Although our survival in New Brunswick had the
wished for effect on the marketplace, nothing was ever said
about our adventure, even after our programs passed muster in
the main provinces we served. The same hand-wringing over
the same ominous fears occupied the industry chatter, whether
it came from the IBC or from the nerve centers in our branches.
The invariable responses amounted to the standard, hopelessly
minimal pulse-taking, a process called calculating the ELR, or
earned loss ratio, followed in short order by head-shaking
admissions that it didn't prove anything because the numbers
concealed an indeterminate number of counter-balancing forces.
Nowhere was there a mechanism that could be tapped for
samples of the requisite information to pinpoint a cause or
verify an intuition, much less one that routinely gathered
relevant data with a frequency adequate to monitor a
developing trend. Worse yet was the sense of being
directionless; no one had any plan, not even an expressed desire
to conjure one.
With no ghost of experimenting-past, present or future
apparent in the chiefs' consciousnesses, where was the
authorization, or even recognition, of Merlin-esque projects to
come from; it seemed clear to me that the misfortunes of the
industry were due to faulty leadership in significant places.
Still, the possibility existed that somewhere in the hierarchy,
there was a chief who not only had the wisdom to envision new
possibilities but also the will to risk trying them. At least
there had to be a best candidate, though my inventory of
possibilities did not look promising.
The first candidate to consider was my mentor. If he
still harboured any illwill over the New Brunswick affair, he
never raised it but there was no collegiality either. When his
day had gone well at the IBC, he became a genial but decidedly
stuffy old chap. Our communication otherwise was awkward.
As a chief, I became convinced that he made a better
Watson than Holmes. His agenda for me consisted of more
legions of numbers marching off a borrowed teletype. His plan,
if it could be so called, was clearly not pro-active. He seemed
content for me to now sit and wait until someone, as yet unknown,
pronounced the ratemaking exercise a success or failure. How or
when this would be determined did not concern him, though he
openly acknowledged that there were fundamental weaknesses
in the chiefs' expectations for the custom ratemaking scheme.
The flaw in the scheme was the distinct possibility that
market realities, combined with the poorly-founded
classification scheme, would render the custom rate structure
plan futile, the equivalent of attempting to nail jelly to the
wall. For example, since the age of the driver actually was
only statistically related to the quality of the risk, the act of
raising the rates for some whole age-class to a different extent
than our competitors would tend to encourage more of the better
drivers in that class to seek insurers who rewarded accident-free
history or lower mileage or some other loophole in the
classification scheme. The resulting mix of our policyholders in
that age-class would then shift unpredictably, invalidating
the statistical basis for the rate. Conversely, lowering the
rates for some class would bring in more policyholders in that
class, conceivably altering the quality of the group's risk.
Whether this would happen, or was happening, whether there was
a better classification scheme, would be determined elsewhere;
academia possibly, though they were out of touch with
real world data, or in smoke-filled back room negotiations
where the doability would be traded for industry-wide
acceptability and political desirability to major players.
My originally vague dissatisfaction with the lack of substance
in the classification scheme had been set aside while I focussed
on the essentials of producing the structure and learning the
ropes. Now though, the inherent flaws seemed to cry for
examination; but fatalism or risk-aversion or other priorities
yielded a colorless horizon.
Next on my list of candidates were the chiefs
committed to the shareholders' laws. Their highest vision
was a policy management system linking our branch underwriting
functions with accounting and claims, incorporating our current
paperhandling and forms and reports. Though admirable and
desirable, it was strictly the usual tank-operation. It was
designed to mimic the existing world but with better
communication to accommodate the intended growth of the
company. There was no capability built-in to do ratemaking,
statistical enquiry, simulations or any of the other wizardry I
was looking for. Interlopers with intentions of any such wild
unruliness would not be tolerated. Such tampering was not only
incompatible, it was an unholy infringement on their territory
Nor was there any hope from the Society of winged beasts.
The Society was home to both species of winged beast,
life and non, and their program for non-life winged beasts was a
less than satisfactory adaptation that barely acknowledged
the property and casualty actuary's different world.
Unfortunately. it was my only official guidance in actuarial
matters and its sum total consisted of a list of exams, each with
a preparatory textbook. I found myself immersed in the study
of Life Contingencies, an interesting but irrelevant tour of the
many-faceted formulas needed to estimate premiums for every
conceivable life insurance, pension and annuity form. Had that
been an isolated detour in a program devoted to wizardry, the
incentive of future wonders might have alleviated my impatience.
But the later texts looked even worse; more relevant, yes, but
dry, non-mathematical catalogs of policy forms and legal
technicalities. Not a shred of evidence to support the
future I was seeking; and the only sign of change in
Society programming was news of an argument among the
board members over the use of calculators in the math examinations.
Calculators! A tool that had already proved itself useless in
the real world of ratemaking, a major part of actuarial science.
My mentor could see some use, some confirmation of worth, in this
news, for my discarded programmable calculator, but I was less
than impressed with this so called innovation.
The incongruity between the Society's program and my
expectations suggested that my original vision in the library of
Merlin-esque adventures had been a trip to the Twilight Zone.
Yet my daily exposure to our problems showed exactly the type
of needs the brochure had described. Somewhere in the ranks of
winged beasts there were advocates of the wizardry we needed
but they weren't accessible to me. For a while I continued
working my way through the Society's exercises but my time
was too scarce and too precious for this useless extravagance
and I fell sick of their program's content because it bore no
resemblance to the quest that had summoned me from the pages
of their own brochure.
While wandering in these doldrums, convinced that
the key to escaping this morass was to find the right chief to
make use of my skills, I began considering ...
They had blessed our union with new titles, new
structures, new playmates and a new toy. KGH was now the
Vice President of Underwriting and I was, officially, the
company Statistician. The toy was an IBM 5110, an early mini
computer, that was to be mine for testing. It came with some
experimental software and the limited services of two
consultants from the States to the South. Although the
playmates and toys were likely a concession to the powers in
London and were planned to be only temporary, there was a
theoretical chance that the senior chiefs might be persuaded to
keep them permanently.
All of this raised the eyebrows of the other chiefs,
mostly because my former mentor had more seniority, more
industry stature. Not only had he been passed over for VP of
Underwriting but his department had disappeared and I had
surfaced in the court of the apparent victor. The official reason...
... On paper as well as geographically, it appeared that
our paths would not often cross with the winged beast and his
tribe, since our explicit mission was to explore the esoteric
techniques being promoted from abroad. But our territories were
not so separable, at least not from the vantage point of my
vision in the library. In my view, if our efforts to establish
Merlin-esque ideas failed to breach the main actuarial
territories, then the power of this magic would never be
realized. Applying its force to molehills when there were
mountains that needed moving would waste its brilliance, fail
to solve the critical problems of our industry and leave the
impression of irrelevance and expendability. We would
remain, at best, a shaky affair of a...