Expert judgement and scientific humanities / Jugement d’expert et humanités scientifiques

actuaries

Expert judgement has been used since the actuarial profession was founded. A recent discussion paper « Expert Judgement » issued by the Institute and Faculty of Actuaries (IFoA) written by the Solvency & Capital Management Working Party, aims to provide a framework regarding expert judgement processes. The background of this paper is the change within the regulation of insurers (Solvency II) and more generally the change in regulatory frameworks on a large scale.

This discussion paper echoes the recent stakes of the International Actuarial Association (IAA) – the worldwide association of professional actuarial associations – which develops the International Standards of Actuarial Practice (ISAPs) for strengthening the actuary’s professional judgment.

Echoing this call for fostering the professional judgement, I propose to complete technical skills with scientific humanities (philosophy and social sciences). I argue that the use of humanities would strengthen the actuarial practices. The reasons of my proposal are twofold.

  1. Scientific humanities are useful for helping actuaries to develop critical thinking:

IFoA 1.7.2.1 – Related to this are the disciplines and skills of critical thinking which push those asking the questions to provide a clear purpose and implications for the advice and for experts to articulate the bases for their judgements and the underlying data, information, evidence, concepts, ideas and interpretations which underlie their view.

  1. Scientific humanities are useful for helping actuaries to build trustworthiness:

ISAP 1 # 1.1 – This ISAP provides guidance to actuaries when performing actuarial services to give intended users confidence that (…) the assumptions and methodology (including, but not limited to, models and modelling techniques) used are disclosed appropriately.

Why scientific humanities are important for achieving trustworthiness?

Trustworthiness depends on two things : motivation and competence. Let us elaborate on this.

  • Firstly, an example : trustworthy physicians are people who are capable to make an accurate diagnosis, to know the side effect of the drugs they prescribe, capable to recognize the boundaries of their own capacities, capable to see how their knowledge is up to date.
  • In the same vein, trustworthy actuaries have to be capable to make an accurate diagnosis on risk models, to know the side effect of the risk models they prescribe, capable to recognize the boundaries of their own capacities to master risk models, capable to see how their risk models are up to date.

To achieve this goal, social science can be useful toolboxes for actuaries. Why?

  1. The history of risk modelling allows to detect the generation of models.
  2. The epistemology of risk modelling allows to detect the appropriateness of assumptions:

ISAP 1 # 2.7.2 – The actuary should consider the appropriateness of the assumptions underlying each component of the methodology used. Assumptions generally involve significant professional judgment as to the appropriateness of the methodology used and the parameters underlying the application of such methodology. Assumptions may (…) be implicit or explicit and may involve interpreting past data or projecting future trends.

  1. The sociology of risk modelling allows to understand the role of models.

Until now, the actuary’s competences are mainly made of high skills in mathematical and actuarial sciences. But new competences are needed to scrutinize risk models with expert judgement. Hence my recommendation is: because of this, the actuaries have not to outsource epistemic responsibility.


Christian Walter

Actuaire agrégé, chercheur en philosophie et sciences sociales, spécialiste de la finance / Fully qualified actuary, my research activities relate to financial modelling, history of financial thought, epistemology of finance and ethics of finance.

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