Interdisciplinary Research – Opportunities for Actuarial Profession

1. Interdisciplinary Research – Opportunities for Actuarial Profession By A. Skučaitė, Lecturer, Vilnius university

2. Acknowledgment • Part of this research was supported by international projects BaltMob (Baltic Mobility) and BaltMob II * • Main goal of both projects – to bring interdisciplinary competence into academic research * See www.enta.ee/baltmob; www.enta.ee/baltmob2 for more information

3. Outline • Concept of Interdisciplinary research (IDR) • Strengths and weaknesses of IDR • IDR and actuarial science

4. Concept of Interdisciplinary Research

5. Concept of IDR • “For some it is quite old, rooted in the ideas of Plato, Aristotle, Rabelais, Kant, Hegel (….) who have been described as “interdisciplinary thinkers”. For others it is entirely a phenomenon of the twentieth century (….). The actual term did not emerge until the twentieth century (…..). However, the basic ideas are quite old (….)”. * * Klein, J.T., “Interdisciplinarity – History, Theory and Practice” (1990)

6. Concept of IDR • Exact definition of IDR is still unclear • At one extreme (simplest case) we may say that IDR is present: “when elements of any two disciplines are used in research process”

7. Concept of IDR Blackwell, G. W., "Multidisciplinary Team Research", Social Forces, Vol. 33 (1955)

8. Concept of IDR • Different bodies of knowledge are represented in the research group • Group members use different problem solving approaches (…) • Members of the group perform different roles (…) • Members of the group work on a common problem • There is group responsibility for the final product • The group shares common facilities • The nature of the problem determines the selection of group personnel • Members are influenced by how others perform their tasks Birnbaum P. H., “Contingencies for Interdisciplinary Research: Matching Research Questions with Research Organizations”, Management science, Vol. 27. No. II. (1981)

9. Concept of IDR Interdisciplinary research is a mode of research by teams or individuals that integrates • Perspectives / concepts / theories and/or • Tools / techniques and/or • Information / data from two or more bodies of specialized knowledge or research practice. • Its purpose is (…) to solve problems whose solutions are beyond the scope of a single field of research practice. Porter, A. L., Roessner, J. D., Cohen, A. S., Perreault, M., “Interdisciplinary Research: Meaning, Metrics and Nurture”, Research Evaluation, Vol. 15, No. 3 (2006)

10. Two stages of IDR • Multidisciplinarity:

11. Two stages of IDR • Interdisciplinarity: • Bioinformatics • Econometrics • Behavioral finance • ……

12. Strengths and weaknesses of Interdisciplinary Research

13. Strengths / weaknesses of IDR • Main advantage: • To achieve new results (scientific knowledge) which could not have been produced if the participating researchers would all have had the same disciplinary knowledge

14. Strengths / weaknesses of IDR • Weaknesses and threats are closely related to main advantage: • More time and effort consuming • At least two researchers from different fields are involved: • Lack of “transferable” skills (communication, time management etc.) • Confluence of different “cultures” and traditions • Necessity to “overstep” boundaries of own field of research

15. Strengths / weaknesses of IDR • Weaknesses and threats are closely related to main advantage: • Results achieved (at least at the beginning) are quite “trivial” when seen from perspective of “traditional” sciences • IDR is a tool and not a goal

16. Strengths / weaknesses of IDR • IDR resembles very much work in multinational environment • Each discipline represents its own “culture”, for example • “Thought pattern” (paradigms) - • Specific terms (including jargon, say IBNR, UPR etc.) • Traditions how technically present results and solutions • Different notation etc.

17. Strengths / weaknesses of IDR • IDR resembles very much work in multinational environment • Common problems arising from “cultural” differences in IDR: • What data to use • Which research method is “best” • Unawareness and / or misunderstanding of terms (differences in meaning of the same word) • Methodological mistakes when applying methods from other fields • Communication problems • Ethical issues, …..

