to perform a review of some statutory (or regulatory) work, and realised some mistakes afterwards when the damage can no longer be undone? 

After that unforgettable episode, I made myself a promise: to always take time to review my peers’ work. This has immensely helped me to improve the quality and structure of my deliverables and ensure that they are relevant to the target audience.

The moment when I lost the balance

However, when I thought I had found the magic formula to go about my job and excel at it –investing time in peers’ work review– I started losing sight of real business situations.

Sure, I started applying these principles to my day-to-day reserving tasks but I ended up digging into every single calculation and piece of work and I became annoyingly skeptical. You can imagine the consequences. The time and costs allocated to the projects exceeded the budget.

I decided, then, to grab the bull by the horns. I had a thorough discussion with my team leader, Pavel, seeking more clarity and support, based on his experience. Being a qualified actuary from IFoA, he gave me a bunch of useful insights and helped me with finding the right balance between idealism and realism, looking for economic impacts instead of focusing on technical aspects of the problem.

With his help, by all means valuable, I committed to compiling some questions that could help me with work reviews. I learnt, not precisely the easiest way, that we need to strike a balance between what we like to do as actuarial professionals and what the actual situation demands.

My quick guide with key questions around work review

Asking the right questions and reflecting on actuarial-related matters with some experienced professionals is always helpful. During the exchanges, permanent references to the actuarial standards have kept me up-to-date and are helping me to be largely compliant with them as an IFoA member.

These are a few questions that helped me the most:

Do I have a good understanding of what and why we are doing this?

  • Am I an expert in this domain? → Reserving, pricing, regulatory reporting, pensions?
  • How material the results of the work for decision makers?
  • Who is the ultimate user, what is the context? → Regulator, insurance company’s board, trustees, policyholder concerned with increased level of insurance premium?
  • What are the deliverables? → A comprehensive report or executive summary?
  • What are the technology.models used? Is it reasonable? → Simple excel worksheets or IT tools like R, Python, Prophet, ResQ, Power BI, etc.

What would be the ideal scope and extent of the review? How much time should I spend on reviewing the task?

  • Is the work recurring or one time?
  • Is a full scope review required or limited review is okay? → Can I look at samples? Is it possible to do a high level independent check for overall reasonableness without looking at things in detail? (Concept of proportionality)

At which point should the review be done?

  • Parallel to the work performed
  • In case of audit reports → Hot or cold (before or after a firm’s audit report is issued)?
  • In case of model release → Pre-release or post release?

Who should perform the work review?

  • Does a qualified actuary need to review the work? Any specific regulatory requirements, other internal policies require additional levels of review and sign off?
  • Can part-qualified members/juniors also perform the peer review?
  • Should the reviewer be “independent” (external to the team), or could it be someone from my own team?

What are the professional requirements?

  • IFoA – APS X2? 
  • Other actuarial organisations such as Society of Actuaries, Institut Luxembourgeois des actuaires, etc. may have different/further requirements.
Continuing the journey: Further challenges in an actuary’s life today

Five years and three companies. To some, that may be a bit of a bumpy race; to me, it has been an incredible journey. Each company has given me a diverse yet unique enriching experience because of the different sectors they operated, ways to understand the business, organisation and functions, processes and operations put in place. 

When I look back, I recall further practical examples. Remembering the challenges from such examples helps in getting a more clear picture of what needs to be done in deciding work reviews.

Domestic operations vs global operations

It’s much easier to discuss work when everyone sits in the same office. Tedious email exchanges are uncommon because the team discusses procedures and results face-to-face. In this case, the true challenge is documenting properly the results of such a review. On the other hand, in multinational companies, people are seated all across the world. Work, then, is discussed by means of long emails and conference calls. Such means of communication, with time differences across the world, adds complexity to the review procedures and documentation.

Size of the organisation

The larger companies usually have structures and formal peer review procedures in place, however they might invest much time following up, micromanaging and in compliance matters.

For small and medium organisations (SME) it can be even tougher to lay out clear procedures and guidelines on peer review. Compared to actuaries working in larger organisations, there are likely fewer people to ask and less support overall.  Actuarials SME may also be less willing to allocate time and resources to such review frameworks, because it represents a direct and visible cost and it doesn’t bring direct benefits.

Financial Transformation agenda, streamlined processes

We see it more and more that insurance companies move to modern technology, streamlined processes, looking for efficiencies, and operational benefits. There are different views on what needs to be done at the local Business Unit (BU) level, and what can be done at headquarters. This creates situations when unified methodologies, policies and rules are not fully reflecting the local practices, the local regulatory requirements. Would such centralised and streamlined approaches provide users with reasonable results? Who needs to look at it and how to act?

Core companies vs consultancies

We see more and more situations where the actuarial calculations, modelling and analysis are outsourced to external actuaries, and managed services and becoming the market trend. How can you review the work of an external actuary?

When working as a consultant or an expert assisting in audits, however, the focus isn’t on redoing the work that insurance companies have already done but to review that work within the budget and time considered for the assignment. This, while also ensuring that there are no material misstatements. The extent of the review should be proportionate to the work complexity, judgements taken and circumstances in which errors could be made.

Bringing everything together

So we come back to our original question: what is the right extent of a review? 

The question seems to be rhetoric but in reality it’s far from being so. It is actually a challenging question. Unless we know pretty well the very specific work that we are looking over, we will hardly get a convincing, precise answer, if that ever happens. 

I keep the above quick guide always handy as a first step to decide the level of review. I’d be glad if you could use it too. They will likely help you to go through your own actuarial journey and  make your work more effective, of a better quality, and with a good governance structure that helps your team and, ultimately, your organisation. All of this while also complying with the professional standards –it’s like cherry on the cake. 

What we think
Aishwarya Khandelwal, Senior Associate at PwC Luxembourg
Aishwarya Khandelwal, Senior Associate at PwC Luxembourg

In the pandemic-dominated world, we all have moved to remote work and team and client engagements happen, commonly, virtually. The pressing current times may be the cause of more job-related mistakes or omissions which calls for higher governance and work quality controls. But there is a silver lining! This brings the opportunity to ramp up the actuarial modernisation, more specifically when it comes to work reviews, and further enhance our professionalism and contribution to society.  

I am sure in a few months I will have something to add to my list of questions on how to deal with reviews when we are home working. The lifelong learning concept is not about improving your actuarial skills, but also about being better professional overall. 

Leave a Reply

Your email address will not be published. Required fields are marked *