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The Mysterious World of Actuarial Evidence

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By Kelley McKeating, FCIA

Most actuaries understand the gist of what their actuarial evidence (AE) colleagues do for a living. However, the details of AE practice may be somewhat unclear to some actuaries in other practice areas. Here are some facts about AE practitioners (from the CIA database and a survey of the practice area conducted in 2011):
  • About 3 percent of Canadian actuaries list AE as a primary area of practice—78 in total as of August 2011.
  • Only about a dozen of these are full-time AE actuaries.
  • Almost 50 percent combine AE with a pension consulting practice.
  • AE is almost always a second career for actuaries. The vast majority enter the practice area after achieving Fellowship (more than half after the age of 40).
  • About 60 percent of AE actuaries have a pension background and about 30 percent come to AE from life insurance work.
  • AE actuaries are generally older than other FCIAs (median year of birth in AE: 1955; all CIA: 1967) and they have been Fellows longer (median year of FCIA in AE: 1986; all CIA: 1999).
AE practice can be broadly divided into three categories:
  • Family law (marriage breakdown pension valuations, spousal support buyouts, etc.);
  • Civil litigation (economic loss valuations related to personal injury, fatality, or wrongful dismissal; valuation of interests in estate disputes, etc.); and
  • Non-traditional (pension or insurance litigation, for example).
Although the typical client is a lawyer, AE actuaries also often work directly for individuals in family law (marriage breakdown) situations. Most AE actuaries focus on either family law or civil litigation, but also do some work in one of the other areas. The "non-traditional" AE actuaries form the smallest subset of the practice area, and are least likely to work outside their niche.

Until recently, the AE practice area was quite evenly divided between family law and civil litigation practitioners. However, recent legislative changes in Ontario have significantly reduced the number of marriage breakdown pension valuations being performed by independent actuaries.

Of interest (and of concern) is evidence that suggests that the majority of AE work, particularly in the civil litigation area, is being performed by non-actuaries—usually accountants or economists. This is particularly true in western Canada and Ontario. In Québec and Atlantic Canada, actuaries continue to provide most AE services.

Opportunities

As noted above, AE tends to be a practice area of middle-aged and older actuaries. According to the 2011 survey, 40 percent of AE actuaries expect to retire in the next five years and a further 20 percent within five to 10 years.

As many senior members of our practice area begin to retire, there are exciting opportunities for new entrants to AE. New blood in AE is key if actuaries are to play a continuing role in legal proceedings in Canada.

Challenges

Of course, a career in AE poses some challenges; some are unique, others are common to all practice areas.

AE actuaries usually work as sole practitioners, alone in a home office. Some have one or two employees. A small number have partnered with another actuary. Working alone or in a very small office is not for everyone. As a small business person, you must be able to motivate yourself to meet deadlines and to do what it takes to grow and sustain your practice.

Also, as with any practice area, AE actuaries must adapt to external factors over which they have no control. For example, the recent changes to family law in Ontario have had (and will continue to have) a negative impact on the income of many Ontario-based AE actuaries as they realign their practices to the new reality. These short-term challenges may make AE unappealing for the next year or two, particularly if you live in Ontario.

However, there is much AE work being done by accountants and economists. And there are all those AE actuaries who are preparing to retire . . . In the medium and long term, there are exciting opportunities for any actuary with the right skill set and a yearning to build their own business.

Curious?

You are comfortable with the concept of being an entrepreneur, of growing and sustaining a small business? You believe you’d enjoy the flexibility and work-life balance that comes from being at the heart of a small, unstructured enterprise? You may wish to investigate opportunities in actuarial evidence.

To find out more about the AE practice area:
  • The Committee on Actuarial Evidence web page contains links to material of interest such as the AE Skills and Knowledge Inventory (SKI) and an audio file of the "Actuarial Evidence for Non-AE Actuaries" session from the 2011 CIA annual meeting. Log into the CIA Members Site and then click here.
  • Attend the session entitled "The Non-traditional Actuary – Building a Full-Time Practice that Includes Actuarial Evidence" at the 2012 CIA Annual Meeting.
  • Consider attending the AE Seminar, which will be held September 14–15, 2012, at the Waterside Inn in Port Credit, Mississauga, ON.
Kelley McKeating, FCIA, is Chair of the Committee on Actuarial Evidence.
 

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