18. Strengths / weaknesses of IDR • Meeting is scheduled at 12:00 • Is it acceptable to come at 12:30 • In some cultures – “No”, in some – “Yes”

19. Strengths / weaknesses of IDR • Misunderstanding of terms – examples • “Risk”: • Insurance and engineering: “probability of accident x average loss per accident” • Statistics: “probability of some event which is seen as undesirable” • Finance (investments): “(unexpected) variability or volatility of returns”

20. Strengths / weaknesses of IDR • Accountant: “Please remove virus from my computer” • Computer specialist (after a week when nothing was done): “Well, You asked to remove virus, but there is no virus in Your computer, there is only a worm”

21. Strengths / weaknesses of IDR • It is impossible to isolate vocabulary from grammar, syntax or national culture in general • So it is very difficult to separate "knowledge" from methods, theories and history of practice in specific field, but… • Abundance of languages is no longer obstacle for communication

22. Interdisciplinary Research and Actuarial Profession

23. IDR and Actuarial profession • Syllabus of actuarial education (1975): • Mathematics: algebra, trigonometry, calculus; • Probability and statistics; • Compound interest mathematics; • Life contingencies; • Construction and graduation of mortality tables; • Applications: Life insurance, pensions, … Panjer, H., “Educating the Future Actuary: from Actuarial to Risk Management Education”, Presented at Groupe Consultatif / IAA Education Seminar, Edinburgh (2006), downloadable from http://www.gcactuaries.org/events.html

24. IDR and Actuarial profession • Syllabus of actuarial education (2005) – new additions: • Economics; • Applied Statistics; • Risk theory; • Introduction to actuarial practice (applications), etc. Panjer, H., “Educating the Future Actuary: from Actuarial to Risk Management Education”, Presented at Groupe Consultatif / IAA Education Seminar, Edinburgh (2006), downloadable from http://www.gcactuaries.org/events.html

25. IDR and Actuarial profession • Changes in syllabus reflect changing realities of actuarial practice: • It expands quickly to new areas (public health, social benefits, banking, enterprise risk management) requiring from practitioners to acquire new skills • “Technical” (mathematical, statistical) skills even very brilliant are no longer enough • At least some knowledge about economy in general, investment principles, risk theory, etc, is almost are “must”

26. IDR and Actuarial profession • Actuaries are supposed to be not only experts in their field but also excellent “team players”: • Be able to present ideas and results clearly • To explain why one or another solution should be adopted and what risks are associated with it

27. IDR and Actuarial profession • “Business managers cannot be expected to like and accept what they cannot understand” Bhattacharya, S. N., “Actuaries in the Changing Context”, Presented at 28th International Congress of Actuaries, Paris (2006), downloadable from http://papers.ica2006.com/247.html

28. IDR and Actuarial profession • According to survey (SOA) employers think that besides professional knowledge other skills are important for actuaries: • Effective communication • Innovative thinking • Appreciation of business context and general business acumen • Leadership Daykin, Ch., Lyn, C., Palandra, M. T., “Professionalism within the Business Context”, Presented at 28th International Congress of Actuaries, Paris (2006), downloadable from http://papers.ica2006.com/348.html

29. IDR and Actuarial profession • “Business design is incomplete if it does not take into consideration how the human element interacts with the business model. Should psychology, sociology and behavioral economics play a bigger role in the education of actuaries?” • “Probably so, but the syllabus for qualification is already overloaded”. Daykin, Ch., Lyn, C., Palandra, M. T., “Professionalism within the Business Context”, Presented at 28th International Congress of Actuaries, Paris (2006), downloadable from http://papers.ica2006.com/348.html

30. IDR and Actuarial profession • It is not possible to be expert in many fields • IDR and general transferable skills may be helpful

31. IDR and Actuarial profession • Interdisciplinarity is great opportunity now faced by actuarial profession • In some cases it may become the only way to “survive” under changing environment